Thanks very much. It's great to be here. My background has been diverse, but I spent a long time in the domain name IP address community. I was the CEO of ICANN for an incredibly long time, too much for my sins. So I come out of a background which understands talk about standards and technology in the Internet Engineering Task Force, etc. So I sort of thought half at home in the last set of sessions I've been in. But I also come with an economics and politics background, and that's really what we're talking about here.
So it's a change of pace, if you like, into the world of economics and policy, but I think an area of change which is exceptionally relevant for this community and potentially the expansion of what you do beyond the enterprise and what might be feasible in the next period of time. So let me take you through a set of ideas, analysis and principles that have been in discussion for quite a long time, particularly we've been doing this in Brussels for about five years. Who's we? And that's a lot of words, mostly for the website later.
Guide is a group of people, about 150 people from about 30 countries around the world who have a multi-stakeholder, completely diverse set of backgrounds, mostly in the policy, politics, law, implementation, software writing, code writing, about aspects of running digital and data systems. Our main thing that brings us together is that we are focused on the idea of the person being the main focal point for data governance and digital governance, rather than the company or the state. So that's our sort of framework we come to this point from.
And we've been working on an idea which we call the digital economy architecture, and specifically for Europe here. And I think the relevance here is there's a need for an economic and industry structure model to bind together. I think a lot of what this community and others have been working on for quite some time, if you like to see it as sort of a sort of a caravan to join, if you like. We started this work in 2019.
We did, we released a report in 2022. We've done an enormous amount of consultation with parts of the European context, so DG Connect, DG Justice, DG Consumers, DG Competition, etc. Lots of think tanks, World Bank. We amended our thoughts. We realised we'd said some things which were too complicated, so we made them simpler. We have this idea, last year, of an innovation digital economy act that we talked about. And we're in the process of doing more consultation about this.
If you're in the politics and policy game, your life is condemned to this sort of never-ending consultation process, but that's how you change ideas. And so we've been working on this quite a lot. So this is partly a collaboration between a bunch of really leading economists and then idiots like me who are just the stuff who do, you know, policy and networks and making technology work. So a mix of the two people. Let me switch to being an economist briefly.
If you think of the digital trade model, it is consumers who give money to a digital service provider and the digital service provider gives you a service. There we go. It's Adam Smith 101. And if your digital service provider then goes and talks to a manufacturer or a producer, that's e-commerce. That's the e-commerce style on one page. We all know that's supported mostly also by advertising.
And in that advertising space, the digital service provider receives payment from an influencer and in return for that, they give them information specifically about what the consumer or what the person wants. And that is modern e-commerce. And if that's what was happening throughout the entire digital world, I wouldn't be standing here, you'd be having more drinks, we wouldn't care because that works for the market. And it works importantly because consumers basically rely on 100 and 150 years of experience and legislation that supports them being able to to be able to make decisions.
I can hand back goods, I understand what I'm doing, I can make transitions, I can make comparisons. And in this world, you know the market works because the consumer's king. The margins in e-commerce are mostly very narrow. And that's normally a fairly good indication that the consumer is king in the way that market works. But you and I all know that that's not the whole story, is it?
Because, oh and we've got other producers who also get payments, I talked about that, because we all know that in return for this, the digital service providers take a vast amount of information from us. Nobody in this room, myself included, has any idea. That's Mr Shrems, he's probably the one person who has some sense of it, but almost none of us know exactly how much data is being pulled in about us. And that data essentially is a form of digital barter. And it's almost like serfdom, and it's literally like serfdom, if you think about it.
You go back a thousand years in this continent, and if you wanted to be, to survive, I'm a farmer, my family would all be sort of serfs. You know, for the right to actually get some food, I would be on your land, and on your land I get some food, because the right I have to survive, but you the lord get most of the rent, you get the benefit. So to a degree, we have the same thing going on here.
For the right to be in the digital world, I have to have your app on my phone, I have to interact with your service, in return for which you take a vast amount of information from me, and you monetize it, and you make the profit out of it. And that is both through the common advertising mechanism we've talked about, but it's also to subversives. So this is everybody from Toys R Us to one end, to the FSB and the other, right. So we don't know, we have an above ground system we sort of understand, and we have a below ground system we have no real idea about.
Very few people understand how the bottom system works, right. It's not just that it's advertising driven, because the use of that same data then gets shared right across the economy, and we have the risk in large parts of the economy that that data is being shared to other producers, allows, as we've pointed here, individualized and maximized pricing terms, what the economists call data-driven price discrimination. I'll give you an example from my home country. Most Australians have no idea that they're not paying the same house insurance price as their next door neighbor.
Indeed there would be no Australian household that pays the same price for their home insurance, because there's so much data available to the oligopoly of insurers that the insurers have basically maximized pricing across every household. And yet the consumers have no idea. It's their data that's been used to optimize price against them, and they've got no idea that's happened. So in terms of, you know, what do we do about that, we're a pretty conservative bunch. We actually quite like the idea of markets. Markets tend to work. They deliver good outcomes generally.
We're not saying there's not a role for government. There is, but markets generally work, and in this model those parts are markets. You can negotiate terms, you've got dispute resolution mechanisms, you've got skills, you know what's working backwards and forwards, but guess what? That's not a market. That is a form of serfdom. Facebook is the gift that keeps on giving if you're in this space. So can you think of anybody else who's got two billion customers and a contract that's the same for all two billion of them?
My contract lawyer professor back when I was a young fella would have said, guess what, it ain't a contract, but separately it ain't a market. Think about it. Think in your own business, your own segmentation. You've got a segment of, you know, different type of customers, you have different sort of terms for different sort of customers. They've got one set of terms and conditions. It's not a market. And what's the consequence of that?
Well, one of the consequences is the way this is presently working is that it's driven by one incentive system, one overwhelming incentive system, which is advertising, with a secondary one behind that, which is, as I said, price discrimination in the hands of other producers. What's the consequence of that? We have a huge misalignment of incentives across the market.
Now, I'll let you read that. You can read that faster than I can speak it through, but you will recognise up there problems that you have seen in your life, in your kids' lives, in the, you've heard in the media, you've heard of issues. There's a whole range of problems we have in the digital world, right? And one of the reasons we have all those problems is because we don't really have an operating market. We don't have a segmentation mechanism.
I know you can't go back here and find a segment for people who are willing to share data such that they can deal with a particular form of psychological weakness. Or I've got a segment who have got one set of needs around social cohesion and some people who like to be by themselves, right? All the things we have in markets of being able to make choice, we don't have. And as a consequence, these problems just fester.
Now, I used to run government agencies in Australia, and I'll tell you what happens when the market doesn't work. People complain to the government, right, as they fix it. This is a survey we have, one of our colleagues out of Canada has done. He does it on a regular basis. I won't go through detail. The stuff in the purple there is all to do with data, and it is people telling in 25 different countries around the world, telling governments, please fix the data problem, right?
So if the market doesn't work, people bitch to the government, and then the government gets told, you know, we've got to fix things. Guess what government does badly? Segmentation, because it's politically very difficult. So you tend to make one size fits all legislation, right? So what does that mean?
Well, here's an example. Just on data privacy, we have 137 countries with 242 laws. So for those of you who are doing international business, I bet your general counsels are always telling you the law in this country and law in that country on privacy affects you. And this is a consequence of not solving the problems of the digital economy through market-based mechanisms, pushing it back to government, and no governments, with the exception of the European Union and a few other places, it all looks different because every government's different.
So we have a proposition, and our proposition is fairly simple. It says, let's make the market work.
Rather than having a bunch of serfdom for people about the way their data gets used, and to a degree I would argue, rather than put your head in the sand and pretend that the data is not being used, and that's not so much about the European legislation but some views about that data can't be owned or can't be monetised, there's some interesting European law about that, some of that, what you should say actually, we think, is give consumers control over their personal data and who has access to it, but not just their personal data, what's important to the economy that that data can be relied upon.
So give consumers control over their verified personal data and who has access to it. Enable citizens to be able to negotiate the terms under which that data is being used and enable them to understand. Now a lot of the present European legislation is based around those ideas, however it has at its heart a vision of the individual interacting in the economy. That's what you do in your right legislation, you can't segment, right, you have to write this one size fits all for every citizen.
So the GDPR is atomistic individual, dealing with big company or dealing with big business, and we all know in complicated markets, in complex arrangements, we don't understand this stuff. So we're arguing do the same thing we've done in financial services, do the same thing we've done in labour markets, which is give people rights of association and importantly give them expert representation from people who know what they're talking about.
In Australia we have a thing called superannuation, it's like the American 401k, our whole retirement income is money that we have to save and put in the market. So we, you know, do I understand the details of what happens in the bond markets shifting overnight or what's happening in machine trading on particular shares in New York or, well that's a complexity of the market, no I don't.
What we have though in all that saving is we have financial advisors, it's what we've had in Europe in the financial market, you know, the people who give advice on financial services and they know there's only 15 or 20 questions that really matter to an individual. They help explain the detail, they've got the expertise to understand what happens in the market but also have enough knowledge to share it back to the consumer to say help make your own choices.
Now here's the funny thing, I don't fully understand the nature of those markets but I do think I'm making choices, I do think I have control, I do change how my money gets spent and it is my responsibility and there's many segmentations. Look how many different funds there are in the financial services world for retirement income, it's a reflection of segmentation and choice.
So part of what we've said here is when it comes to this issue of personal data and how it gets used in the data economy in the 21st century, people will be effective when they can actually negotiate in groups, have scale, have experts who can support them as well as as well as being having the right to negotiate. There are going to be some people for whom that's all very nice but it doesn't meet, doesn't meet the end bite right.
Now I, you know, you used to work in government, you always worry about the homeless, the refugee, the people have had to run away from broken families, people who, you know, people who are drug addicts, the people, you know, people on the fringe and in democracies we have to worry about people's on the fringe, that's very important.
So not only are we saying okay 90, 95 percent of the population, whatever it is, should have the ability and recognise they can look after their own interests but you should also have a mechanism where you impose fiduciary obligations on the use of data, particularly inferred data and that there should be a responsibility to ensure a very simple thing.
We have had for several hundred years around the world where you have a disproportionate amount of information on somebody else, doctor, patient, psychiatrist, patient, rabbi, member of the synagogue, you know, public servant and a member of the citizens, we've had rules which says you should handle that data in the best interest of the data subject. Well if we do it offline, why shouldn't we do it online?
Right, I can give you a case of a particularly spectacular, well-known international data provider, I'll state at that, who literally in Australia has been going around collecting information on people who are looking for basically drug rehabilitation centres and alcohol rehabilitation services, packaging that up and selling it to alcohol companies as an advertising opportunity. Do you think that's collecting data in the best interest of the subject?
All right, so we think you could do something on those and the last one is have a market structure and incentives to achieve accountable data commons. The European legislation has moved forward on data commons, this is data collected for public goods, how do you actually make it happen?
So we have said basically, and I'll come to this structure, you should have a linkage whereby consumers should have representatives or advisors who can help them understand, not only have I got the opportunity to choose, but what is a good choice, what am I trading off, what do I know, how does this data get used? I had no idea it got used for that, who's selling it for? Have an advisor who could say, listen that's great but I've got this list here of 30 names and don't give them any more data because we know what they do with it, right, who gives you that advice?
And then where's that data then going to be held? And we're sort of, we're neutral on this, but you know, in many big markets we've seen this, you know, large-scale data registries and such emerge, I won't go into that so much now, but you've got this role to produce your advice and you've got the people who have the role for managing key personal data machine-readable outputs and have this in a machine-readable context.
My own background from the DNS is the expectation that you would have this traffic running at, you know, milliseconds, the sort of resolutions you get in the internet now, not the yes I agree or not agree to getting these following cookies, not that rubbish, right, but the sort of one-off, yes I agree this is what I want and don't want and then it's automatic for the rest of the year until you change it again, right, that's sort of a model. And part of it also is it allows a transfer from the people who get the benefit of the digital data through to the people who are putting it in.
Now we're not saying necessarily payment, we're not saying necessarily pay for your data, although that may happen, but at least have some participation in the value created and give opportunities here for a market.
And in our thinking with more roles in various places there, I won't go that through in detail because I've got 50 seconds left, but you can get a sense of not only should you have the analysis of the market, but you need to put in place an industry structure and a process to whereby you can achieve the objectives, and we think that's a really big opportunity in Europe now, especially since January the 20th, to start thinking about not just the rights that have been established under legislation for the last five years or more, but how do you think about really making those rights turn into practical outcomes where it changes things, and I think this industry has a big role to play in helping to make that happen and get the benefit, frankly, of a new form of market structure.
We finish with we think that results with an alignment and that you actually have market forces applying across the entire of the digital economy, not just in parts of it. And I thank you. Thanks so much, Paul. Really good to hear some different ideas and go adjacent. There aren't any questions from the audience yet, so if you go quick, we can maybe pull up a question from the audience. In the meantime, I have a question for you.
If you were here earlier in the week, you would know that inclusivity is one of the things that we've been focusing on this year, and I was delighted that you mentioned sort of marginalised populations and refugees, and we had a spokesperson from the United Nations High Commissioner for Refugees here also keynoting. So what I know you mentioned, though, I just wanted to get clear in my mind, could digital expert advisors play a role in reducing digital exclusion, especially for vulnerable populations who lack sort of digital literacy and trust in digital services?
Yes, we had an interesting discussion about that in the group, and people said, well, you know, how are we going to do that? And we said, hang on. One of our basic mantras is, if we do it offline, why can't we do it online? And in the offline world, we have a lot of groups that work with those communities who understand their issues, and in many respects, you could say, I don't need to build a new bunch of lawyers who look after that sort of group.
There are, for the blind, all sorts of associations, there are people, UNHCR, there are other people who work with refugees, work with the homeless, they know their issues. They're probably the natural owners of being the advisors for those sort of segments.
Okay, great, thanks. And then, what incentives are envisaged for startups and SMEs to integrate with this kind of ecosystem? How will they access or offer digital expert advisor services?
Right, I think this is very important. Imagine a Europe where there is 40, 50 organizations playing that role of being that advisor, and helping people think through how their data should get used, and helping putting into code, they're helping the putting into code, something like EPP, or some similar thing, here's a code which lets you decide what people's preferences are.
I now have, if I'm a doctor in, let's say I'm an endocrinologist, I'm from Prague, I want to do some research about nature or some cancer of some sort, how do I actually go about finding a group of people who are willing to participate in my market presently, who are willing to give me data, in the data commons, under existing European legislation, how do I find those people to join?
Now, I can go through the public health process, pretty complicated, or, you know, I run advertisements on Facebook, all right, how do I, but let's say I turn around and I can go, okay, I am going to go to ten, five of these groups who have got, you know, ten million members each, if you like, and just put them, would any of your members be interested in participating in a long-term study of the effects of long-term COVID? And they may only get 30,000 responses out of those ten, you know, 40 million people who get responded. Guess what?
Those 35,000 people are more than you can get any other process. Now, that's an idea for the common good. I'm a start-up. How about I go to my VC and say, I've done a deal where 30 million Europeans will be proposed from these, you know, opportunities proposed to them, for 50 cents each, they will get a chance to look at it and tell me whether they like the product or not. We all know within a month whether we've got a business or not.
Now, most VCs, they either want to know you're going to go or you're going to die, right? They'll pay to know that.
So, it's going to unleash, as one of my economist colleagues keeps saying, don't get hung up on the privacy element, right? That privacy control is important. When you empower people to participate in markets, you unleash innovation you've never considered. If you think about, just I'll close with this, if you think about what happened in Europe and North America in the middle of the 19th century through to the middle of the 20th century, first of all, you let people with labour be able to be able to move their labour.
Hence, they're incentivised to get skills because they could move their labour. And then you say, I'll give you advice about how you can actually use your savings, so now I can shift my savings around. That's what created the middle class. That's what created the modern economy. Just that ability to make decisions and choices around two key parts of people's lives.
Okay, great. Thank you very much, Dr Paul Timmy.
