Apr 2, JDN 2457846
The US Senate just narrowly voted to remove restrictions on the sale of user information by Internet Service Providers. Right now, your ISP can basically sell your information to whomever they like without even telling you. The new rule that the Senate struck down would have required them to at least make you sign a form with some fine print on it, which you probably would sign without reading it. So in practical terms maybe it makes no difference.
…or does it? Maybe that’s really the mistake we’ve been making all along.
In cognitive science we have a concept called the just-noticeable difference (JND); it is basically what it sounds like. If you have two stimuli—two colors, say, or sounds of two different pitches—that differ by an amount smaller than the JND, people will not notice it. But if they differ by more than the JND, people will notice. (In practice it’s a bit more complicated than that, as different people have different JND thresholds and even within a person they can vary from case to case based on attention or other factors. But there’s usually a relatively narrow range of JND values, such that anything below that is noticed by no one and anything above that is noticed by almost everyone.)
The JND seems like an intuitively obvious concept—of course you can’t tell the difference between a color of 432.78 nanometers and 432.79 nanometers!—but it actually has profound implications. In particular it undermines the possibility of having truly transitive preferences. If you prefer some colors to others—which most of us do—but you have a nonzero JND in color wavelengths—as we all do—then I can do the following: Find one color you like (for concreteness, say you like blue of 475 nm), and another color you don’t (say green of 510 nm). Let you choose between the blue you like and another blue, 475.01 nm. Will you prefer one to the other? Of course not, the difference is within your JND. So now compare 475.01 nm and 475.02 nm; which do you prefer? Again, you’re indifferent. And I can go on and on this way a few thousand times, until finally I get to 510 nanometers, the green you didn’t like. I have just found a chain of your preferences that is intransitive; you said A = B = C = D… all the way down the line to X = Y = Z… but then at the end you said A > Z. Your preferences aren’t transitive, and therefore aren’t well-defined rational preferences. And you could do the same to me, so neither are mine.
Part of the reason we’ve so willingly given up our privacy in the last generation or so is our paranoid fear of terrorism, which no doubt triggers deep instincts about tribal warfare. Depressingly, the plurality of Americans think that our government has not gone far enough in its obvious overreaches of the Constitution in the name of defending us from a threat that has killed fewer Americans in my lifetime than die from car accidents each month.
But that doesn’t explain why we—and I do mean we, for I am as guilty as most—have so willingly sold our relationships to Facebook and our schedules to Google. Google isn’t promising to save me from the threat of foreign fanatics; they’re merely offering me a more convenient way to plan my activities. Why, then, am I so cavalier about entrusting them with so much personal data?
Well, I didn’t start by giving them my whole life. I created an email account, which I used on occasion. I tried out their calendar app and used it to remind myself when my classes were. And so on, and so forth, until now Google knows almost as much about me as I know about myself.
At each step, it didn’t feel like I was doing anything of significance; perhaps indeed it was below my JND. Each bit of information I was giving didn’t seem important, and perhaps it wasn’t. But all together, our combined information allows Google to make enormous amounts of money without charging most of its users a cent.
The process goes something like this. Imagine someone offering you a penny in exchange for telling them how many times you made left turns last week. You’d probably take it, right? Who cares how many left turns you made last week? But then they offer another penny in exchange for telling them how many miles you drove on Tuesday. And another penny for telling them the average speed you drive during the afternoon. This process continues hundreds of times, until they’ve finally given you say $5.00—and they know exactly where you live, where you work, and where most of your friends live, because all that information was encoded in the list of driving patterns you gave them, piece by piece.
Consider instead how you’d react if someone had offered, “Tell me where you live and work and I’ll give you $5.00.” You’d be pretty suspicious, wouldn’t you? What are they going to do with that information? And $5.00 really isn’t very much money. Maybe there’s a price at which you’d part with that information to a random suspicious stranger—but it’s probably at least $50 or even more like $500, not $5.00. But by asking it in 500 different questions for a penny each, they can obtain that information from you at a bargain price.
If you work out how much money Facebook and Google make from each user, it’s actually pitiful. Facebook has been increasing their revenue lately, but it’s still less than $20 per user per year. The stranger asks, “Tell me who all your friends are, where you live, where you were born, where you work, and what your political views are, and I’ll give you $20.” Do you take that deal? Apparently, we do. Polls find that most Americans are willing to exchange privacy for valuable services, often quite cheaply.
Of course, there isn’t actually an alternative social network that doesn’t sell data and instead just charges a subscription fee. I don’t think this is a fundamentally unfeasible business model, but it hasn’t succeeded so far, and it will have an uphill battle for two reasons.
The first is the obvious one: It would have to compete with Facebook and Google, who already have the enormous advantage of a built-in user base of hundreds of millions of people.
The second one is what this post is about: The social network based on conventional economics rather than selling people’s privacy can’t take advantage of the JND.
I suppose they could try—charge $0.01 per month at first, then after awhile raise it to $0.02, $0.03 and so on until they’re charging $2.00 per month and actually making a profit—but that would be much harder to pull off, and it would provide the least revenue when it is needed most, at the early phase when the up-front costs of establishing a network are highest. Moreover, people would still feel that; it’s a good feature of our monetary system that you can’t break money into small enough denominations to really consistently hide under the JND. But information can be broken down into very tiny pieces indeed. Much of the revenue earned by these corporate giants is actually based upon indexing the keywords of the text we write; we literally sell off our privacy word by word.
What should we do about this? Honestly, I’m not sure. Facebook and Google do in fact provide valuable services, without which we would be worse off. I would be willing to pay them their $20 per year, if I could ensure that they’d stop selling my secrets to advertisers. But as long as their current business model keeps working, they have little incentive to change. There is in fact a huge industry of data brokering, corporations you’ve probably never heard of that make their revenue entirely from selling your secrets.
In a rare moment of actual journalism, TIME ran an article about a year ago arguing that we need new government policy to protect us from this kind of predation of our privacy. But they had little to offer in the way of concrete proposals.
The ACLU does better: They have specific proposals for regulations that should be made to protect our information from the most harmful prying eyes. But as we can see, the current administration has no particular interest in pursuing such policies—if anything they seem to do the opposite.
Human Economics 