Effects of Recommender Systems in E-Commerce Vary by Product Attributes and Review Ratings

Companies that are driven by data (e.g., Amazon, Facebook, Google) rely on data subjects, people who provide personal information to the companies, to determine if the firms’ services work as they are intended. Data subjects—whose personal data is collected, held, or processed by these companies—have long been considered consumers, but a new article suggests that it might be more appropriate to consider them as investors who are entitled to certain rights.

Data Subjects As Investors

The article, by researchers at Carnegie Mellon University (CMU) and Pepperdine University, appears in Berkeley Business Law Journal.

“In this new era of data capitalism, data subjects should be considered as investors because of their contribution to companies,” suggests Tae Wan Kim, Associate Professor of Business Ethics at CMU’s Tepper School of Business, who coauthored the article. “Justice demands that data subjects be aware of their contributions, claim their entitlements, and be treated as investors.”

Under current practice, data subjects typically do not have any substantive rights to their data once they transfer it to a firm. Thus, they are considered consumers, allowing the firms to collect information about them in exchange for a service. As currently understood, the firms that process the data are the rightful owners of it because they apply their labor to convert raw materials of data—usually some form of unprocessed information about the data subject’s online activity—which enhances the data’s value.

In their article, the authors argue that most people who offer personal information to firms should be considered investors and as such, are entitled to certain rights, such as control, information, and litigation rights. The authors also argue that the rights of data subjects to their data are already governed by a sufficient set of mandatory rules that distinguish them from consumers.

“We posit that data subjects should be entitled to claim additional rights that are typically associated with being investors because they qualify as investors in the objective sense, even though they may lack the necessary subjective condition of being an investor—an awareness of their legal part in the transaction,” explains Joseph Xu, Assistant Professor of Operations Management at CMU, who coauthored the article. “Data subjects’ initial and continuous support significantly affects firms’ business success and should be treated accordingly.”

Imagining a New Possibility

The authors argue that as investors, data subjects are entitled to receive financial security from the firm with which they share their personal information in exchange for their contribution of resources. Data subjects are justified in receiving this based on an analysis of the impact of their contributions to the firm’s balance sheet, the authors say. Furthermore, data subjects meet the objective condition of being investors in the firm because they retain a property interest in their data even after it is transferred to the firm.

The authors recognize that implementing their proposal will require overcoming technical and regulatory hurdles, but they say the challenges are not insurmountable. In fact, in some cases, such as tracking data-equity claims, systems could be used that are akin to reward programs like those for frequent airline travelers. They also acknowledge that more discussion of implementation of this proposal is needed, especially when it comes to issues such as maintaining anonymity and privacy, adapting financial regulations, and trading data-equity claims.

“Our idea is radical, and we are the first to defend it, so we expect resistance,” says Bryan Routledge, Associate Professor of Financial Economics at CMU, who co-authored the article. “But we are imagining a new possibility, something that could be a reality.”

###

Summarized from an article in Berkeley Business Law Journal, Are Data Subjects Investors? by Kim, TW (Carnegie Mellon University), Lee, J (Pepperdine University), Xu, J (Carnegie Mellon University), and Routledge, B (Carnegie Mellon University). Copyright 2020. All rights reserved.