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Analytics Magazine

Analyze This! Dark side of the digital world

July/August 2014

Vijay Mehrotra

Big data, unintended consequences: What Amazon’s domination of the book publishing industry could portend.

By Vijay Mehrotra

Given my love of books, it is perhaps not surprising that Amazon.com – where, thanks to the digital technologies of today, a plethora of books can immediately be found about nearly any idea that pops into my head and be delivered (free with Amazon Prime membership!) to my doorstep with remarkable speed – is a website that I love deeply. Like many avid readers, I purport to do my best to support my local independent booksellers, but too often there is simply no denying the powerful pull of the super convenient, instantly gratifying, highly personalized Amazon.com experience.

Thanks to my bi-monthly book club, I recently read “Who Owns the Future?” by Jaron Lanier, a celebrated technologist and MacArthur “genius” award winner best known for his contributions to the field of virtual reality. Lanier is known as a big thinker, and in this book – at once rambling, provocative and thoughtful – he once again shows why.

“WOTF” begins with a bleak assessment of where digital technology is leading us all. The main thrust of Lanier’s argument is as follows:

  • Technology makes it very easy to give away for free a lot of things that people find valuable – just think about the search engine. Being human, we are conditioned to love the chance to get something for nothing, and we have gratefully grabbed at it with both hands.
  • However, the value that technology grants us is not actually free. In exchange, we tacitly give up information about ourselves, which is then stored as data.
  • Thanks largely to analytics professionals, this data is then pooled and analyzed to create a variety of commercial opportunities that would not otherwise exist.
  • This commercial wealth confers extraordinary power upon those who own the technologies that capture and analyze this data (Lanier calls them “Siren Servers”).
  • This power in turn enables the owners of the Siren Servers to have a huge impact on the society that we live in, including employment, government, culture and ideas.
  • Taken to their logical conclusions, all of this ultimately dooms the human species to a very sad and cataclysmic ending.

 

Along the way, Lanier also wanders off into pleasantly intense digressions on a broad variety of somewhat related topics, including Aristotle, the tenure system, biodiversity and the concept of local optima. He too clearly loves to read.

Impact on Publishing

While still digesting this thought-provoking book, I came across George Packer’s recent article entitled “Is Amazon good for books?” Taking a long hard look at Amazon.com, the website that perhaps most fully embodies Lanier’s concept of a Siren Server, Packer finds that many of Lanier’s more dire predictions are already playing out there.

Packer’s particular focus is Amazon’s impact on the publishing industry, and he believes that the stakes here are incredibly high: “In the book business the prospect of a single owner of both the means of production and the modes of distribution is especially worrisome; it would give Amazon more control over the exchange of ideas than any company in U.S. history. Even in the iPhone age, books remain central to American intellectual life, and perhaps to democracy.”

I wholeheartedly agree.

Just as Lanier predicts, suppliers and consumers alike had originally both rushed to embrace Amazon, for like so many technologies it seemed to magically (that is, without cost) provide all parties with something for which they hungered. As Packer writes, “When Amazon emerged, publishers in New York suddenly had a new buyer that paid quickly, sold their backlist as well as new titles, and, unlike traditional bookstores, made very few returns” – generating fresh revenues for publishers with little incremental investment. Meanwhile, we readers flocked to Amazon in droves for its convenience, its variety, and its low prices.

Amazon.com today accounts for more than 40 percent of all printed books purchased as well as 65 percent of all eBooks, so it is probably fair to say that book buyers by and large still love Amazon. For us as readers, this is fortuitous, since the number of independent bookstores in business has declined by more than 50 percent since Amazon’s founding. However, as its share of overall book sales has ballooned, Amazon has taken advantage of its market power to aggressively push the terms of its agreements with book publishers dramatically in its own favor, often through tactics reflecting Amazon’s famously secretive and opaque corporate culture. Meanwhile, Packer reports, the many publishers large and small whose businesses are now dependent on Amazon for much of their distribution and revenues are learning firsthand that, as Lanier sharply points out, “information supremacy for one company becomes, as a matter of course, a form of behavior modification for the rest of the world.”

Packer’s article also describes an Amazon culture that places a very low value on human beings that are involved with development, promotion and distribution of books, placing its faith in algorithms rather than editors and relying on volunteer (that is, free) reviewers to take the place of staff writers. All of this serves as a real illustration of Lanier’s premise that as more and more aspects of the enterprise are mediated by software, those in the business of carefully creating content (rather than digitally distributing it) will be increasingly de-valued and many forms of employment that have long-term value to our culture will subsequently perish.

Eliminating the Gatekeepers

While Amazon’s efforts at actually serving as a publisher have so far failed, it is clear that we can expect them to continue to pursue the holy grail of “eliminating the gatekeepers” from the world of publishing by producing its own original content. Indeed, one comes away from Packer’s article with the feeling that if Amazon’s founder and CEO Jeff Bezos could eliminate the need for authors and publishers by replacing them with automated content-generating software, he would not hesitate for an instant.

In fact, book distribution has from the outset been only a small part of Bezos’ vision. The real prize for Bezos has been the access to reams of consumer data and the ability to analyze this data for fun and profit. According to Packer, as early as 1995, Bezos had publicly stated that “Amazon intended to sell books as a way of gathering data on affluent, educated shoppers.” Indeed, today the $5.25 billion in book sales makes up only 7 percent of Amazon’s total revenues. This too is just as Lanier predicts in “WOTF,” which may be why it was somehow not available directly from Amazon.com when I looked for it the other day (it has since been restored somehow).

One book that I was able to find on Amazon.com was “Ethics of Big Data,” in which author Kord Davis asks a number of more fundamental questions about data and its place in the business world. As a longtime software/IT professional with a deep grounding in philosophy and the history of technology, Davis is equally comfortable discussing topics as diverse as digital strategy, supply chain optimization, application development and values-based management. As such, he has a unique perspective that motivates him to take these important – and very thorny – questions seriously. As he writes in the book’s Preface, “nobody in history has ever had the opportunity to innovate, or been faced with the risks of unintended consequences, that big data now provides.”

In particular, Davis identifies four major aspects of any serious data ethics discussion:

Identity: In the digital world, who we are is tacitly defined by the data we leave behind and indeed our own sense of self is often tightly intertwined with our online activities. Davis points out that capturing and analyzing our digital trail “provides others the ability to quite easily summarize, aggregate or correlate various aspects of our identity – without our participation or consent.”

Privacy: Does your decision to engage in a digital interaction confer upon other entities the right to utilize data captured in the course of that specific interaction, and to link it to other sources of data that may correspond to you? As Davis asks, “Does privacy mean the same thing in both online and offline worlds?…should individuals have a legitimate ability to control data about themselves, and to what degree?”

Ownership: Digital technology, data and analytics have given some companies the ability to turn individual users’ data into saleable assets and many others the capacity for improved decision-making and increased profitability. Intelligently utilizing data is something that we typically celebrate in our profession, but Davis again challenges this view by asking some very fundamental and thought-provoking questions: “Does our existence itself constitute a creative act, over which we have copyrights or other rights associated with creation? If it does, then how do those offline rights and privileges, sanctified by everything from the Constitution to local, state and federal laws, apply to the online presence of that same information?”

Reputation: Davis hits the nail on the head when he points out that, thanks to the ability of data to be combined and analyzed to drive inferential and predictive judgments, “the number of people who can form an opinion about what kind of person you are is exponentially larger and farther removed…” And while these online reputations are stubbornly persistent, the accuracy of this reputational assessment is too often an afterthought.

Call for Action

Unsatisfied with merely admiring the problem, both Lanier and Davis also call for action. Lanier proposes a technological and marketplace solution to the otherwise inevitable destiny that he believes digital technology, user data, and business analytics are rapidly leading us into, problems that are so vividly illustrated by the case of Amazon. He suggests an elaborate (though high-level) framework in which all personal data and creative works are tagged so as to enable their owner/creators to capture micropayments whenever and however their data/works are utilized. While his proposed remedy is at this stage sketchy at best, from my perspective he is to be commended for engaging us all in a conversation about a technology-enabled solution to a complex set of problems that few others are even willing to acknowledge.

Davis, like Lanier, is a technologist rather than a Luddite (as he quite rightly points out, “whereas big data is ethically neutral, the use of big data is not”). In “Ethics of Big Data,” he strongly encourages organizations that use data extensively (as well as the policy-makers who attempt to make judgments in support of social good) to have meaningful discussions about how and why we use data and what the ethical implications are of those actions. In his call for serious ethical inquiry, Davis asserts that “Organizations realize that information has value that can be extracted and turned into new products…the ethical impact is highly context-dependent. But to ignore that there is an ethical impact is to court an imbalance between the benefits of innovation and the detriment of risk.”

Especially, as Lanier would be quick to add, “with technology itself enabling the risk to be pushed off onto many, while the benefits are captured by an ever smaller few.”

As Packer reports, Amazon has given very little thought to the near-term ethics or the long-term implications of the way in which it has used its customers’ data to obtain its current level of market power. But as Amazon’s current battle [1] with publisher Hachette rages on, with publishers, governments and erstwhile business partners sure to follow, it is clear that this particular story is far from over.

As analytics professionals, neither is ours. We have a significant stake in the outcomes of these conversations about ethics and the future. As such, we would be wise to actively participate in those conversations. At this particular moment, we have considerable leverage to advocate for a digital future that reflects our own values.

The world of digital business – our own personalized Siren Server – has provided us with a massive, lucrative, and free channel for our products and services. Today’s digital enterprise depends so much on our ever-expanding ability to capture, transmit, store, integrate and organize data, and our deep capacity to use this data to summarize, analyze, correlate, predict and optimize. Through no fault of our own, we have been bestowed with The Sexiest Job of the 21st Century [2], and it is indeed tempting to believe that we are an integral and indispensable part of the world in which we live and work, and that we always will be.

Turns out this is exactly what the publishers thought when Amazon first appeared on the scene too. Beware: There is no free lunch.


Vijay Mehrotra (vmehrotra@usfca.edu) is a professor in the Department of Business Analytics and Information Systems at the University of San Francisco’s School of Management. He is also a long-time member of INFORMS.

REFERENCES

  1. For more on this, see http://www.nytimes.com/2014/06/21/business/booksellers-score-some-points-in-amazons-standoff-with-hachette.html and http://www.latimes.com/books/jacketcopy/la-et-jc-amazon-and-hachette-explained-20140602-story.html#page=1.
  2. http://hbr.org/2012/10/data-scientist-the-sexiest-job-of-the-21st-century/ar/1

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