The Data Economy Is a Barter Economy

The use of consumer data today is expanding exponentially — as is public and political criticism of these practices. Just think of the political scandals that exploded a couple of years ago around Cambridge Analytica. Or regulators around the world examining whether social media platforms such as Facebook have abused their monopoly powers.

The new bipartisan bills calling for tighter tech regulation that are now circulating in the U.S. Congress — and the appointment of Lina Khan to head the Federal Trade Commission — will only inflame this debate.

So, what is the best way for businesses to use data in a way that feels ethical to consumers and does not spark a regulatory backlash? This question is sparking endless angst in today’s C-suites. All manner of policy responses have been suggested: breaking up tech giants, redefining monopoly controls, introducing new privacy laws, and letting consumers “own” their data to name a few.

One simple and important place to start is to change the way we talk about it. Policy makers, economists, techies, lawyers, business leaders, and consumers should borrow an idea from cultural anthropology and consider the concept of “barter.” Doing this will clarify the minds of regulators and investors to focus on the scale and nature of long-concealed exchanges that now lie at the heart of the tech world, and how to create a more acceptable framework that protects consumers.

At first, this might sound odd. After all, anthropology is one of the least-known social sciences — it’s probably most famously associated with Indiana Jones. And the word “barter” conjures up images of swapping meat for berries — an image that seems far removed from the modern C-suite, let alone Silicon Valley.

Economists tend to assume that barter is a prehistoric practice that disappears whenever societies invent money — that, at least, was the scornful view of Adam Smith, the 18th century intellectual, and it has shaped economic thinking today. Most Western executives have absorbed a cultural assumption that because “money makes the world go round” — to cite the cliché — the most important things in an economy are measured in monetary units and/or organized with money. Transactions that happen without money (i.e. those which are “free”) are thus downplayed and/or ignored.

Anthropologists, however, have a much broader vision of how the economy works. They look at how exchanges bind societies together in a broad sense and know that money-based exchanges are only one of the flows that bind us together. Systems of social credit, gifts, and barter matter too, even if they are rarely discussed in public and cannot be easily factored into an economic model.

Looking at what is hiding in plain sight — i.e. non-monetary flows — can help frame the modern digital economy. After all, what drives the business strategy of companies such as Facebook, Google, and numerous others, is partly an exchange that does not entail money: Consumer data is being collected in exchange for the provision of internet services, just as berries might be swapped for meat.

I would argue that “barter” is the best word to describe this exchange. And if this phrase was inserted into the language of the C-suite and policy making today, with a broader anthropological perspective, this could deliver several benefits. Most notably:

1. It would make everyone aware of both sides of the transaction.

The idea that the modern tech economy depends on two-way — not one-way — flows is often lost in the public debate about data usage. Consumers are not just giving up data (which they sometimes hate), they’re also getting services in return (which they almost always like). Since they don’t want to lose the latter, they continue to deal with social media sites, even amid political outcry.

2. It illuminates the point that consumers don’t seem to want to pay for these transactions with money.

In recent years, tech companies, have offered internet users ways of “selling” their data for money, and paying for internet tools (with money). For example, in 2019, Facebook, created a “Study” app that paid users for access to their data for market research purposes. But consumer interest and uptake has been low. Maybe that reflects inertia. But I suspect it reflects the fact that digitization has made barter so efficient that Adam Smith’s assumption about the evolution of societies is wrong.

3. It draws attention to scale and significance of these transactions for the wider economy.

At present, these flows tend to be excluded from economic measurements (such as gross domestic product data) and investors’ models of company valuations. This is a big mistake: This barter trade needs to be acknowledged to get an accurate picture of how the economy really works, and what companies are worth.

4. It could help policy makers understand today’s corporate monopoly power.

In recent decades, American regulators tended to assume that the best way to tell whether a corporate monopoly exists (or not) is whether consumer prices were high. Khan, the new head of the FTC, is among those who have argued that this approach is outdated, since companies are using monopoly powers even when prices are low. Talking about “barter” might help frame this more effectively.

5. It would make it easier to build a data system that feels more ethical to consumers.

The current system is provoking endless controversy. This isn’t necessarily because consumers want to abolish the use of barter; they probably do not, given how efficient it is. What is needed, however, is an effort to change the terms of the barter trade to give consumers more power. How? By forcing companies to provide far more transparency in these trades and letting consumers control the duration of a trade (i.e. how long data is retained). Most important of all, consumers should be free to cut barter deals with different providers to create competition — which means that regulators should put the onus on tech companies to provide easy data portability, just as financial regulators put the onus on banks to make it easy for consumers to change bank accounts.

By acknowledging the word “barter” — and talking about what is hidden in plain sight — the private sector could and should reshape the current debate itself, embracing a broader vision of how our data economy works. Instead of talking about this in terms of a negative (i.e. “free” or the absence of money), we need a positive, active term.

Or, if you prefer, ponder another cultural wrinkle that economists and techies also often ignore: the original linguistic root of the word “data,” which comes from the Latin word dare, meaning “to give.” This might seem surprising in our modern numbers-obsessed world. Or maybe not: that original root meaning is a small reminder of the exchanges that bind us together, with far more than just money. We ignore this at our peril today. Think of that when you next toss that “data” word around.