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Guest blog post from Richard Thaler

24th Jan 2013

Richard Thaler, co-author of Nudge and Professor of Behavioural Science and Economics at the University of Chicago Booth School of Business, has written an article for us about midata. midata is a programme which gives consumers the right to request their transaction information from firms in a portable machine readable format. The Government recently announced plans to give midata statutory backing. This proposal will be debated in the House of Lords on 31 January.

Here is what Richard had to say:

Britain is on the verge of taking an important step to make sure the benefits of modern technology and “big data” are realised not just to big business, but to everyone by making sure that you can have useful access to the data that companies are collecting to track your behaviour.

Britain is already ahead of the game compared to most countries, including the United States. There is already a law in place that says that if a company holds information about you, then, it must be willing to share those data with you in an “intelligible” fashion. Of coure this calls to question exactly what is meant by “intelligible”.

In practice, the way the law has worked is that if you send a request to some retailer to ask for your usage data they will typically charge you a fee, and then after a lag of several weeks, they may send you a big pile of paper listing all of your transactions. About the only practical use for this pile of paper is to serve as kindling for your next fire.

To counter this, the Government has announced plans to create a separate right to receive your transaction data in a portable electronic format – they are calling this programme ‘midata’. Initially the focus will be on the energy, mobile phone, current account and credit card sectors – but the power may be extended to other sectors if appropriate. This seemingly minor change might appear to only matter to a few tech-oriented people who could figure out how to make use of such a file, but this would be the opposite of the truth. Rather, this tiny change has the potential to completely reshape the nature of competition in the United Kingdom, and spur the growth of an entirely new category of business called ‘choice engines’. But there are some key questions that are being asked about the reform.

Won’t this impose substantial costs on businesses? No. The proposal says that only if a business is tracking consumers’ transactions electronically would they be required to share that data with their consumers. This immediately leaves out small businesses that record consumers’ purchases on paper. Technology industry experts have been clear that once individual data is being tracked, the cost of making it available to an individual consumer in a confidential, secure manner is not significant.

Far from being overly burdensome, midata has the potential to cut red tape too. By making markets more transparent it will remove the need for regulation of product specification or prices.

I am worried about security and privacy. Shouldn’t this initiative make me nervous? We should all be concerned about these issues, but this initiative should make things better, not worse. Other laws can address when and how businesses can share the data they collect on their customers with other firms, and make sure that consumers can easily opt out of that data sharing. The step taken here will at least assure that the data the firm has on you is correct, and that the firm does not have you confused with someone else with the same name.

A key principle here is that it is individuals taking the decision to get hold of their data which firms currently control. This is not about Governments or other organisations being given access to individual user data. There is one subtle issue of privacy to which firms will need to be sensitive. Individual family members may want some privacy within the family. Giving each family member their own card, or making it clear that any purchase can be made “off the record”, would be a smart business practice for many firms.

Why would consumers who are not computer nerds possibly want access to a file containing information about their transactions with a firm? What would they do with it? To fully answer this question we have to use our imaginations a bit. Making your data available in this way would help to create a market for new businesses to help you make use of your data. Suppose you could get a file listing all the purchases you have made on your credit card during the past year. New web sites that we call ‘choice engines’ would emerge (you can think of them as something like the travel web sites that now allow us to find the cheapest fare between London and Frankfurt). With one click, you could upload your own shopping history to one of these choice engines, one that provided a service relevant to your own family’s needs.

We are all familiar with the difficulties of trying to choose the best mobile phone or energy tariff. At the moment we have to decide which of the hundreds of available tariffs offers the best value based on a guess about how much we will use, sometimes in units most of us don’t understand. midata will give us the opportunity to make decisions based on our previous usage: choice engines will be able to take our data and tell us exactly which tariff is the right one. This is something that the firms already know.

This is not just about price comparison type sites: Finland’s leading grocer has coupled with a third party to provide customers with a breakdown of the nutritional content of their shopping basket via data collected through their loyalty cards. This provides a real time weight and diet management tool for individuals and families.[1] Tesco’s recently announced Clubcard Play is the type of thing we can expect to see more of in the future. Clubcard Play will give consumers “simple, useful, fun” access to their own data, to help them “plan and achieve their goals”.[2] We can expect more of these types of services to spring up as more data is released.

Who will be against this? Expect the loudest complaints from firms that have the most to hide. If both price and usage data are available in uploadable data formats, choice engines will make consumers smarter shoppers and markets will get more competitive. Specifically, firms that offer good value products will gain from those whose business strategy relies on deception and subterfuge.

Will anyone use these choice engines? Have you ever used a travel web site to book a flight or a hotel, or a restaurant searcher to find and book a reservation? If so, then you are sophisticated enough to use other choice engines that could now emerge. It is a mistake to judge an innovation by what services are available now. When the iPhone came out there were not very many apps. Who could have imagined that you could now track how many steps you take with your iPhone or automatically send your blood sugar test results to your doctor every time you check it? Furthermore, the mapping services available on gps devices are only possible because government released the satellite data that make them possible.

In short, there might be a whole range of new areas of innovation that open up as a result of midata, many of which are likely to be dreamt up by the next generation of innovators.

Release the data, and the apps will come.

Richard has also recently written about the disclosure of information in the Harvard Business Review.


[1]www.tuulia.fi/corporate.htm
[2]www.marketingmagazine.co.uk/News/MostEmailed/1152799/Tesco-plans-open-data-Clubcard-Play-scheme/
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