The price of privacy

I love it when economists and their ilk reduce a complicated issue in life to a simple line and chart (that’s what makes Freakonomics so popular). At the latest New York Tech Meetup, founder Sam Lessin did just that with my favorite topic: privacy and publicness. In a rebuttal to Clay Shirky’s Cognitive Surplus he said:

Privacy was once free. Publicity was once ridiculously expensive.

“Now the opposite is true: You have to pay in a mix of cash, time, social capital, etc. if you want privacy.”

Right. It takes effort to create privacy — or to build a private image, as Laurent Haug argues. If you decide not to bother, if you opt out of using Facebook, LinkedIn, Twitter, et al, then there’s now an opportunity cost: you miss making connections that have personal or economic value. That’s why people quite willingly give up what we used to think of as privacy: because it’s worth it to them. These are the new economics of privacy.

So maybe I can start to understand what Fred Wilson was talking about when he said there was money to be made in privacy, in premium privacy (because there’s now a premium on it). I’m still looking for concrete examples of how, but I’ll just bet Fred will invest in one soon.

Now let me make a caveat: privacy and publicness are neither mutually exclusive nor binary; they aren’t competitors at all times. So this is an oversimplification, which I’ll oversimplify even more:

Once-abundant privacy is now scarce. Once-scarce publicness is now abundant.

It’s the second half of that that interests me most since I’m writing a book about that.

So if we’ve seen Lessin’s Law on Privacy, then Jarvis’ Corollary on Publicness (which is my synonym for publicity because publicity as a word is so freighted with marketing meaning now) is this:

Now publicness is free.

So the old controllers of publicness — media and entertainment companies — can’t make money on it anymore.

The economics of abundant publicness mean that the old gatekeepers — editors, agents, producers, publishers, broadcasters, the entire media industry — overnight lost their power. That’s why they’re so upset. That’s why they keep complaining about all these amateurs taking over their sacred turf — because they are. What they thought was valuable — their control — now had no value. They can’t sell their casting couches and presses on craigslist for nothin’. They are being beat by those who break up their control and hand it out for free (Google, craigslist, Facebook, YouTube, etc.).

Abundant publicness also creates new value. Google search is made up of that value. Twitter movie chatter predicting box-office success is that value. Annotations on maps, restaurant reviews, health trends, customer desires — and on and on — all find value in our publicness and so new companies are being built on that value. That is why it is in the interests of both companies and customers to be public and why privacy — when it does compete, when it discourages publicness — becomes a nuisance for them.

Abundant publicness leads to the confusing economics of free: If everyone can create stuff, then stuff is no longer valuable. But your stuff can gain value for you if it’s spread around and remixed and is more public than the next guy’s. The way to make it more public is to make it free. That’s OK because it doesn’t have value anyway. So you have to find value now not from owning and controlling the stuff but from making it more public and extracting value through a side door: advertising, performances, reputation…. (If I were good, I’d turn this into George Carlin 2.0: you no longer want a place for your stuff, you want your stuff to be in every place).

Abundant publicness raises all sorts of issues around ownership. Who owns the wisdom of the crowed? The crowd? Or the company that adds value to it? See also the questions above about making free stuff public to gain value. You can’t make it public with DRM and ownership controls, or at least not the old ones built for a scarcity economy. Being public is about giving up control, which is the exact opposite of how media used to make their businesses.

Abundant publicness makes filters more valuable. See again Prof. Shirky.

Abundant publicness increases the value of reputation. See aplusk.

At the same time, abundant publicness makes fame a devalued commodity. See Lindsay Lohan.

I’m exploring these ideas for my book so please help me tease them out. What are the implications of abundant publicness and scarce privacy?

: Here’s Lessin’s talk:

Speaking of Fred Wilson, I came across Lessin’s talk because Fred recommended watching Twilio’s superb presentation at the Tech Meetup. It is, indeed, a model for such talks and here it is.

: MORE: Seth Godin just emailed alerting me to a typo I’ll leave above: “the wisdom of the crowed.” A spooner insight, he calls it: “But who are the ‘crowed’? They are the newly attended to, the newly famous. We crow about them, thus they are crowed. Does the insight of someone with a lot of twitter followers deserve more attention? Are they more wise? The wisdom of the crowed.”

He’s right. I was starting to dance with that question but let it go: When everybody’s heard, no one’s heard. So who *should* be heard? Or is that an old-media worldview speaking? There’s no longer the media structure to decide should’s. Do people rise on merit of what they say? On tricking Google and Twitter? On outrageousness? On authority?