That California is the source of some of the more dingbat ideas in our civilization is well known these days. That still doesn’t excuse those attempts they keep making to top the last excess, like this idea that the tech companies should be paying us all for the data we hand over. But that’s what new Gov. Gavin Newsom, D-Calif., proposes: that those who collect data and then profit from it should be paying a digital dividend back to us, the providers of that initial data. The proposal fails on two really very simple grounds, one theoretical, the other just depressingly practical.
But, you know, hope springs eternal over there on the left coast. As Newsom suggests, those companies which collect data should be paying out a dividend to those they collect it from. This apparently qualifies as an interesting political proposal out there. Which brings us to our first and theoretical problem. Sure, there’s value here, but who is adding it? We’ve skimmed by this before and the problem still remains.
Any individual datum is worth nothing. There simply is no market for the information that I just visited, or did not visit, a manga site. No one will pay for it, no one is even interested in it. What people are interested in is identifying all of those who visit manga sites, or even those who might be persuaded to, in order to be able to advertise to them, of course. The value is not those individual pieces of data, but that information about the population.
We, as individuals, do not have that population information. The tech companies do have that. So, they’re the people who gain that value, obviously enough. But more importantly, they should be the people who gain it. For what is Facebook? Look at it as nothing other than the business plan: Let’s collect all this data then process it into something people will pay for. Note the point there, it’s the processing that adds the value. Thus, it’s the system which does the processing which should, righteously, be receiving that value created.
No, really, think on it. Bread sells for more per pound than wheat, it’s the processing of the grain into food that adds value. The baker gains that added value, not the farmer. A Ford costs rather more per tonne than steel does. It’s Ford adding the value to the metal, it’s Ford that gains that value added. Individual data is worth nothing, population data quite a bit. The tech companies are the systems which process and add value here, they’re the people who should be gaining the value add.
Which leaves us with the practical aspects of the proposal. Facebook’s revenue per user appears to be around $30 per year. Two billion users, $60 billion in revenue, that’s about right. Note that is revenue, not profit. So, the maximum return we’re likely to gain from a data dividend is what, $2.50 a month? This is something important, is it? Even, is this something we could distribute without swallowing it all in costs?
A moment’s thought shows that this idea of a digital dividend simply doesn’t work. It’s not even us adding the value so we shouldn’t be getting the revenue, but more than that, the amounts are so trivial that is doesn’t make sense to even be speculating about it.
The entire concept is piffle, but then you know, Californian politics and all that.
Tim Worstall (@worstall) is a contributor to the Washington Examiner’s Beltway Confidential blog. He is a senior fellow at the Adam Smith Institute. You can read all his pieces at The Continental Telegraph.
