Database nation: the upside of "zero privacy"

Reason, June, 2004 by Declan McCullagh

IF YOU HAVEN'T noticed it already, flip back a few pages and take a good look at the front cover. Unless you picked this magazine up on a newsstand, you should see your neighborhood's grinning mug shot, exposed in all its glory from above. Depending on where you live, you may be able to glimpse your neighbors' homes, a gas station or two, and perhaps the local elementary school.

Welcome to the database nation, where the tiny chunk of data that represents your physical address can pull up an overhead view and driving directions to your front door. And that's not all. When your address is linked to databases like those used by Yahoo! People Search, your phone number may be readily accessible. Your county government's Web site probably displays your home's floor plan and assessed value, letting nosy neighbors chuckle over Alice's quaint split-level or Bob's lack of elbow room when the in-laws visit. Pay-as-you-go databases like Lexis-Nexis' P-TRAK, P-FIND, and P-SEEK tie together mortgage records, vehicle registrations, court judgments, bankruptcy histories, and any other public information they can gather. Google and Yahoo! can record every search you've ever made and link it to whatever computer you used at the time. Credit card companies know what you buy, frequent shopper programs know what you eat, and your insurance company knows what medical procedures you've undergone.

Is it any wonder that public concern about privacy has risen dramatically during the last decade? Self-help and advocacy books abound, with titles like I Love the Internet But I Want My Privacy Too! and Privacy for Sale: How Big Brother and Others Are Selling Four Private Secrets for Profit. Hundreds of privacy-related bills have been proposed in the U.S. Congress and state legislatures. In a February 2003 Harris poll, 69 percent of those surveyed agreed that "consumers have lost all control over how personal information is collected and used by companies." That view was summed up with cynical certitude by Sun Microsystems CEO Scott McNealy. "You have zero privacy anyway," he said a few years ago. "Get over it."

What McNealy didn't mention, and polls and politicians don't recognize, is the unsung benefits that have accompanied the data-basification of American society. More precisely, they're unacknowledged or invisible benefits. It's easy to complain about a subjective loss of privacy. It's more difficult to appreciate how information swapping accelerates economic activity. Like many other aspects of modern society, benefits are dispersed, amounting to a penny saved here or a dollar discounted there. But those sums add up quickly.

Markets function more efficiently when it costs little to identify and deliver the right product to the right consumer at the right time. Data collection and information sharing emerged not through chance but because they bring lower prices and more choices for consumers. The ability to identify customers who are not likely to pay their bills lets stores offer better deals to those people who will. In films like The Net and Changing Lanes, Hollywood tells us that databases can be very dangerous. The truth is more complex. Being a citizen of a database nation, it turns out, can be very good for you.

Mistreat Me, Please

When Safeway or Giant offers you a supermarket discount card, it's not because their executives are making value judgments about whether it's appropriate for you to nosh on mocha fudge ice cream instead of wheatgerm-infused organic macrobiotica. They don't care. Instead, supermarket managers use the cards to evaluate the effects of promotional campaigns, understand the impact of price on consumer demand, and make better predictions about what you might be looking for on your next shopping trip. IBM even sells grocers software to "quickly roll out a loyalty program designed to reward and retain your best customers and track shopping patterns." Technological innovations are crucial in the cutthroat supermarket business, where profit margins hover around 2 percent and sales at rival superstores like Wal-Mart and BJ's Wholesale Club have been increasing by 19 percent a year. Far from a means to snoop on customers, discount cards are more like a way for supermarket chains simply to survive.

Some vocal activists don't see it that way. A group called Consumers Against Supermarket Privacy Invasion and Numbering (CASPIAN) has sprung up for the sole purpose of condemning supermarket discount cards. "We've got to stop supermarkets from manipulating us into surrendering one of our most intimate possessions--the ability to make reasoned, non-coercive decisions about how and to whom to disclose intimate information about ourselves," CASPIAN warns. "How can supermarkets justify this vicious mistreatment of the very patrons who keep them in business?" Simple: Nobody is forcing shoppers to sign up for discount cards; they do it because the benefits outweigh the costs.

The implications of living in a database-driven society go far beyond supermarket cards. Consider Gateway, which in 1997 was looking for a way to boost Internet purchases of its computers. It decided to offer would-be purchasers a way to obtain instant credit through its Web site. By filling out an online form, customers could apply for immediate financing and, in nearly all cases, receive an answer in just 15 seconds.