Automation Laws: Tech Businesses Organize Customer Information

"All tech businesses monetize the organization of their customers' information."

The common belief -- and why it's wrong

Businesses sell goods, not information. This is what almost everyone assumes, and it is backwards.

Consider the steel. It begins as iron ore, which is common, and coke, which is common, and limestone, which is common. It passes through the furnace, the caster, the rolling mill, the inspection line, where its carbon is measured to the hundredth of a percent and its tolerance checked against a sheet. By the time it ships, almost nothing of its value is the iron. It is the carbon held to spec, the tolerance verified, the grade established and recorded. The ore was cheap. The knowing was not.

The subtler trap

If the matter is not the product, it is tempting to conclude the information is -- and here both sides go wrong at once.

The buyer knows better than to pay for the matter; he knows the value is something around information, and tries to buy that. He buys a data feed, then a second to reconcile the first, a dashboard, a report, a license, a model. He is not short on any of it. He is drowning in it, and still has not bought the thing he came for, because every object he acquired sits near the organizing without being it.

The seller makes the matching mistake -- he thinks he has sold it. He hands over a deck, and the resolving leaves with him. He hands over a framework, which is the shape of an answer and not the answer. He hands over a report that is already going stale, a dashboard without the judgment that works it, trained staff whose heads will turn over. He thinks he sold the organizing. He sold what was left of it. Neither the buyer nor the seller quite touched the actual product: the organizing itself, in a form that stays organized.

The exceptions that aren't

If organizing is the thing being sold, some businesses look like counterexamples -- they appear to sell the opposite, to sell disorder. The cryptographer scrambles a message; the shredder destroys a document; the casino manufactures chance and charges admission to it. But look at which variable each one orders. The cryptographer scrambles for the adversary and resolves for the holder of the key; he organizes access, and is paid for that. The shredder delivers a certainty of destruction. The casino sells an experience built to land reliably, randomness held inside a dependable frame. None of these is an exception. Each is the law in disguise, organizing one variable while disordering another.

The hardest case folds back the same way. A business can manufacture a disorder in order to charge for relieving it -- the toll on a road it blocked, the rule it captured, the problem it quietly created and stands ready to solve. This looks like the place the law finally breaks, and it is the place the law is confirmed most sharply. The work being sold is still the resolution of an uncertainty; the uncertainty is simply one the seller introduced. Even the racket has to dress itself as organizing to collect. The law does not have an edge it fails at. Pushed to the extreme, it closes on itself -- the apparent exception turns out to be the rule itself.

Why it holds

Underneath all of it is a single reason. Disorder is the natural state of things, and order is the exception. This is the second law of thermodynamics, and it is not a metaphor here.

A company's way of doing something -- a process, a record, an arrangement that works -- is a low-probability configuration, one of the few orderly ones among an enormous number of disorderly ones. Systems do not stay in low-probability configurations. The arrangement was built to match a particular set of conditions, and conditions change, and as they change the arrangement no longer matches, and the situation drifts back toward the disorder that was always far more likely.

This happens on its own. No one has to mismanage anything for it to happen. And a company operating in that drifted-back state pays for it, in errors and delays and decisions made without knowing what is true. So there is something to sell in moving the situation back toward order, and there will keep being something to sell, because the drift does not stop.