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Data Is Just Like Oil, Other Than These Few Minor Differences
You may have heard something about “data being the new oil” or some such. Just as petroleum drove economies in the 20th century, so will digital information in the 21st. I really started hearing about this framing after a May 2017 cover story by The Economist. The piece had a pretty snappy lede:
An oil refinery is an industrial cathedral, a place of power, drama and dark recesses: ornate cracking towers its gothic pinnacles, flaring gas its stained glass, the stench of hydrocarbons its heady incense. Data centres, in contrast, offer a less obvious spectacle: windowless grey buildings that boast no height or ornament, they seem to stretch to infinity. Yet the two have much in common. For one thing, both are stuffed with pipes. In refineries these collect petrol, propane and other components of crude oil, which have been separated by heat. In big data centres they transport air to cool tens of thousands of computers which extract value—patterns, predictions and other insights—from raw digital information. Both also fulfill the same role: producing crucial feedstocks for the world economy. Whether cars, plastics or many drugs—without the components of crude, much of modern life would not exist. The distillations of data centres, for their part, power all kinds of online services and, increasingly, the real world as devices become more and more connected. Data are to this century what oil was to the last one: a driver of growth and change. Flows of data have created new infrastructure, new businesses, new monopolies, new politics and—crucially—new economics. Digital information is unlike any previous resource; it is extracted, refined, valued, bought and sold in different ways. It changes the rules for markets and it demands new approaches from regulators. Many a battle will be fought over who should own, and benefit from, data.
Data and oil do have “much in common.” But some pretty big differences, too, as this Michael Mandel chart shows:
It’s almost like the analogy isn’t really insightful at all. As tech analyst Ben Evans has put it, “What data, analysed in what ways, deployed how, updated how?” Some interesting links on the subject:
- Here’s Why Data Is Not The New Oil — Forbes
- Data is not the new oil — TechCrunch
- You may have heard data is the new oil. It’s not — World Economic Forum
JimP,
Patents and copyrights are the new oil. These are the very things we have allowed China to steal outright or more recently leverage out from under us in exchange for access to their markets. Every time that happens it is like a billion barrels of oil being given away to a competitor for nothing. I love to cruise YouTube and make use of wonderful works of genius available in the public domain. Recently I have seen a tightening up with more content behind the paywall. As much as this frustrates me I can’t complain because this is our collective oil and it is valuable.
The Trump is necessary. We need more winning. We need China to pay us for our creativity. Trump will put pressure where it is needed. They will yield back to a level playing field. More winning.
Regards,
Jim
Whoa Whoa WHOA, I thought we were supposed to jeer at the old doddering Senator who said the Internet is a bunch of tubes. People said “innertubes” for a while to wink at everyone else who got the joke. Heck, I rolled my eyes. And then I thought no, that’s actually right.
But it’s in the Economist, which means it will be skimmed by people who make a point of taking out the Economist on the plane, and smiling as they lower themselves into the warm bath of continental groupthink. Ah, you know, they call this magazine a newspaper. It’s one of those things you have to love about them.
OTOH, they do report from everywhere so I can pretend to know what’s going on in Zaire; the captions are arch, and the back of the book is fantastic. But for some reason I have come to believe that whatever they put on their cover is the last thing I’ll read. If ever.
The big difference between an oil refinery and a data center is that the oil company paid for the oil. The data was probably taken for free, maybe even without the knowledge of those who provided it.
The modern economy has always been dependent on information, it is what makes it work. Market prices are the information system that drives it. Basic materials such as oil and iron oar generate increasing supply curves as they are limited and it costs more to to find and develop more and generates new technology so we can use less per unit of production. That will always be the case and the economy can’t replace stuff with data. However, as the above schematic demonstrates, data is different, it doesn’t face an increasing supply curve and this means it generates natural monopolies where supply and demand don’t cross except when still newer technology sweeps it away. It’s a problem innate to big data and the only thing that will make it worse is to try to regulate away it’s innate nature which will just lead to a symbiotic relationship between big data and big government. It’s a scary world and we better figure it out.
An English visitor to the US, writing in 1852:
If, on the arrival of an European mail at one of the northern ports, the news from Europe reports that the supply of cotton or of corn is inadequate to meet the existing demand, almost before the vessel can be moored intelligence is spread by the Electric Telegraph, and the merchants and shippers of New Orleans are busied in the preparation of freights, or the corn-factors of St Louis and Cut hicago, in the far west, are emptying their granaries and forwarding their contents by rail or canal to the Atlantic ports.
By 1866, the Atlantic telegraph cable was in place, and it was no longer necessary to wait for the arrival of the vessel carrying the European mail.
Data has always been critical for business and the economy. One of the main selling points for IBM punched-card systems in the 1920s and 1930s was their ability to facilitate the analysis of sales data and of customer preferences.
See also this article about using network technology for a stock-trading edge, in 1914.
Speaking of oil, fraud in olive oil is an old, old problem. Adulterated olive oil used to be referred to as having been “sophisticated.”
What is the economic cost of making decisions on “sophisticated” data? Looking at climate change, I’d say it was considerable.
One more reason why data isn’t like oil: while you can make up data and use it as if it were valid, it’s a bit hard to run your car on fake gasoline.