Geoffrey Manne on the power of collecting data in the Economist

ICLE’s Executive Director Geoffrey Manne was quoted in the Economist, where he noted that tech firms collecting data alone does not necessarily give them competitive advantage. By contrast, the real source of value in data emerges from how firms use the data they collect:

The strange thing about data is that they are an inexhaustible resource: the more you have, the more you get. More information lets firms develop better services, which attracts more users, which in turn generate more data. Having a lot of data helps those firms expand into new areas, as Facebook is now trying to do with online dating. Online platforms can use their wealth of data to spot potential rivals early and take pre-emptive action or buy them up. So big piles of data can become a barrier to competitors entering the market, says Maurice Stucke of the University of Tennessee.

That said, there are other ways of looking at data. Geoffrey Manne of Northwestern University argues that, unlike physical resources, they are not rivalrous, meaning they can be collected and used by different parties without causing a clash of interests. It is not the data that are valuable, he says, but the services powered by them. Some firms are just better at developing new offerings than others.

Still, assuming, as many economists in the field now do, that data matter quite a bit, what can regulators do to limit their power? Broadly, possible actions fall into two buckets, one more Hamiltonian, the other more Jeffersonian, to stick with the labels of Frank Pasquale of the University of Maryland mentioned earlier in this report.

Of the two, the first is the more straightforward. When Facebook took over WhatsApp, a popular messaging service, for about $23bn in 2014, the deal barely raised any eyebrows in antitrust quarters. Today the acquisition would probably be blocked, because it has since become clear that Facebook was taking over a serious rival. And despite promises to the contrary, the social network proceeded to merge some of the two firms’ data, which last year earned it a fine of €110m ($122m at the time) from European Commission regulators.

Read the full article at the Economist.