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California wants Silicon Valley to pay you a data dividend

The Golden State thinks tech companies should share the wealth.

An outline of the state of California is superimposed over a vast array of zeroes and ones.
Matt Anderson / Getty Images

It isn't a secret that tech companies collect your personal data and use it to make a buck. If you don't like it, stop using Facebook and Google. And the rest of the internet.

California Gov. Gavin Newsom thinks there might be a better relationship: Charge companies to use your information and give some of the benefit back to you. He calls it a "data dividend."

"We recognize that your data has value," Newsom said during his State of the State speech on Feb. 12.  "And it belongs to you."

The idea of paying consumers for their data -- either by letting them sell it or by taxing companies for the money made using personal data --  isn't entirely new. Academics have kicked the idea around for decades, and Washington State tried to pass a similar plan in 2017.

Newsom's suggestion, however, is eye-catching because it coincides with privacy becoming a front-and-center issue for many internet users. Calls for tech companies to get our consent to use our data have taken an increasingly urgent tone, putting those companies into damage control mode. Paying users for their data, as Newsom is suggesting, usually isn't on the table. His talk of a data dividend might change the conversation.

Now playing: Watch this: Stronger data privacy laws may be coming to the US

Another reason to pay attention to Newsom's dividend talk: California, the home of Silicon Valley, has some of country's most advanced data privacy laws. That includes the state's recently passed data privacy protection law, which aims to give users much broader control over their data, as well as more specific laws that protect schoolchildren's privacy and prevent employers from requiring workers to hand over passwords to their personal accounts.

CNET reached out to several major Silicon Valley companies for comment on Newsom's remarks. The companies either declined to comment or didn't respond.

Here comes legislation

While Newsom's suggestion was open-ended, a bill is very near completion. Common Sense Media, the same organization that spearheaded California's Student Online Personal Information Protection Act in 2014, has come up with a bill it plans to submit soon.

"While platforms are fast and loose with consumer data, they are not so willing to share what they are doing with the data or how much they are profiting," said Jim Steyer, CEO of Common Sense Media, in a statement. "We fully support the Governor's data dividend proposal and expect to introduce legislation that reflects that in the coming weeks."

The details of the bill, drafted by Princeton economist Glen Weyl, aren't public yet. Weyl said in an interview that the bill is unlikely to push for a straight tax on tech companies for using consumer data, nor will it try to create a specific wage companies must pay consumers directly. Instead, he hopes the bill will help groups of people bargain for a good return on the data they're generating for tech companies.

That's because data isn't just helping companies sell ads. It's helping them build the tool of the future: artificial intelligence. And once AI starts really taking off, it will earn tech companies a lot of money while putting some people out of a job, Weyl said.

"This is more of a big-picture answer to the questions about AI," Weyl said, "rather than a huge check in the near future."

Paying the price

The idea of paying consumers for their data first surfaced in the 1990s, when Kenneth Laudon, an economist at New York University, argued that access to consumer data was artificially cheap. Companies sent out junk mail, and consumers and the government paid with time wasted on unwanted letters and subsidized postal rates. Invasion of privacy also prompted feelings of helplessness and lost trust in companies.

"The cost of invading privacy is far lower than the true social cost," Laudon wrote. And that was in 1993.

To fix that, he suggested consumers should be allowed sell their data.

More recently, virtual reality pioneer Jaron Lanier wrote a book called Who Owns the Future? that focuses on the idea of paying users for internet content. Since then, Facebook co-founder Chris Hughes as well as academics like Weyl have argued that companies such as Facebook and Google should pay users for time spent searching, clicking and liking, either with a tax or in wages. Finance expert Saadia Madsbjerg of the Rockefeller Foundation said the data brokers who buy and sell information about your internet usage from ISPs and other sources should be taxed for selling consumer data.

California might be a powerful place to try the concept IRL. Laws passed in the Golden State tend to set things in motion nationally, like when the state legislators passed the strictest data privacy law in the country in June. That matters throughout the country.

In his book Click Here to Kill Everybody, cybersecurity expert Bruce Schneier points out that the toughest state law in the country becomes the de facto federal law for the tech industry, because every tech company has customers in all 50 states.

The only thing that can stop a law like California's is a federal law that supersedes it. After California's data privacy law passed, major tech companies including Facebook and Google asked federal lawmakers to pass a privacy law to create a national standard. Several bills have been introduced, but none has passed yet.

Some privacy advocates don't love the idea of a data dividend. They say public policy shouldn't create incentives for consumers to share data. Rather, it should help them keep their information private.

Marc Rotenberg, president and executive director of the Electronic Privacy Information Center, said a data dividend is more akin to a copyright law than a privacy law. Copyright law encourages people to publish their work.

"That's not how we understand privacy." Rotenberg said. "Typically, we want to restrict data or make available the least amount of data possible."

Balancing a payday with privacy restrictions

Alessandro Acquisti, a professor of information technology and public policy at Carnegie Mellon University, said concerns a data dividend will simply encourage people to share their information are valid, up to a point.

A data dividend should be balanced with regulations that protect privacy, he said. Otherwise, a data dividend "may create perverse incentives without ultimately addressing consumers' privacy concerns."

Acquisti said there's no reason Newsom's soon-to-be-unveiled bill can't strike that balance. What's more, a law may be the only way to return the value of data back to internet users.

"I do not believe that such a significant change in the policy of consumer data will be implemented by the tech industry," Acquisti said, "in absence of regulatory intervention."