On the Web, if you can't see the Free Lunch , then it's You

Tuesday, September 21. 2010

On the Web, if you can't see the Free Lunch , then it's You

The text below was from a post to the VRM forum, and it is informed by the analysis we did on "FreeConomics (see the O'Reilly Web Expo presentation here)

I think we are in danger of making the error of thinking that privacy is largely a technology rather than an economics problem.

If you use someone else's platform they will have to eventually extract rents from it to sustain it. The less relative power you have, the more exacting the rent. If you won't pay the rent in cash, they will take it in other ways, such as datamining and/or selling your details.

The only - and I mean only* - way this will change is if one either:

(i) pays the price for keeping a neutral "Trusted Party" up and running
(ii) ditto to keep one's own data.

My view is that the economics of "keeping your own data" is easier to pay for as "business as usual" rather than something most people will actually pay for separately. Thus one option is P2P tools one can download a la Skype, that create a credible alternative

The other parties that can fairly easily run the "Trusted party" system are:

- the ISP, as part of your monthly subs.
- The payment network (Visa, Paypal) as part of the payment service

On the "free" internet, someone is subsidising everything, and if you can't see the free lunch then it's you

* Apart from accepting advertising of course, but that is so interlinked with datamining online these days.

Posted by Alan Patrick in Identity / Profiles / Trust at 17:34 | Comments (2) | Trackbacks (0)

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Very nicely put. The interplay of eceonomics and technology here is 'Transaction Cost Economics'. The websites load the costs onto the user, there's a very strong incentive for them to do that. You can exercise your freedom on Facebook and control your privacy if you have the patience of a saint and the brains of an MIT postgrad. Everyone else is fair game.

#1 Gordon Rae (Homepage) on 2010-09-21 23:19 (Reply)

Spot on re transaction economics.

I would also argue they also play on the same lassitude effect that those mail book clubs used, ie too much hassle to manage it.

#2 alan p on 2010-09-21 23:39 (Reply)

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