For the past year we have been hearing over and over again that “data is the new oil”. So, I was curious to find the genesis of this reference. Ten to twelve years ago, if we looked at the market capitalization of the world’s wealthiest companies, they were oil companies. If you look at the market capitalization of the world’s wealthiest companies, 5 of the top 6 companies are data companies today. Therefore, it only seems to make sense that the analogy is related to the companies that have the most value in the world.
But is data really the new oil? Oil had a lot of value because it was a consumable and subject to the economic laws of supply and demand. Combine this with the perceived scarcity of the product, it drove the price of the product, and its value, very high. Is this the same with data? In the 90’s, author and noted speak in the area of future studies (a futurist) John Naisbitt wrote in his book, Megatrends;
So how can we best characterize how data should be viewed today? As we have said, scarcity is not an issue with data and it probably won’t become one. Maybe we need to bring the spaceship up a bit. Maybe data is the new energy? There are many types of energy all around us and some are self generating, solar, wind, hydro, and geothermal to name a few. We are always trying to find new ways to harness these energies to provide the most value for the consumer.
Another interesting conversation is the fact that energy has driven a lot of legislation. Over the last decade or so we have started to see this around data as well. Compliance laws around SEC-17 are for financial data as well as HIPAA for healthcare data are all driven around the misuse of data or the protection or privacy of data. New, even stricter laws such as GDPR in Europe define who owns data that is collected and what can be done with that data. This begs the question, do we see more laws coming around the collection, usage, and ownership of data? I do believe we will see a lot more.
If oil companies haven’t been in the top 10 companies in the world (based on market capitalization) since 2016 (Exxon 2016), then what is the future of these data companies? Will they be around in a decade? If not, what replaces these companies? I would predict that entering the “data economy 2.0”. Data having value in an of itself was the first big realization that data was important. However, we are finding that it’s not just the data that is important, it is the meta data (the data about the data) that is adding as much value as the data itself. Not only is data growing, we are getting more information from the data making it that much more valuable. I believe it is the companies that provide the technology to help find intelligent ways to harness the data and identify how to extract the most value from the data, the fastest, in the most efficient way, become the next generation of large market cap companies. Now some may say that companies such as Facebook, LinkedIn or Twitter have identified ways to use data intelligently; and while that is true, they are really only utilizing a relatively small amount of personal data that is selectively given to them. If we think about how retail companies could start to harness data from multiple end points to get smarter, faster or how financial services companies begin to leverage more and different types of data to make better decisions around cyber theft, the companies that supply the technology to be able to execute these capabilities that will have the most value.
Which brings us back to “do we really want to compare data to oil” today? What should we compare it to? I was talking to a respected colleague the other day and decided to compare data to water. Water? Sure, as he put it; “the global hydration cycle means water never goes away, it just changes forms and moves around. Water makes life, it can take life, it builds, it destroys, it’s fuel, it’s thermodynamically near perfect, it conducts current, and people fight over it. Water is the shit!” I have to say, I agreed with this, so I stopped thinking about another analogy. But that shouldn’t stop you. Let’s think about it, what else would you compare data to? I do like the water analogy. Maybe now we say data is the new water. Just like water is necessary to sustain life, data is necessary to sustain a company. Or, maybe data has another analogy. Maybe data is the new space, the new frontier. Its vast and ongoing with no end in sight and one day, we will find new forms of life there to continue to prosper.
What do you think?