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The Truth About Data: Why It’s Really Valuable.... By William Thomson, Senior Vice President, Forbes

William Thompson
Managing Director at Forbes Media
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William Thompson
Managing Director at Forbes Media

Will Thompson is Managing Director of Forbes Insights, the research and technology analyst practice of Forbes Media, and the Publisher of Forbes AI, a new magazine dedicated to the business and technology of artificial intelligence and machine learning. An expert in the ways technology is transforming business strategy, Mr. Thompson came to Forbes from the Economist Intelligence Unit where he helped advise Global 2000 corporations and venture-backed start-ups on using research to position themselves as thought leaders. Prior to joining the Economist, he served as CEO of a boutique hedge fund communications consulting firm and launched two niche publications. A classically trained operatic singer, Will has a degree in music and a masters of business administration, both from the University of Miami in Coral Gables, Florida.

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About the talk

Unless you’ve been living under a rock, you’ve probably heard that “data is the new oil.”  That’s true, but also not true.  The oil analogy is actually the most instructive at the point it breaks down.  In this keynote, we’ll explore the true economic basis of data’s value by following the breadcrumbs of this analogy until we plunge off a cliff.  At the bottom of that cliff is an undiscovered world of possibility.  This insight will give you a new lens to look upon every aspect of your work and how to methodically and systematically create more value from the same data.

02:10 Data is the new oil

06:30 How to build a true data mode

10:40 Non-rival good

12:44 Make data proprietary

15:45 Data sharing

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Thank you so much and I'm blushing a little bit. I really appreciate it. So I'm coming to you from space this morning because there's no coping space. No, just thank you so much for inviting me to speak with you guys again and for all of you to take the time to show up while you're managing your inboxes disclaimer before I start feeling I am not a data scientist. I'm not a technologist. I'm a thinker and I'm a strategist. He was enough familiarity with these fields and some others to draw meaningful correlations between

them. So I'm going to talk to you about today without slides because I think we've all had enough of slides at this point in the pandemic is based on the excerpt of a book that I'm writing with Nicole to call the CEO of Forbes night witches forces Innovation Coalition on customer-centric AI it combines the discipline of artificial intelligence. Business strategy human-centered design in many many other fields to provide a guy and an actual canvas to to use Ai and ways to improve the customer experience of the number to unveil to you today uses the lens of Economics

to take a hatchet to one of the most frequently cited analogies for why data is valuable, but the most interesting part of that and the truth about why data is expensive in some data is more expensive than others can be seen most clearly from where that analogy breaks down now in grasping this we may be able to get a much more systematic way about many aspects of our work. Now most most of these talks or about work that's been done and dusted and you know tied up with a bow, but this is a peak to a work in progress. As such some of the things I say today may be wrong and if they

are I know everyone here is going to be the best qualified people to tell me so so let's play again. So I'm going to start with this quote from Martin Casado and Peter Lawton who are apart residenz recent Horowitz. They say reading data is a magical mote can misdirect Founders from focusing on what is really needed to win. Now unless you've been living in a socially distance bomb-shelter. You've probably heard the analogy that data is the new oil now and given the coil is the most valuable commodity of the physical economy. It makes sense first glance to say that data is the new oil of the

digital economy yet this analogy quickly breaks down and it's at the point where it's not as I said before that we learn the most about the true strategic value of data and how to plot our own data strategy. So oil is what Economist called a rival good arrival. What is something that only one person can order the time in which if it's used, you know, can't be used against if I hold an apple in my hand and eat it then by definition you can't come along and eat that same app. And in the same way only one person can own a certain barrel of oil at a time. And once that oil is burned

it's gone now data in the digital economy could be considered a non rival good because both you and I can have a copy of the same data. We can look at the same email at the same time. If I delete it you can resend it to me. Now if I want to share data in like a Google doc with you I or with a thousand of you I just click the share button and everybody has it at the same time. I could use I can analyze that data until the end of time and unless I permanently delete it match my computer or sabotage. The Datacenter is stored in it can never be used up and in the traditional

sense. So why is valuable a why is data of valuable strategic asset if it's an inexhaustible resource, like are that everyone can have equal access to well most would say and practice that's because not everyone can have equal a Set the data. So if I went and knocked on Mark Zuckerberg door and ask him politely for all the Facebook data. I don't think he would share the click the share button. He would probably unfriend me. Now if I wanted to get that Facebook data. Anyway, I'd either have to hack his system difficult and illegal, please don't try it

or hire an army of mercenaries to take over his Davis and you're even more difficult and illegal now because it's so difficult for me to get to his data he's able to use it in ways that create value for his company, but not necessarily always for others. So he's created what most of the talking heads in the field would call a date a moute. Now. The idea comes from Warren Buffett who said, you know, in business I look for economic Castle protected by unreachable most now his conception of a moat around an economic Castle consisted of things like big vertically integrated Supply

chains proprietary software processes and many other factors like maybe having a huge Start in a certain line of business, but Dad emotes there a different animal altogether now many investors Founders and analysts think that having a beta mode comes down to possessing a proprietary properly formatted formatted labeled input output data set that no one else has and cannot easily replicate and they assume that this alone will lead to powerful competitive advantage. And the last time I addressed this conference I even said the exact same thing. I was

wrong. I'll tell you why. Having this kind of data is only a small percentage of what it takes to build a true data mode one that meets all the economic conditions that buff it would be looking for in a traditional business. So I started this talk with a quote from Casado in Lawton making a similar observation that data alone is never enough to constitute what most of us would consider a defensible moat but sustainable defensibility in their view is more likely the result of factors. They say such as domain now it a differentiated technology go-to-market speed and

winning the talent worth. Well, that's also true. But this is also not the source of the economic value of a true dat about these are just a handful of tools that you need to build one without a blueprint of what the thing looks like. So how do we build a true date of moat soap for that answer? We have to drill back into the oil metaphor with all its features and laws and the story of how a Titan of yesteryear and the Tecla music today made their fortunes Sew-in 1863 John D. Rockefeller entered the little business now human beings have

known about oil press a thousands of years. The Mesopotamians use bitumen to hold together their ziggurat pyramid the Romans. They saw it bubbling up in Scotland and used it for lubricant and other things now the time Rockefeller got his start oil was mostly used to fuel kerosene lamps, but something important happened between ancient times and Rockefellers day that made kerosene possible oil refining now humans had learned a chemical process to extract more and more energy from the same physical amount of oil in 1863. Kerosene was as far as we've gotten in that refining

technology and the fuel was certainly overtaking other alternatives for lighting like whale oil which pretty smell pretty bad and didn't burn very cleanly kerosene was not so Rosy smelling either and produce some black smoke, but that was a long sight better than what came before. So you'll be able to say that the time Rockefeller started out oil or kerosene look the world but Rockefeller knew that one day oil would run the world. He understood that technology gets better and cheaper overtime in the process and results of oil refining would also so while

everyone else was value in oil as something to be used for lighting homes and lubricating Machinery. He snapped up as much of the oil supply as he could and built out refining capacity while the fuel and the land under which it said was cheap compared to what he thought they'd eventually call us now as a result of his foresight by the early 1880s his company controlled 90% of the US refineries in pipeline, but Rockefeller had a vision like his controversial business practices. I would you maybe aware of this a true value of oil was in its refinement and

distribution. Unrefined oil sitting in the ground at very little value but its value increased remarkably as it's loads of a supply chain to the point of purchase Now by controlling Refinery operations and distribution Channel Rockefeller, effectively control the immensely profitable us oil industry now fast forward to the day whether they realize it in these exact terms are not the founders of today's Tech Titans had the same fundamental observation about the value of data like oil data has always been with us the first day that was an inventory of the panel inscribe them a clay

tablet in a rock thousands of years ago data has been around for all of civilization, but technology presented an opportunity for us to get more value out of every bit and bite through more and more powerful and increasingly taper tools to analyze it the same way oil refining work. Now the information revolution also enabled us to transfer data literally at the speed of light. And for next to no cost to the value wasn't locked away an inaccessible file cabinets full of paper the Rockefeller use the railroads to make it faster and cheaper to use oil Beyond its point of origin does

increasing its value is a commodity now our modern-day Barons used a vast network of fiber optic cables and all of the advanced Information Technology. They need it yet able to do better than Rockefeller in two ways first while Rockefeller merely supplied the oil and extracted huge rents from the economy at powered a massive amount of economic value was created by the people who use that oil to power factories to light homes and do everything else that gave us modern civilization. Today's date of Masters also created the products and services with

that data think about it as a Rockefeller had also owned all the oil companies and most important. The reason we can send data nearly instantaneous. And cost free is because it's a non rival good you'll remember that if it was a rival good like paper or clay tablets that used to contain data or Rockefellers oil. It will be difficult to replicate it and very costly to transfer it. So the underlying reason data used to be very expensive is because even though by its nature it's a non rival good. It was inextricably linked

to a rival gun like paper and are think of it like multiplying any number by Zero no matter how large the number multiplying it by zero gives you 0 and when you fuse any non rival good with a rival when it becomes rival again now technology broke the bond between physical writing services in data unleashing that were unleashing that that nonrivalry, but it also created new ways of fusing Rival and nonrival goods together that allowed for that rivalry to be restored again and this time

instead of it being a binary yes or no rivalry is now on a spectrum that can be increased or decreased based on certain actions. Now this process of transforming data from a non rival good to a rival good is the precise reason that some data is more expensive more valuable than others today instead of it being pricey though because it's stuck on paper. It's can be made expensive partly because of a company having it locked away in their digital file cabinets Zuckerberg. It's kind of like turning a cubic square foot of air into a barrel of oil now Rockefeller

everyday and then use machine-learning to refine that to jet fuel and they also operate the metaphorical planes and Airlines. But here's where we move Way Beyond the common understanding of a data mode and why I took up so much time explaining this important concept making data proprietary is far from the only way to transform it into a rival good there are certain processes of data collection transmission analysis, an even sharing that can transform it into a rival good and create massive value the more rival

it becomes through these processes the more valuable. It is now knowing this key fact will enable you to look at your data strategy in a more scientific way than your competitors and enable you to more systematically and reliably add value at every step of the process. So, how do we do this? So first of all, this is one of the ways that you can increase the rivalis if your data data also needs to be clean node are right on that is laid out in neat rows that are consistent not jumbled up and Both of these things take a huge amount of

data scientists time and because they're important to producing that rivalry. Now. It's also important to make sure that the data is laid out in such a way where you can get it the thing where the Target that you're most interested in with the minimum amount of effort. And this is no simple task that requires a massive amount of real-world context data science skills and is a huge source of of rivalry. I'm and all of this is a massive amount of work. And if one if two organizations have the exact same data, but one can do all this work and the other one cannot

then one can do a i and the other can't. Now that's value. And the reason why data scientist makes so much money. They think but think of this day just sort of turning your crude oil into kerosene. So if you don't have the data in any state of Sanitation, let's let's look at the ways that data Gathering can actually increase rival. Public data for instance is widely available on the internet and it seems to get increasing every day. It's free and you can aggregate large amounts of it, but you would imagine there's a little competitive Advantage because everybody has

access it's a non rival good. Now, let's imagine that you were able to scrape every local school or event calendar in the country and spent and Link it to a data set that you already have about the kinds of events that a large number that a large number of people have attended in the past. Now you're able to provide a more valuable service to local event organizers by helping them recruit the best attendees and end to attendees by helping them better find events. But you've also turned are in 200 oil by combining this free data set with your rival proprietary one in a way that makes the

proprietary one more rival not in the interest of time. I'm going to skip past some of the other ways of the of creating rivalry because there's there's some similarities But what I'm going to do is I'm going to talk to you about a really unintuitive way to create rivalry. You can certainly do it through data sharing but can you create more rival data by giving it away for free? What's up? What type of thought experiment in the closing minutes of this discussion. So so much about Tech & Innovation relies on the adoption of Standards either formal or practical does like

Windows. Everybody uses it cuz everybody uses it that way. Everybody's working on the same Playbook. Now Elon Musk Coke that giving away his IP for Tesla's battery who would be more than just a PR stunt. He thought that if everybody adopted the same architecture, it would be cheaper for him to make these things as people competed against each other to make them in Trove the cost down. It didn't work out that way but there's a glaring opportunity. And again, this is a thought experiment for one of today's date of giants to become even more gigantic like giving their data.

So there have been some calls by researchers, especially in the bipod Community or Facebook to make its at anonymized data available in a public data trust So in theory if Facebook were two completely transfer data without an optimization to a trust not just for research but for businesses and governments everywhere, it would become an indispensable building block nearly every organizations Technology stock this in turn would strongly incentivize all these organizations to engage with their stakeholders within the Facebook ecosystem rather than on the open web because of

the massively increased insights, they could attain and recycle to create more valuable products and services know all these organizations engaging there would make it essential for people whether they wanted to or not to reactivate their accounts. But because the data would be held by a trusted third-party users are more likely to be friends up willingly Now The Pearl Operation of Engagement with Facebook data would create an avalanche of data and presumably give the Data Trust insights into the data of other parties using that system to enrich his own data sets, which

it could then share back with the organization. Now if Facebook paid the trust a fee per impression for targeting a bad's the way many Publishers do with third-party targeting Services, it would massively increase Facebook's prediction power the effectiveness of its ads the audience numbers and engagement of Facebook in the new types of products and services to create all while funding with trust and reading Facebook of most data security cost. It would also give the social network social justice friendly face as well. Now as I said at the beginning and I've and I've cut through a few

of these things that in service of time data transmission is also one key way that you can shoot me an email and then we can talk about at the beginning I said, this is a this basic concept of fusing a rival good and anion. We're good together makes the whole combination rifle and that technology has made it possible to have varying degrees of rivalry a spectrum versus a yes or no. It's a still fairly new idea. There are holes brighter Minds The Nine can certainly find ways to be more systematic and mathematical with quantifying both the relative rivalry of the data sets in

the mechanism through which rivalry is increased or decreased some of you though. I think I'm completely full of crap, especially if you think that I want to hear from you. Feel free to drop me a note at w Thompson at forbes.com that W Thompson at forbes.com, and I look forward to chatting with you. Thank you so much.

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