History has taught us that a leap in innovation is central to economic transformation. Humanity has gone through several notable economic transformations driven by innovation, from the Gutenberg press and the printing revolution that followed, to the assembly line and the Industrial Revolution. Today, society is witnessing the emergence of the data-driven economy and the industrialization of the very process of learning.
Although the data-driven economy is the successor to economic transformations of the past, many facets of it are unlike anything humanity has witnessed before. In this video, CIGI Senior Fellow Dan Ciuriak explains that there are at least five important ways that the data-driven economy is different than economic frameworks of the past: asymmetries in access to data (the central feature of the data-driven economy), the role of machine learning, rapidly increasing market concentration, new forms of trade and exchange value, and a new degree of systemic risk.
Coming to grips with these five features in a timely manner is of utmost importance to policy makers across the globe.
We have gone through, humanity has gone through, several transformations of the way that we innovate. From individual innovations, which were sporadic in time — the Gutenberg printing press, for example — to the Industrial Revolution where one innovation fed on the other, to the knowledge-based economy where we industrialized the very process of research and development to now the data-driven economy where we are industrializing the very process of learning.
There are at least five major points on which the data-driven economy has unique features compared to the economic frameworks that we have experienced in the past.
Perhaps the most striking feature of the data-driven economy is that it is based on information asymmetry. Firms that have access to big data, they have an information advantage over firms that don’t.
Artificial intelligence is the new thing which is driven by big data. The ability to digitalize our economies has created an information base that exceeds the capacity of the human mind to use, but does not exceed the capacity of the machine to use.
The last few decades have seen growing concentration across almost every industry globally. But the data-driven economy promises to have that effect “on steroids,” as it were.
Another interesting feature of the data-driven economy is that it gives rise to a new form of trade. The search engines, social media, for example, they acquire data that’s very valuable but nowhere is this acquisition recorded in terms of paper trail, of invoices and receipts.
The data-driven economy has created a new economic potential for gain, for wealth creation, but it also creates new forms of risk. So, if we take a look at data in that context, what would the nature of a meltdown look like? Could shut down entire economies, could be trillions of dollars of damage. Who knows? We haven’t gone through this because we’ve never yet had a digitalized economy.