INSUBCONTINENT EXCLUSIVE:
Amazon, Alphabet, Alibaba, Facebook, Tencent - five of the world's 10 most valuable companies, all less than 25 years old - and all got
rich, in their own ways, on data
No wonder it's become common to call data the "new oil"
As recently as 2011, five of the top 10 were oil companies
Now, only ExxonMobil clings on.The analogy isn't perfect
Data can be used many times, oil only once
But data is like oil in that the crude, unrefined stuff is not much use to anyone
You have to process it to get something valuable
You refine oil to make diesel, to put it in an engine
With data, you need to analyse it to provide insights that can inform decisions - which advert to insert in a social media timeline, which
search result to put at the top of the page
Imagine you were asked to make just one of those decisions
Image copyrightGetty ImagesSomeone is watching a video on YouTube, which is run by Google, which is owned by Alphabet
What should the system suggest they watch next? Pique their interest, and YouTube gets to serve them another advert
Lose their attention, and they will click away
You have all the data you need
Consider every other YouTube video they have ever watched - what are they interested in? Now, look at what other users have gone on to watch
Weigh up the options, calculate probabilities
If you choose wisely, and they view another ad, well done - you've earned Alphabet all of, ooh, maybe 20 cents (15p)
Clearly, relying on humans to process data would be impossibly inefficient
These business models need machines
In the data economy, power comes not from data alone but from the interplay of data and algorithm
50 Things That Made the Modern Economy highlights the inventions, ideas and innovations that helped create the economic world.It is
broadcast on the TheIndianSubcontinent World Service
You can find more information about the programme's sources and listen to all the episodes online or subscribe to the programme podcast.In
the 1880s, a young German-American inventor tried to interest his family in a machine to process data more quickly than humans could manage
Herman Hollerith had designed the machine but needed money to test it
Picture something that looks a bit like an upright piano but instead of keys, it has a slot for cards, about the size of a dollar bill, with
Image copyrightGetty ImagesImage caption
Herman Hollerith's tabulator and sorter box, used to process the 1890 United
States census
Facing you are 40 dials, which may or may not tick upwards after you insert each new card
Herman Hollerith's family didn't get it
Far from rushing to invest, they laughed at him
Hollerith evidently did not forgive - he cut them off
His children were to grow up with no idea they had relatives on their father's side
Hollerith's invention responded to a very specific problem
Every 10 years, the US government conducted a census
Governments through the ages have wanted to know who lives where and who owns what, to help raise taxes and find conscripts.But if you're
going to send a small army of enumerators around the country, it must be tempting to ask about an ever wider range of things
What jobs do people do? Any illnesses or disabilities? What languages do they speak? Knowledge is power, as 19th Century bureaucrats
understood just as well as 21st Century platform companies
Image copyrightGetty ImagesYet with the 1880 census, the bureaucrats had swallowed more data than they could digest
In 1870, they'd asked just five questions
It soon became clear adding up the answers would take years - they'd barely have finished this census when it would be time to start the
A lucrative government contract surely awaited anyone who could speed the process up
Young Herman had worked on the 1880 census, so he understood the problem
He had decided to seek his fortune by inventing a new kind of brake for trains
As it happened, a train journey helped him to solve the census problem instead.Rail tickets were often stolen
So railway companies found an ingenious way to link them to the person who'd bought them: a "punch photograph"
Image copyrightGetty ImagesConductors used a hole-punch to select from a range of physical descriptors - as Hollerith recalled: "Light hair,
dark eyes, large nose et cetera." If a dark-haired, small-nosed scoundrel stole your ticket, he wouldn't get far
And after observing this system, Hollerith realised people's answers to census questions could also be represented as holes in cards
That could solve the problem, because punched cards had been used to control machines since the early 1800s - the Jacquard loom wove
patterned fabric based on them
Image copyrightGetty ImagesImage caption
Weaver and inventor Joseph Marie Jacquard demonstrating his loom complete with
punched cards containing the pattern instructions
All Hollerith needed to do was make a "tabulating machine" to add up the
census punch cards he envisaged
In that piano-like contraption, a set of spring-loaded pins descended on the card; where they found a hole, they completed an electrical
circuit, which moved the appropriate dial up by one
Happily for Hollerith, the bureaucrats were more impressed than his family
They rented his machines to count the 1890 census, to which they'd added yet another 20 questions
Compared with the old system, Hollerith's machines proved years quicker and millions of dollars cheaper
More importantly, they made it easier to interrogate the data
Suppose you wanted to find people aged 40 to 45, married, and working as a carpenter
No need to sift through 200 tonnes of paperwork - just set up the machine and run the cards through it
Governments soon saw uses far beyond the census
"Across the world," says historian Adam Tooze, "bureaucrats were inspired to dream of omniscience." America's first social security
benefits were disbursed through punched cards in the 1930s
The following decade, punched cards notoriously helped organise the Holocaust.Businesses, too, were quick to see the potential
Insurers used punched cards for actuarial calculations, utilities for billing, railways for shipping, manufacturers to keep track of sales
Hollerith's Tabulating Machine Company did a roaring trade
You may have heard of the company that, through mergers, it eventually became: IBM
It remained a market leader as punched cards gave way to magnetic storage, and tabulating machines to programmable computers
It was still on the list of the world's 10 biggest companies a few years ago
But if the power of data was apparent to Hollerith's customers, why did the data economy take another century to arrive? Image caption
Voice-activated smart speakers capture ever greater amounts of data about us
Because there's something new
about the kind of data that's now being compared to oil - the likes of Google and Amazon don't need an army of enumerators to collect it
We trail it behind us every time we use our smartphones or ask Alexa to turn the light on
This kind of data is not as neatly structured as the pre-defined answers to census questions precision-punched into Hollerith's cards
That makes it harder to make sense of
But there's unimaginably more of it
And as algorithms improve, and more of our lives are lived online, that bureaucratic dream of omniscience is fast becoming corporate
reality.The author writes the Financial Times's Undercover Economist column
50 Things That Made the Modern Economy is broadcast on the TheIndianSubcontinent World Service
You can find more information about the programme's sources and listen to all the episodes online or subscribe to the programme podcast.
