Data has been referred to as the new oil, the oxygen of artificial intelligence (AI) and even as the new plutonium. No matter the analogy, it’s clear that data is broadly deemed to have value. That’s as it should be. Data is at the heart of our intangibles-based economy. It’s central to innovation and new technologies such as generative AI. And it’s the foundation of all social media platforms. Data is, quite literally, transforming existing businesses and creating new ones, as we speak. It is the principal driver of economic growth and wealth in this era.
Surely something this valuable must have a well-defined method of valuation. But no. That is not the case. And this needs to change, urgently.
It’s not that there haven’t been efforts in the right direction. In 2019, Canada’s statistical agency, Statistics Canada, produced experimental estimates for the value of data in the range of $200 billion, for Canada alone. To put that in perspective, Statistics Canada estimated the value of Canada’s oil reserves at about $300 billion. Others point to the market capitalization of so-called big data companies such as Google, Amazon, Apple and Meta, which is in the trillions of American dollars (although the book value of tangible assets of these firms is in the billions, the difference being the inferred value of data).
But the truth is that even accountants, whose job it is to value intangible assets, haven’t yet figured this out.
Importantly, the value of data to a firm is not necessarily its value to society. When data is aggregated, it can reveal highly beneficial new insights — that can be used in, for example, new treatments in health care, improvements in traffic flow, the tracking of pandemics, better understanding of climate change and the like.
Conversely, aggregated data can be used for practices that are invasive and socially harmful, including the erosion of personal privacy, greater economic concentration and lower competition, promotion of disinformation, electoral interference, and even genocide. None of these factors is taken into account in market assessments of a firm.
These factors shed light on why no ideal, standardized methodology has yet emerged to measure data’s value either to the individual, to a firm or to society: that value depends on data’s use in a particular context. This context, in turn, is framed by governance — the rules and regulations that determine how data can be used. These laws and regulations vary, of course, across jurisdictions. But the absence of that methodology also reflects a lack of laws and regulations, or the inability to enforce these, especially around uses of personal data.
This gap in valuation leads to very important policy implications for Canada, several of which CIGI will explore at an upcoming international conference on the valuation of data. Here are three:
First, consider that there are pre-notification rules when a merger takes place between firms, so that if a firm’s revenues or assets are above a certain threshold, they must be reviewed by the federal Competition Bureau. Also, if the purchaser is a foreign company, it must comply with the Investment Canada Act. Currently, in neither case is the value of data assets included in that assessment, although acquiring the data may be the main purpose of the acquisition. These regulatory gaps have enormous implications for the protection of personal privacy, competition and even national security.
Second, private sector data is essential for the crafting of sound policy. Yet firms may be unwilling to share, unsure about sharing, or incapable of sharing that information, despite its potential use to benefit society. To unleash that value of data, firms need clear intellectual property rules, regulations and standards related to data use and reuse, and clear rules on data mobility. These, in turn, require sound privacy legislation, including in the areas of de-identification or anonymization, and interoperability.
Third, given the overlapping ways in which data permeates the economy, policy making must be adaptive. Although digital technologies touch on personal data and privacy, public health, and competition and consumer protection, policy making typically treats each of these areas separately, creating fragmented responses and overlapping regulation. That’s why a whole-of-government approach is required — one that must include all orders of government. To add to this complexity, policy structures must also consider what is happening beyond Canada’s borders.
Fully unleashing the value of data — for individuals, for firms, for society — requires sound governance, at the regional, national and international levels. Integral to that process is determining how we set data’s value. This should be the starting point of every current discussion about data governance.
A version of this article first appeared in The Globe and Mail.