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From Atoms to Bits: the Data Economy is real. Part II

The world of atoms can be mirrored into bits using sensors. Bits can be interpreted as data and data can be correlated and analysed generating more data. We can use the awareness created by data analyses to influence the world of atoms.

The Data Economy

The Industrial Economy is based on atoms, although in the last 50 years it has leveraged more and more on bits to make the manipulation (assembly, transport, use) of atoms more effective, to the point that most of today’s industrial economy would come to a screetching halt if computers stop.

Today we have a Bit Economy flanking the Industrial Economy. There are some profound differences among the two, like the almost zero cost in delivery bits (the logistic chain for bits is highly simplified), the duplication of bits is basically free and giving out a bit still let’s you keep your bit.

These three factors alone create a different set of rules for the Bit Economy where scarcity is no longer an issue, hence price is no longer tied to scarcity.

There is more. The lower cost in the manufacturing/distributing “bit-stuff”, very low capex involved, has opened the offer side to thousands, if not millions of players, from age 7 to 82, as Tim Cook pointed out in last week keynote. At the same time, the possibility to reach at basically zero cost every single person in the world connected to Internet (3.739 billion as of March 31st 2017 according to Internet World Stats) makes even small, niche, markets approacheable to small companies, cutting off, at the same time, the big players whose business models are not sustainable in niche markets. The explosion of offer targeting a fragmented demand has changed the rules of the game in several markets disrupting the big players.

As a further point the low transaction cost of the Bit Economy and therefore the higher efficiency in the whole production-delivery life cycle has and is chewing on jobs. In a way the Bit Economy is decreasing the overall market value, even the increasing volume of sales cannot compensate for the decrease unitary price decrease in several markets.

We are now starting to flank the Bit Economy with the Data Economy. The Bit Economy, in a way, is replacing atoms with bits, with the consequences I just explained, the Data Economy is using bits (data) as the new raw material and in a way has some similarity with the Industrial Economy. Raw Materials are precious, it is not enough to know that there is plenty, you need to get it and be able to process it. The value, however, is not only in the raw material itself, it is in the processing, in the knowledge that lets you create value out of it.

The Data Economy is about leveraging on Data to create value. We got plenty of data, but not necessarily all of them are accessible, and in many cases the more data you have and the trickier it is to process them, hence the processing becomes a differentiator. You can have access as anyone else to a text in Chinese or in Arabic or in Tagalog, however if you don’t know that language that text has no value to you. The value is created by those who have the knowledge to translate it into your language and that knowledge is not a commodity. We are starting to have better technologies to process data and create value out of them, like Deep Learning on the software side, but also new chip architectures to improve big data processing…

You may have open data, but you don’t have open processing nor open knowledge (in the sense that acquiring knowledge is a lengthy and time expensive endevor), meaning that companies can control the value. If I give you an information, we both have it, like for bits, but information is often time and context sensitive, hence it loses its value rapidly and you need to come back to me for an updated one. The rules at play in the Data Economy are different from the ones in the bit economy.

About Roberto Saracco

Roberto Saracco fell in love with technology and its implications long time ago. His background is in math and computer science. Until April 2017 he led the EIT Digital Italian Node and then was head of the Industrial Doctoral School of EIT Digital up to September 2018. Previously, up to December 2011 he was the Director of the Telecom Italia Future Centre in Venice, looking at the interplay of technology evolution, economics and society. At the turn of the century he led a World Bank-Infodev project to stimulate entrepreneurship in Latin America. He is a senior member of IEEE where he leads the New Initiative Committee and co-chairs the Digital Reality Initiative. He is a member of the IEEE in 2050 Ad Hoc Committee. He teaches a Master course on Technology Forecasting and Market impact at the University of Trento. He has published over 100 papers in journals and magazines and 14 books.