The digitisation of analogue information

By February 27, 2013 No Comments

A couple of weeks ago I wrote about the opportunity to find value in the shadows of big data by gleaning insights that are unrelated to reason the data was collected in the first place. This morning I read Max Levchin’s transcript of his DLD talk from last month in which he also talks about drawing value from big data. Levchin sums his thesis up with the sentence:

the next big wave of opportunities exists in centralized processing of data gathered from primarily analog systems

By which he means using digitised data about non-digital items to improve efficiency in the way those resources are used and priced with value created by increased utilisation.

Collaborative consumption is one example of this phenomenon which is already playing out where often the digital data is manually entered (e.g. apartment owners tell Airbnb when their apartments are available). Going forward data will increasingly be gathered by sensors and increased utilisation will spread beyond items that we own and taxis that we use to our time and capital and benefits will grow from increasing the time in use to include dynamic pricing.

I’m going to illustrate with two of Max’s examples. Firstly better utilisation of aeroplance pilots:

There is also a neat symmetry to this analog-to-digtail transformation — enabling centralization of unique analog capacities. As soon as the general public is ready for it, many things handled by a human at the edge of consumption will be controlled by the best currently available human at the center of the system, real time sensors bringing the necessary data to them in real time. The freshest, smartest pilot, most familiar with the particular complicated airport will land your plane — via remote control.

And secondly dynamic pricing of car insurance:

On a Sat morning, I load my two toddlers into their respective child seats, and my car’s in-wheel strain gauges detect the weight difference and reports that the kids are with me in a moving vehicle to my insurance via a secure message through my iPhone. The insurance company duly increases today’s premium by a few dollars.

My keepHonest app sees this too and immediately offers me up as a customer to a few competing insurance companies in the background, but nobody is willing to charge me less right now, and the phone chirps sadly to let me know I’m now paying a higher premium. Safer, but more expensive.

But In a few hours, my car’s GPS duly reports to my insurer that I only drove two miles to the park, never sped and, and observed all traffic signs. My phone now chirps happily: not only has my rate been discounted, several companies are offering me a deal on insurance!

There will be opportunities in both the infrastructure and application layers for delivering these services. The key to successful investment will be understanding the dependencies between the two and getting the timing right.