Newsom wants companies collecting personal data to share the wealth with Californians
Newsom wants companies collecting personal data to share
the wealth with Californians
By JAZMINE ULLOA MAY 05, 2019 | 5:00 AM SACRAMENTO
With a legislative battle underway in California over a
landmark 2018 law that allows consumers to control what online personal data
companies collect about them and sell, Gov. Gavin Newsom and state lawmakers
have started work on another ambitious pursuit: putting a financial value on that
information.
Newsom has assigned a team to work with national data
scientists and legislators to create a “data dividend” — a payment that
businesses would make to the state or to consumers if their personal data are
sold. The concept has been discussed in Silicon Valley for years as a way to
tackle growing income inequality at a time when tech companies have flourished
and advances in automation have eliminated jobs.
But there is lots of debate over how it should work.
“[A data dividend] is a hard problem to solve,” said
state Sen. Bob Hertzberg (D-Van Nuys), who co-authored last year’s California
Consumer Privacy Act. “I see it as a societal issue. We have the potential to
monetize people’s value and ask: How do we create assets that can be enjoyed by
the common good?”
Hertzberg and other state lawmakers have started their
own data dividend discussions with experts — any plan crafted by the governor
will require legislative approval — and at least one proposal introduced would
create a legislative committee to study the issue.
Social media platforms such as Facebook, Twitter and
Instagram and tech giants such as Google have long relied on the free trade of
personal information in exchange for services. But any business can package and
trade the personal data they collect from users or clients in the hidden online
marketplace.
Banks, insurance providers and major retailers such as
Amazon possess significant information about what people buy, watch, want or
need that can be bundled and sold to third parties or used to target
advertising and increase profits. No state or federal law provides consumers
the right to know how much the information is worth or how much businesses pay
for it.
The practices have also allowed third-party traders to
compile data sets from multiple companies to create profiles about consumers
that can be repackaged and resold, data scientists said.
Scandals over the practices of third-party data firms
such as Cambridge Analytica, which obtained the information of tens of millions
of Facebook users to help President Trump’s 2016 campaign, have led consumers
to demand more privacy regulations. Last month, Facebook reported it expected
to pay up to $5 billion in fines to federal regulators over privacy issues.
California took the first step to regulate the
marketplace and rein in data brokers last year when state lawmakers passed a
far-reaching privacy law that gives people the right to “opt out” of having
their data collected and allows them to ask companies to delete it. A data dividend,
data scientists said, would go further, allowing consumers to collectively
leverage their power over their information.
Such a system could allow the state to redistribute the
profits — or develop an entirely different system, requiring businesses to pay
people for the content they upload to free platforms. For example, Instagram
became a billion-dollar company with just 13 employees and the help of hundreds
of thousands of people around the world who contributed their photos without
compensation from the company.
“I think most people recognize that there is something
unsustainable going on here, where we are concentrating more and more power and
wealth in a few companies, and it is not normal power. It is power over the
nature of our democracy, over our families, over our personal identities,” said
computer scientist and author Jaron Lanier, who has been meeting with state
lawmakers to discuss potential models for a new data dividend.
The concept shouldn’t be misunderstood as “anti-tech,”
Lanier added. Drafting up a data dividend could allow the governor and state
lawmakers to rethink the economy and measure the invisible labor of people,
whether it’s posting content to social media platforms or contributing personal
information useful in coding new tech tools, he and other experts said.
In a state that’s home to the most tech billionaires and
Silicon Valley businesses that have spurred growth of the information economy,
the push for a data dividend has taken hold as income inequality is acutely
felt. Families that earn in the top 10% make more than 10 times as much as
those in the bottom 10%, nearly double the divide in 1980, according to a 2019
study by the Public Policy Institute of California.
Newsom put legislators and tech companies on notice in
his State of the State address in February that he planned to expand the
state’s data privacy efforts when he praised the 2018 law, saying “companies
that make billions of dollars collecting, curating and monetizing our personal
data have a duty to protect it.”
“California’s consumers should also be able to share in
the wealth that is created from their data,” he said.
Part of the challenge in crafting a state data dividend
is that public officials have little idea what the data are worth. Companies
have their own internal finance teams that place values on the data of
different types of users or customers, and no state or federal agency has
oversight over the private estimates.
There also is debate about how the data dividend should
be structured. It could function like Alaska’s Permanent Fund, in which oil
companies doing business there pay a portion of their revenues to the state,
and a part of the profit goes to a savings account divided among Alaskan
residents.
Or it could be a payment or reward that goes straight to
consumers who give companies the right to sell the personal information
collected from them. Or it could function as a state tax on the businesses,
with the resulting revenue redistributed to consumers.
Olaf Groth, an author and managing partner of Cambrian
Group, an advisory think tank that designs tech strategies, policies and
applications, said it could make sense to have a "data trust fund”
instituted by the state and accessed by entrepreneurs and researchers who study
or train in artificial intelligence.
Or, “You could say to the big digital companies — Google,
Amazon and their Chinese equivalents — that they have to pay a small percentage
of their revenue to their customers who are leaving these data footprints,”
Groth said. "But the amount of dividend any customers would receive, given
how many customers there are, would likely be too tiny to matter much.”
Dominique Shelton Leipzig, co-chair of the international
law firm Perkins Coie’s Ad Tech Privacy and Data Management practice, said that
in developing a data dividend, legislators and the governor will have to
consider the entire internet ecosystem and all its smaller players, including
bloggers, entertainment companies and students.
Putting limits on the free exchange of personal
information could hinder small businesses and entrepreneurs that rely on
advertising and donations and also hurt internet users, she said.
“The reason there is so much content is available to
consumers globally is because it is ad-supported,” she said.
The discussions are likely to coincide with another fight
this year over the state’s privacy law: Business groups want to narrow the
scope of regulations for employers, while privacy advocates are working to
expand protections for consumers and enforcement against violators.
Privacy advocates absorbed a major defeat last month as
the Privacy for All bill, which would have created an “opt-in” option for
consumers and require businesses to get permission before collecting their
personal data, was shelved.
Six other industry-backed privacy bills remain, including
proposals that would exempt insurance companies and agents from California’s
privacy law and allow companies to collect some personal data on employees and
consumers needed for loyalty programs, gift cards and discounts.
Sen. Henry Stern (D-Los Angeles) pulled back another bill
that would have amended the state’s privacy law to allow targeted advertising
by small businesses and nonprofits seeking customers or potential donors. His
other proposal to establish a joint legislative committee to study putting
together a data dividend moved out of a Senate committee last month.
Stern said the joint committee would allow legislators to
analyze how Facebook and other tech companies could give back to the economic,
media and political landscapes they have upended.
A data dividend is more than a tax, he said.
“To me, it’s not only about the individual relationship
with the internet: What is the selfie worth and are you getting enough for it?”
he said. “It’s more of collective look at it: What is the broader public cost
and is tech taking a proper equity stake?”
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