Is data the new oil?

Is Data Really the New Oil?

You may have seen the phrase ‘data is the new oil’ being bandied about recently and wondered why anyone would compare two things that are apparently so different from one another.

The truth is that this phrase has been around since at least 2006, with British mathematician Clive Humby commonly credited with coining it in that year. More recently, Intel CEO Brian Krzanich brought the phrase back into the spotlight again in 2016. So, what reasons are there for believing that data is indeed the new oil?

There Is More Data Than Ever Before

Perhaps this very first point actually seems to contradict the theory that data is the new oil rather than support it. After all, there is less and less oil in the world every day while the amount of data in circulation grows with each passing hour.

Yet, to fully understand this comparison we need to consider that oil becomes more valuable the scarcer that it becomes, as demand continues at a high level while we use up the planet’s finite reservoirs. Meanwhile, data becomes more valuable over time as more of it abounds in the world.

There are a few reasons why the presence of growing amounts of data increases it value rather than diminishing it. For a start, it is easier to draw conclusions and reach decisions based on 1 million or 10 million examples than it is from just a hundred or a thousand. This means that big data sets are inherently more valuable than smaller ones.

Also, as companies gather more and more digital information, they run the risk of being swamped by it all. Therefore, being able to access easily usable and tailored sets of data helps avoid the risk of being overwhelmed by useless data.

Additionally, those companies that gather data are becoming smarter than ever before about how they collect and then sell it. It is now possible to obtain highly specific and targeted data in a way that simply wasn’t available in the past. 

All of this means that the people who know how to gather and then exploit data are going to benefit enormously from doing so in the long run. Just as there is no benefit in living about a massive oil field if you don’t have a drill and a pump, so you can’t profit from tons of data if you don’t know how to handle it.  

As the amount of data continues to increase over time, so we can expect the demand for it to carry on rising too. At the present time, there seems to be nothing to suggest that we have reached anywhere near the limit of its possible future value.

Everyone Needs It But Few People Control Most of It

What do companies such as Facebook, Apple and Google all have in common? The answer is that these technology giants hold vast quantities of data that are, arguably, even more valuable than the main services that they provide.

It has been estimated that only about a fifth of all the information in the world is held on the internet, with the remainder stored by companies and organisations on their own private systems. This brings us back to the similarities with oil again.

Just as the exploitation and distribution of oil is largely controlled by a few nations and global firms, so a large percentage of the most valuable data around is controlled by relatively few companies. The effect is the same, as those who have the data or oil that everyone needs can control its price and availability.

Data can be used for a huge variety of reasons. From sales campaigns to election predictions and from big economic policy decisions to city planning, everyone wants the right data at the right time to meet their needs.     

Making decisions based on cold, hard facts and figures is far more effective that doing so based on opinions. This is why everyone wants to have the data that helps them move forward in the right way.

As well as big businesses, councils are also among those who need to use their data in the smartest possible way. With a huge range of services to provide and resources to allocate, it is vitally important that councils are able to access and effectively analyse large amounts of up to date data. 

While some authorities use this approach to predict future challenges, others use it to make their cities smarter and better to visit or live in. In fact, places such as Milton Keynes and Glasgow are regarded as being among the world leaders when it comes to collecting and using data to improve the quality of life for their citizens. 

It Can Be Analysed More Effectively Now

Of course, oil has been present under the surface of the Earth since long before we had the knowledge of how to access it and then use it effectively. Just imagine how different the history of the world would have been if our ancestors in the likes of the 4th, 8th or 12th centuries had learned how to power machines with oil.

If this had been the case then oil would have become highly sought after a lot earlier than it was. In this case, there would almost be no oil left in our days, as our ancestors would have used it all for their own purposes. 

Equally, we have typically had access to more data then could realistically be used. In the past, manual examination of information or limited computer analysis could only really put a small part of the data to good use.

Of course, there has never been any chance of our data running out like the fossil fuels will eventually do, although undoubtedly chances to obtain and useful valuable information have been missed in the past.

However, recent advances in computing have now made it far easier for us to analyse big data quickly and effectively. In particular, the spectacular success of artificial intelligence in the last few years now allows us to crunch vast amounts of data in little time, making data more valuable and more manageable than ever before.

This means that there are far more possibilities of putting good data to use, just as we now have a huge number of ways of using oil that never existed in the past.

To sum up, while there are some compelling similarities between oil and data, there are also a number of crucial differences. However, when we look at the subject overall it is easy to see why people are increasingly beginning to view data as being the new oil due to its growing importance, economic value and usefulness. 

Mostafa Hashem

Managing Director and Lead Consultant

Smartlytics Consultancy

www.smartlytics.co.uk