If today’s data practices are causing people to feel disempowered and eroding their trust, then we have now entered a downward spiral – a race to the bottom – in which the competitive dynamics of the tech industry are increasingly at odds with the interests of individuals. Helping investors to find and track value around trust, privacy and user-managed identity — not surveillance — is the mission of “Race to the Top”. This initiative of the venture-capital community is explained by Magdi Amin in this blog post – “Race to the Top: A New Business Paradigm for Identity Data.”
Race to the Top stands for a new business paradigm for the use of personal data that prioritizes the trust of individual consumers of our products and services.
To build trust, Race to the Top collaborators prioritize the safety and agency of consumers and individuals in products and services. They incorporate user privacy protections in their startup requirements. Their investments are not only commercially good, but they build trust by taking an ethical, privacy-preserving approach to data.
Gathering Sept. 13 in Silicon Valley
The initiative has gathered steam with venture investors since a May 21 meeting at the MIT Media Lab. At least three more meetings to gather interest and feedback from investors and companies are set for Sept. 13 in Silicon Valley, and later in September and early October in Seattle and New York. A dozen or more venture investors have joined the working group, and more are invited.
“The context is that the group is developing principles and tools for VCs to use when we invest, to help make sure these investments are not only commercially good, but that they build trust with clients by taking an ethical, privacy-preserving approach,” says Amin, of Omidyar Network. The Silicon Valley meeting will hear from experts on emerging U.S. and EU privacy law, on how to understand and act on consumer sentiment, and ideas for investing principles and measurement tools that involve artificial intelligence and other capabilities.
Among key points from the MIT meeting:
- Polls show the public increasingly wary of privacy and data risk
- Do we need the data/privacy equivalent of the financial-service industry’s “Equator Principles”
- A RTTT goal is to get VCs to look over horizon to opportunity to solve data responsibility
- Need to convey investment risk inherent in mis-use of data; political risks
- Are user-controlled data co-operatives a possible solution?
- Challenge – How to get principles and tools to managements – and public?
- Challenge – How to make data ethics, and future harms, part of start-up mentality?
- Challenge – How to create a marketplace for user data that rewards user concretely?
- Challenge – How to make principles auditable and enforceable – laws, a new governance entity, both?
The case for Race to the Top
This briefing is co-authored by Magdi M. Amin, Investment Partner, Omidyar Network
(Mamin@Omidyar.com) and Gordon Myers, Chief Counsel, Technology and Private Equity, International Finance Corp. of the World Bank Group (Gmyers@ifc.org)
Data is at the heart of the digital revolution and has created immense economic and social value. And it will continue to play a vital role in solving the biggest problems of our time and fueling economic growth. As such, data is critical to us as individuals, technologists, investors, and entrepreneurs interested in a healthy society of empowered people.
The companies we invest in as VCs are at the center of the data economy. Competitive dynamics, and the drive toward growth, are driving some parts of the sector toward ever-more intrusive forms and amounts of data collection. Two risks emerge from this dynamic. As time goes on and our data changes hands, the way it is used can stray from our original preferences, violating our privacy. Additionally, bad actors can see all of that valuable data sitting there and try to steal or manipulate it for personal, monetary, or political gain. As a result, we have seen a series of systematic failures across the industry, including security breaches, privacy violations, bias and a lack of transparency.
As consumers have become more aware, there preferences have changed very clearly and quickly.
- In March of this year 58% of respondents to an Axios survey agreed with the following statement: “The privacy threat is a crisis, and we need to force companies to change.” This was up from 51% in 2018.
- Axios also asked for a response to the following: “Online services are essential, and we all have to accept some risk.” The share agreeing with this statement dropped from 46% to 38%.
This extends beyond privacy.
- Some 58% of Americans feel that computer programs will always reflect some level of human bias (Pew)
- According to HSBC, more people would trust flipping a coin than getting mortgage advice through machine learning.
- A recent paper estimated that over 130 bills have been introduced at various levels of government in the US alone. Thus, not only do current practices contribute to the tech backlash, the regulatory response also creates immense risk for businesses and for investors.
If today’s data practices are causing people to feel disempowered and eroding their trust, then we have now entered a downward spiral – a race to the bottom – in which the competitive dynamics of the industry are increasingly at odds with the interests of individuals.
This downward spiral cannot persist without eventually reaching a failure point at which customer engagement, trust, traction, and commercial viability becomes irreversibly damaged. The VC industry, in the view of some, has contributed to the problem by prioritizing growth over trust. Our view is that the VC industry can play a key play role in being part of the The VC industry can be part of the solution, along with technologists, lawyers, regulators, and CEOs.
Race to the Top collaborators are working toward:
- A common set of principles to guide investment decisions that build trust and to help investees
- Tools for supporting investment decisions at each stage of the VC life cycle;
- Tools for the companies we invest in, to ensure that their products are aligned with committed values and contribute to a Race to the Top.
There are currently 13 VCs and 5 thought leadership organizations participating in the coalition. Participating Organizations: Omidyar Network, International Finance Corporation, National VC Association, Information Trust Exchange Governing Assn. (ITEGA), PTB Ventures, Pick Axes & Shovels, Harvard Kennedy School, DBL Ventures, West Wave Capital, Anthemis Capital, Glasswing Ventures, Structure Capital, Flourish Ventures, Firefly Ventures, Georgian Partners, QED Ventures, Greater than X, MIT Media Lab.
Omidyar Network is supporting the coalition by commissioning background studies to identify and strengthen the commercial case for a new paradigm. The papers will provide:
- Detailed analysis of consumer preferences regarding privacy, safety and security of information technology products. To what extent have consumer preferences changed, and will this result in a material shift in growth from products that are perceived to create risks and harms and toward those that are perceived to be more aligned with privacy and safety?
- Analysis of the emerging policy and regulatory framework at the U.S. federal and state levels concerning privacy and product safety. What are the downside risks and liabilities facing both enterprises and VCs who do not shift to more privacy-enhancing business models? What are the business practices that will be incentivized or disincentivized by the emerging policy and regulatory framework?
- Examples of firms, enterprises and business models that represent a Race to the Top commitment.
We look forward to your participation.