We have all heard the terms “data is the new oil” or “our economies will be fueled by data” but to be honest I never really understood what people meant by saying this. I mean it is obvious that data is very important to things around here, but at the end of the day economies are made up of things and I can’t see how we replace all those things with data and all just eat, sleep and drive data. But actually to make sense of the importance of data you have to think about economies in a totally different way and it just came to me recently the connection between these things; data, services, token economies, and the sustainability thing.
Here’s my premise; as a function of information technology – among other things – we are switching from an economy of things to an economy of organization. I think the first thing to note here is that information is, on its most fundamental level, about organization. An economy based on information technology is a services economy, one that delivers value by organizing things into processes that deliver value to an end-user. A transport service, an accommodation service, catering service, all organize and integrate things into functional processes that deliver value to an end-user.
The interesting thing is that a true service economy is really based on very different objectives and principles to those of the industrial economy. The logic of an industrial economy is to mass-produce standardized goods and push them out to end-users, trying to get them to purchase as many units as possible. The aim is to produce and sell as many things as possible, with limited interest to how they interoperate with other providers, while in many ways the producer is incentivized for the product to deliver only a minimal service to ensure re-purchase again. The obvious result of traveling down that road is that we end up with too many things that don’t work together so well; the overall experience is fractured and degraded, we never really get the overall experience required to enable quality of life, just lots of nice things.
A services economy is about organizing things and it is actually quite the opposite of this. We want to maximize the value delivered to the end-user by organizing things into processes that meet their needs. It is only by continuously delivering value that the end-user stays subscribing to your service. At the same time, you are also incentivized to reduce the production and usage of things because people are just paying for the service; the cost of producing and maintaining things is on the balance sheet of the company. This is interesting because it means that the companies make money by reducing the production of things, which is the complete opposite of the mass-production model.
So this new form of the services information economy is about organizing things in a way that delivers maximum value while reducing the cost of physical maintenance. In other words, in this information economy, economic value is created by reducing the consumption of things while maximizing the service delivered; which is done by organizing things more effectively.
I think it is only in this context that “data is the new oil” makes proper sense because the way to deliver more with lower material costs is to know exactly what is needed, at a given time and place in a given context, to a specific user. Once a product has been “servitized” it is then data that is maximizing the difference between the cost and value delivered and thus maximizing returns to the organization.
I think that would be the essence of a sustainable economy, one that is set up – on a systemic level – to deliver more value with less consumption. We can note that the main thing that has changed here is the set of incentives that the producers find themselves under in a service economy – they are now making their money by conserving rather than consuming more material resources. This is what we mean by systemic change, you reorganize the system in such a way that it is by default set up to produce a different behavior, which it is radically more effective than trying to reduce emissions or asking people to recycle and be nice when fundamentally they are in a system that incentivizes them to do the opposite.
Ok, so I have probably just told you a whole pile of things you already knew, but here is the stuff you didn’t know – unless you are one of these token gurus, with a beard, sandals and a noisy computer in your basement mining bitcoins.
A token is a representative unit of value within a given economy or service network. The value of the token goes up as the perceived value of, and demand for, the network goes up. Whereas fiat currencies are transactional – designs to enable the exchange of products within a national economy – tokens are designed to access the value delivered by a network, thus the value of the token is linked to the value of the network as a whole. A company gains profit not necessarily on the transactional exchange of each product but on the growth of the service delivered by the overall network which is reflected in the growth of the value of their token.
The selling of products is becoming a commodity, the building of integrated service systems is where high value-added is, we might call this the “economy of organizing”. How does it work? You simply look for where things do not fit together around the end-users needs because of the fractured siloed nature of the industrial economy, whether that is multimodal transport, healthcare or a travel service. You create a protocol that enables all the different parts to interoperate and coordinate to deliver a more effective overall service to the end-user, you then create a token for people to access the service delivered by the network. You then try to maximize the service delivered by the network while reducing the cost thus increasing the token value. Potentially this systematically incentivizes producers to develop the value of the whole network rather than just sell products transactionally.
An information economy is a service economy, the economics of service is a token economy and a token economy is – potential – a systemically sustainable economy as if designed properly it works to value the whole and not just the parts. Because sustainability is not about the parts it is about the way the parts fit together into the whole, no amount of changing of light bubbles or energy-efficient cars will make it happen, you have to change the structure of the system – a whole new kind of economy that is focused on improving the synergies between the parts rather than the properties of the parts themselves.