Jacob Solomon is the founder and Chief Innovation Officer of Ketch, and a recognized authority in the fields of machine learning and AI.
Teddy Roosevelt joked, “He speaks softly and carries a big stick.” Too often, when it comes to policymaking, policymakers take the “big stick” approach of command-and-control regulation: sticks in the form of sanctions and bans to deter bad actors. Perhaps this made sense a century ago, but in the modern age, with the tools of behavioral science, we know that shoves are often more effective than sanctions. Most of the time, a focus on incentivizing good behavior is far more effective than tunnel vision alone at deterrence.
Case in point: I live in California, the epicenter of the climate crisis, where droughts and wildfires threaten suburban communities like mine. To encourage me to adopt sustainable behavior, the state has introduced a number of incentives, from property tax deductions for installing solar panels and other energy efficiencies on my home to tax credits and freeway access in exchange for drive a car. electric car. These are market-driven incentives, not big sticks, and they work.
The future of market-driven, incentive-based policy design is here, it’s just not evenly distributed. I think of this when I look at another big challenge across the economy: ensuring that data is used responsibly. Our world is extremely data-driven, but currently we are still stuck in the command and control stage. Drawing inspiration from Europe’s GDPR, jurisdictions focus almost exclusively on giving regulators a stick to punish bad behavior.
Applicable when the goal was simply to rein in the bad guys and prevent widespread abuse, to harness the full potential of the data economy, we need to aim higher. Compliance is just the beginning: we must also encourage innovation and incentivize good actors to develop new and imaginative paths towards the ethical use of data.
paths to change
Moving towards an incentive-based approach to ethical data will require action from three key stakeholders: governments, investors and consumers.
• Governments you can create top-down frameworks and official standards that make the use of ethical data more attractive and easier to validate. From tax incentives to public contracts, there are myriad ways that government actors can support companies that take ethical data seriously, reinforcing and validating their efforts and thereby increasing the cost of inaction for companies that they settle for simply complying with the regulatory baseline.
• Investors they can drive change by letting their money do the talking. If venture capitalists and institutional investors make ethical data a priority, just as the ESG crowd has done with ethical and environmental business practices, then companies will gain a powerful incentive to use responsible data management to differentiate themselves. and gain access to capital.
• Consumers they can also vote with their wallets by buying products and services from vendors that are serious about data and refuse to support companies that play lightly with their information. We are already seeing consumers turn away from companies experiencing data breaches; As consumers become more data-savvy, companies will increasingly see ethical data as a key selling point.
So the question is how can we achieve the critical momentum that will allow policymakers, investors, and consumers to harness their nascent power and create the necessary incentives to drive change.
I think the key challenge is to more clearly quantify and codify ethical data practices. Our current command and control approach makes it easy to define bad behavior, but struggles to articulate what we’re trying to move. toward. Attempts to explain why one data handling method is better than another quickly get bogged down in jargon and technical details that make sense to data policy experts like me, but fail to capture the public imagination.
To find a solution, we must look to the environmental movement. Green standards, such as the LEED system for buildings or the EnergyStar system for appliances, are backed by rigorous accreditation processes, but they are successful because they make it easier for stakeholders to compare technologies, products, or businesses without getting bogged down.
A similar approach, perhaps overseen and given credence by a consortium of regulators, consumer advocates, investors, and industry groups, could establish a clear and simple accreditation process for ethical data standards, allowing organizations to gain clear classification. Mere regulatory compliance could earn you a “Bronze” level, the most ambitious investments in new data technologies could earn you a “Silver” level, and active innovation and development of credible and imaginative new solutions could earn you a coveted “Gold” level. .
The great thing about a tiered data standard is that it allows us to look beyond regulatory mandates and dream about how things work. I might Look. As Konstantine Buhler of Sequoia Capital recently pointed out, once you begin to segment the privacy landscape, from companies that don’t even encrypt user data, to those that actively protect sensitive content, to those that fully leverage data infrastructure private and decentralized, it becomes much easier to see which organizations are driving things forward and which ones could be doing more.
With the data standard, a “Platinum” level can be reserved for companies that use advanced technologies to track every piece of data they process, with strong permissions to ensure that data literally can’t be mishandled by internal processors or downstream partners. That may sound like a stretch, but dreaming big and creating a market for genuinely disruptive solutions is the only way to drive the change we need.
Armed with a rigorous rating system, investors could make smarter decisions based on companies’ data practices: a venture capital fund could boast of backing only companies with Gold or better ratings, for example. Government actors could incentivize good data stewardship by issuing contracts only to companies with at least a Silver data rating. And consumers will also be able to make simple judgments about which companies to trust with their data.
When it comes to regulations, let’s talk softly through market-based incentives. Implementing a credible and intuitive data certification process is the first step towards that goal. Done right, it will allow us to go beyond compliance and harness the creativity and energy of today’s tech innovators to drive ethical data for all.
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