by Andrew White | October 15, 2019 | Comments Off on Data and Economic Growth
It was a dream: to be able to read something about information theory and economics- from the IMF. If you are like me, grab a coffee and read The Economics and Implications of Data.
First a most important quote from the paper: “…[D]ata has the potential to contribute to economic growth through its use as an input in the production of goods and services, and by facilitating firm productivity through learning by doing.”
I love that phrase, ‘learning by doing’. In fact, I heard that exact same phrase months ago. See blog: Strategy is Learning By Doing where I was able to talk about strategy and Formula 1 in the same paragraph!
I could quote from many parts of the IMF paper. But let me call out one important issue. This concerns data sharing agreements and specifically open banking. I just happened take an inquiry on this late last week. The idea is that banks are to be required to share transaction data about their customers with other banks upon request. This is meant to reduce barriers to entry and create a more open market, in the interests of the consumer. But what really happens?
What if you were looking for a loan and were talking with a new bank….
Here is the quote: “If the customer were able to provide their comprehensive financial records to the new bank-say, by invoking their right to data portability under open banking regulations- the new bank would have some information in which to base their assessment, lowering the information asymmetry they face. However, they would still be at a disadvantage with respect to a large encumber bank, who would also have access to a large database against which to compare the individual’a data. As access to big data allows lenders to improve the precision of their creditworthiness assessment through analysis, it will continue to act as an advantage to incumbents.”
The section concludes: “Should incumbent banks then be compelled to share their entire customer database in an anonymized basis, in Provo petition grounds?” I wonder if this is seen as a rhetorical question by regulators reading this report? But I digress.
The point is that data begets competitive positioning. More data, up to a point, begets more advantaged insight. My recent blog on rare data elements, suggested that data is the ultimate king: Data is the final arbiter of competitive differentiation.
Going back to the digression: given the propensity for increased regulation and larger and more controlled statism, we might conclude that data sharing agreements will be more mandated by governments across private industry. Will this lead to firms breaking up their data into smaller blocks to dissuade regulators to try to control what to do with it all? Will firms carve out their rare data from the common data so as to keep something back should the tide to share become irresistible? Vexing questions indeed. As a data strategist, these questions may soon become very pertinent.
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