In Part 1 of my Post, Privacy is Dead, I estimated that giving up Privacy in exchange for a number of benefits could be worth as much as $10,000 per year to an individual.  While this isn’t pocket change for most of us, for someone making minimum wage, this might represent 6 months of work.  Let’s take a deeper dive in where that $10,000 number is coming from.

Privacy Property

Why should a company, either your phone company or a bank, be able to share information about you?  Because it creates a new type of property…Privacy Property is the new Intellectual Property.  Google and Facebook have both been very successful at leveraging this Privacy Property to create a new source of wealth.  And we welcome it for the same reasons that we wanted credit scores.  There are scores of new types of Privacy Property that have been created in the last 10 years, and some that have been made even more valuable.

  • Credit – $2,000/yr to $4,000/yr – Today, the average American has approximately $200,000 in debt between mortgages, cars, student loans, and credit cards.  Just one percentage point of difference on a loan could mean thousands of dollars per year in value that this sharing of private information creates.
  • Book Reading – $100/yr – Librarians have a long tradition of protecting what books their patrons are reading.  They’ve fought and won to protect the FBI or other groups from being able to find out who checked out books like “Mein Kampf”.  As it turns out, perhaps that fight was all for nothing.  With eBooks, retailers like Amazon and Barnes and Noble have the ability to not just track what books you have read, but they can provide detailed demographics back to the publishers, who in turn can use this information to tailor books at their audiences.  In addition, they can figure out things that were impossible before, like what pages or passages were most bookmarked, what chapter caused people to lose interest and stop reading.
  • TV Viewing habits – $500/yr – Arthur C. Nielsen created a company starting in the 1950s that tracked what television programs their subscribers watched.  Subscribers were paid for this information.  Today, this information can be gained without special tracking equipment.  TiVo has the ability to not only track what we watch, but how we watch it…which became especially clear when they reported that Janet Jackson’s wardrobe malfunction during the 2008 Super Bowl was the most replayed video ever.
  • Driving History – $100/yr to $1,000/yr – For years, Insurance companies have used driving history to help underwrite their insurance practices.  Today, they have begun using “black boxes” to track how their customers are driving, whether they stop or speed, where they drive and when they drive.  Their customers love this, because they can save hundreds or thousands of dollars per year.  Loss of privacy creates value.
  • Shopping Habits – $1,000/yr – For years, advertisers have tried to figure out what makes a shopper tick.  Now they don’t have to.  Companies like Amazon can figure out what you will like before you know it.
  • Video Rental – $500/yr – Your movie watching history is critical to figuring out what you’ll want to watch next.  Netflix has come up with their own algorithms that can predict better than their competitors what movies you want to watch.  If they know what you want, the more likely you are to buy it, and buy it from them.  The next Step for Netflix and Hulu, Blockbuster, Amazon, and others is to let you tell your friends about the great movie you just watched…but to do that in an automated fashion, they need to get Congress to change the VPPA.  Oh, wait, Congress just passed that in January of 2013!  Welcome to the future!
  • Location Information – $1,000/yr – Today, Google will customize your search results based on where you are, so you get results in your city, not just anywhere in the US. Your location information can be used to better target advertising to you.  This was naturally the case when television advertisers bought airtime based on the region you lived in.  Google already knows where you are generally based on your IP address, mobile technologies take this a step further.
  • Change of Life Predictors – $500/yr – Today, Credit Card companies know enough about your daily habits that they can predict, for example, when you are going to get divorced or have children.  Not that those two things are related.  These major life events can have a large impact on your risk profile, perhaps reducing or increasing your credit rating profile.
  • Health Records – $1,000/yr HIPAA was originally enacted, not because of Privacy concerns, but because there was a need to move from paper health records to electronic ones.  Just like any other business, this was cost driven.  Electronic insurance claims processing has helped reduce health care costs.  Just imagine how much more expensive health care would be with only paper records.  The future is complicated.  Should individuals who smoke or drink have to pay more for health care?  Your employer says yes!
  • Free Stuff – $1,000/yr – Remember in the early 2000’s when you could get free Internet Access or even a free computer if you signed up for a service that would display a constant stream of advertising to you?  It’s possible in the future that a clever company could provide you a cellular smart phone for free with no monthly fees.  All you have to do is let it track your every move, pop up location based advertising wherever you go.  Let it show you ads based on what you say in text messages just like how Google advertises in their mail.  Sell your driving habits to insurance companies without the need for a black box.

Privacy Property is great when you live in a country where you aren’t worried about government persecution.  It becomes dangerous if this can be used against you.  Because of their history, this is why European countries consider Privacy a “fundamental human right”.  Other countries with repressive control generally snoop on Facebook posts or text messages in order to suppress the flow of information.  There is a high “Privacy Inheritance Tax” that can wipe out any benefit, and perhaps cost people more than their money.  And just like with other violations of privacy, oversharing can enable stalking, which is why Congress is considering passing Location privacy rules.  In December of 2012, the Senate Judiciary Committee voted in favor of Sen. Al Franken’s (D-Minn) Location Privacy Protection Act.
Facebook’s Chief of Privacy was quoted as saying that they are working to get rid of surprises.  That seems to address privacy issues…so long as people aren’t surprised by what they are sharing, then it’s okay.  As long as we’re getting our Inheritance, we’re happy.  Hopefully we don’t find ourselves cut out of the will.

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