Part 2: E = mc2 = Value

Part 2: Data As An Asset

The concept that everything of value can be understood as energy is deeply rooted in various disciplines, from physics to economics. Einstein's equation, E=mc2, highlights the intrinsic relationship between energy and mass, suggesting that any matter is essentially condensed energy. This principle can be extended to the idea that any tangible or intangible entity's value is linked to the energy within it or the energy needed for its creation or access. For instance, human labor, whether physical or intellectual, involves energy expenditure, which is often compensated with money, symbolizing the energy's value. Similarly, every product or service we value demands energy for its production, from raw material extraction to the intellectual energy for innovation. Even abstract values like knowledge or time can be perceived as energy forms. Furthermore, art, which holds significant value, requires creative energy, and its value can reflect the energy it evokes in its audience. On a broader scale, economies optimize the production, distribution, and consumption of goods and services, all representing or requiring energy. Even our relationships, which many deem invaluable, are built through emotional and time energy. In essence, the value of anything can be seen as a representation of energy.

Transitioning to the topic of personal data, in today's digital age, we generate vast amounts of data daily, from demographics and web browsing habits to social media interactions and purchasing behaviors.

This data, much like energy, holds immense value. Every click, like, share, and purchase is a digital footprint, a piece of energy contributing to the vast digital universe. As energy is harnessed for various purposes, businesses, governments, and organizations collect, analyze, and utilize this data for multiple objectives, from targeted advertising and personalized recommendations to policy-making and research. As technology advances, the amount and types of data we produce expand exponentially. Devices like wearables, IoT devices, and even autonomous vehicles continuously gather data, creating a digital mist surrounding us. This omnipresent data, combined with advancements in artificial intelligence, is shaping our future, driving economies, and redefining the concept of value in the modern world.

The Metaverse

Virtual worlds and metaverses have recently received a bad reputation due to the backlash against Facebook, censorship, and its name change. The two have nothing to do with each other. Many people have dismissed the idea of the metaverse as something for kids to play in, like Roblox or Fortnite. However, this is a mistaken point of view.

One example of the metaverse's potential is Nvidia's Omniverse technology, which BMW uses to simulate its factories in virtual space. This has allowed BMW to completely transform its factory operations by simulating entire factories and testing reconfigurations in the simulation, making the process faster and less painful. Additionally, the digital twin of the factory can be used to train people before the factory is even built, using non-verbal data to personalize training and engagement.

The metaverse has enormous potential for industries beyond gaming and entertainment. Even BMW's advancements will inevitably be transformed into augmented reality. As a human, I can now be embedded in virtual spaces and interact with things personally, regardless of my learning style or language skills. This technology is already in use and is fueled by data. The usefulness of virtual spaces and simulations is vastly underestimated, and dismissing the idea of the metaverse as mere hype is a profound mistake.

Amazon uses Omniverse to simulate their fulfillment centers, while Kroger in the US uses it to simulate retail spaces and customer flows around them. Once these environments are simulated, it opens up possibilities for training, reconfiguring physical spaces, and even training human beings.

This super network of connected objects could eventually lead to a one-to-one simulation of the entire world in virtual space, like a mirror world. This could bring about significant changes in our lives, including travel. The data story is profound, and we are on the cusp of something we couldn't have imagined before.

Data as Currency

The idea of a mirror world, a virtual space fueled by a constant data stream, is becoming increasingly important. Data is becoming a new form of value, even a currency. Data is being turned into tokens and traded in small contracts, known as tokenization. This means the data will become tokenized and treated as any other asset. For example, people can own their data and trade it with others physically, allowing them to use it. People may even lend their data for a credit check and receive payment through a smart contract. Data trusts will manage individual data, acting similarly to traditional banking custodians. This will effectively manage all data as an asset in a portfolio.

This is not by chance but rather a combination of technologies elevating data owned by the citizen. It will become a traded currency and one of the most liquid assets ever. Many organizations and technology companies are emerging in this field, playing a role in different facets of this virtual world. This is an incredible concept that will transform our understanding of data.

The Value of Data

As a consumer, I possess valuable data based on my behavioral patterns, preferences, tastes, and identity. This information helps organizations understand who I am, what I like, and what I've done. However, we often need to fully comprehend the terms and conditions to give away our data. For instance, when we upload a photo to social media, we unknowingly grant access to our data for advertising purposes. Therefore, one use case for data is allowing consumers to take control of their data and decide how to use it.

Another use case is for businesses to use our data to create personalized experiences, environments, and virtual spaces. However, not all data is created equal, and its value depends on its utility and exchange. Moreover, the data set that was once considered worthless can suddenly become valuable in a different context. Therefore, new value systems for data will emerge, and many other use cases for data will arise.

People will start to control their data and draw value from it by licensing or selling it to third parties, including personal data, behavioral data, purchase history, taste and preference data, and media consumption. Third-party organizations will seek to buy this data to sell products to consumers. Data power virtual worlds and virtual spaces, and organizations will begin to seek out this data to construct simulations and virtual spaces.

Overall, data will be in short supply, even though it is abundant, driven by those who own it. This will give rise to new value systems for data, and people will have more control over their data, enabling them to draw value from it. Today, people are pooling their data into a data pool sold on an innovative contract exchange, and everyone who is part of the pool is rewarded for their contribution. These emerging models will power the new technologies, and engaging with regulators and enabling this ecosystem is essential rather than trying to play catch-up.

The Emergence of Platforms

New platforms allow people to connect and combine their data with others. The resulting combined data is more valuable than its parts, creating an instant data business with others. For example, combining a data fragment with someone else's data can make a worthwhile business puzzle. Even central governments could use such data to simulate the London road system in real-time. This trend is set to reshape the economy and the banking system but also raises regulatory questions.

In addition, the financial system will change with the rise of data ownership. Traditionally, the merchant was on the supply side, and the buyer was on the demand side in the money markets. However, data ownership changes this dynamic. Now, individuals are on the supply side, and merchants are on the demand side. The value of data can be determined either in bits and bytes or at a token level. In the future, as individuals own their data, tokens and smart contracts will replace fiat currency as a means of exchange.

All of these changes have the potential to shift how we perceive value fundamentally. Data, reputation, and core values are becoming forms of value. Data exchange is part of a universal value exchange driving the digital world. A new generation of consumers is already engaging in this world, and their view of value differs significantly from ours.

What is Value

Acknowledging the underlying principles and signals Fortnite, Roblox, and Horizon World games are sending is important. Rather than dismissing them, these examples demonstrate a significant shift in values and what is considered valuable. Understanding this shift on a deep, philosophical level is crucial, especially as information is becoming a part of the physical world.

We have entered an era where technology such as the metaverse, virtual reality, open banking, 5G networks, and AI have converged, enabling us to reshape how we perceive and define value. Apple's recent introduction of new technology creates a new channel that has the potential to revolutionize how we prove our identities. This pivotal moment has placed us on a path toward a world where people will expect these experiences, but regulators and businesses still need to prepare for what is to come.

Apple Vision Pro's augmented reality technology could be a significant breakthrough, adding a digital layer over the physical environment blurring the line between digital and physical worlds. This merging of digital and physical worlds could make an individual's data more valuable than their labor. However, we must exercise caution because financial inclusion is still a problem, as many people need access to smartphones and are unbanked because they need identities. In the short term, we must ensure everyone can access and monetize creative data footprints. Otherwise, we risk creating an even greater divide than we see in financial services. Regulators must play a role in addressing this issue, and we need to consider accessibility needs since these experiences are real and can have a significant impact.

Universal Basic Income

Data is becoming increasingly valuable and may become a Universal Basic Income (UBI) form. It could be used as a basis for determining an individual's value. We need to start looking at data from a different perspective and make the most of this. We must understand that we are experiencing a shift in how things work, and it is about more than just having a powerful computer or enough storage. Once we determine how to use data efficiently, we will understand its worth compared to human labor.

Data and Information

A topic of utmost importance is the lens of data and information. This lens raises profound questions about the nature of value, the meaning of work, and its function in society. These are crucial questions that macroeconomists constantly grapple with as they try to make sense of the bigger picture.

Creating a Data Footprint

By 2025, we will be creating a data footprint every 18 seconds. 90% of the world's data has been generated in the last two years alone. While you and I were talking, 5 million people searched Google. These numbers highlight the exponential growth of data, creating new markets and posing a threat to businesses that cannot keep up with this new form of liquidity.

We often discuss the emergence of open data, but most companies still need help to adapt to open payments and banking. As regulators push for more openness, businesses that need a compelling value proposition and the ability to tap into this new value exchange will fall further by the wayside.

Skepticism is good

We live in a time of significant change and must question everything we hear. We especially need to be skeptical that data has no value and cannot be used as a form of currency. Large businesses worth billions of dollars have been built on people's data. For example, Facebook generates much revenue through its advertising business. This business is built on selling access to data that lets organizations target advertising to specific groups of people. Despite concerns about the ethics of this practice, it is clear that data is valuable.

We need to raise an interesting question about what would happen if the internet went down in our current world, where data is so pervasive and valuable. Google is an excellent example of how deeply ingrained data has become in our lives. We rely on Google Maps to get from one place to another, and most people use Google to help with spelling. If Google were to go down, it would significantly disrupt our lives.

As we progress, the infrastructure story will become increasingly important. Many new infrastructures will run across various networks, and this data layer will run across multiple infrastructures, such as a 5G or 6G network or even a drone network. To stay connected, we must invest in the infrastructure that underpins all this technological advancement. Investors should consider companies that build the platforms we operate on. Additionally, areas such as cybersecurity, cryptography, and data protection between devices are untapped markets for investment. Companies like Google seek to acquire businesses that solve the security problems of data moving between machines. The enablers of this technological world are where investors should be looking to invest rather than virtual experiences.

The most exciting players in this space will be the ones that make and fuel it. We can compare this to the days of the Rockefellers and Carnegies when new railroads were being built. However, unlike those times, we don't need physical trains anymore. Instead, we have digital railroads where data will run across them. Companies will fight for railroads, such as FX or cross-border blockchain protocols. Eventually, these protocols will become the railroads, and the business models and data will run ubiquitously across them 24/7.

Conclusion

Conversations about value are fascinating. When considering infrastructure, it is crucial to consider computing power providers, such as chip makers and cloud service providers. The people who collect, distribute, and enable data utilization are critical. We must be concerned about security and privacy. There is a vast opportunity for those thinking about data, energy, and what this journey means as investors.