Research Blog - Customer Intelligence

One area related to my research that is of little concern to me is privacy. You know, Big Brother is watching and all that. I've heard academics at conferences get up and talk about the universality of privacy as a human right. Bullshit! You only have to travel briefly in other parts of the world to realise what a culturally-specific and loaded concept "privacy" is.

On the other hand, some of those hard-core economists from what's often called the "Chicago School" promote the idea that privacy is inefficient. That is, privacy is when you attempt to misrepresent your demand to the market. The corresponding loss of efficiency on the supply side reduces the public good ergo individual consumers should pay a premium to retain privacy.

Another way of looking at it is that by revealing our demand to the market so it can organise itself better we get an efficiency discount - the price without revelation is the "true price". Generally, if you signal future intent in a way that the market can use to organise itself (eg. flatten supply chains, reduce various kinds of risk) you will be paid a dividend. For consumers, this means that if you buy in bulk or pre-order your purchases, you can expect to get it cheaper.

I have an alternative theory about why consumers value privacy, based on information-theoretic considerations. As humans, we're increasingly defined unqiuely by our individual consumption choices. Hence the need to have "our" brands, labels, sports teams and other preferences expressed by execution: no point being a "Chanel No. 5" girl if you can't buy it. On the other hand, herd instinct and economies of scale mean that we are encouraged to consume what those around us do. How do we break this contradiction? Product lifecycles, constant innovation, fashion and marketing niches allow us to differentiate. "Sure, I wore cargos - when they first came out".