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"Arguing in My Spare Time" No. 3.05

Arnold Kling

Feb. 11, 2000

May not be reproduced commercially without permission of the author

People age quickly on the Internet. Clifford Stoll, who became a major icon of the Net with his book "The Cuckoo's Egg" (a great read, by the way), today is viewed as an old, cranky has-been because he refuses to bow down to the all-powerful deities of Silicon Valley Creativity and Distance Learning.

The other night, I felt very old myself. I attended another of what I call the "MIT nerd seminars," which are dinner talks sponsored by the MIT alumni club. The average age in the audience is about 70, and they are all sharp as tacks. I sat next to a woman who came to DC to work in the Truman administration, and she asked me questions about the course that I'm going to be teaching that were more stimulating than any I can hope to hear from the actual students.

One of the speakers at the seminar was a young dude from the online division of the Washington Post. He tried making the case that we should be happy about losing our privacy. "If the ads that you get are more relevant to you, what's wrong with that?"

At that point, one of the geezers in the audience stood up and stammered, "Why should a company know everything about me? I want to know everything about them! Why can't I find out who has my data? I should be able to know every company that's tracking me on the Internet and what they've got in their database."

There you go. I'm on the old man's side, not the young dude's. Of course, if you add my Internet years (a multiple of 7 times the 6 calendar years I spent operating my web site) to my age when I started on the Internet, I'm 82 years old, which may explain where I'm coming from.

What "personalization" means in the context of the Internet is having a computer gather information on my purchases, combine that with other people's purchase data, and use a statistical model or artificial intelligence algorithm to make recommendations to me. Supposedly, this is the killer application, the holy grail, the sine qua non of electronic commerce.

And I don't get it. I would much rather get a movie recommendation from a friend than from a computer. If she recommends a movie, then when I go to see it I will be trying to guess why she liked it.

Suppose I hate the movie, to the point where I lose confidence in my friend's taste. At least we can have that conversation.

When you get a recommendation from a computer, you have none of that going for you. A computer recommendation is, well, impersonal. To call it "personalization" is downright Orwellian. It should be called IMpersonalization.

As consumers, I think that we have not yet begun to feel the brunt of this. So far, the Internet bubble companies have been in too much of a hurry to capture registered users to do anything with them. We've been getting discounts, free services, sweepstakes entries, and other goodies, and the companies have just been sitting on the data.

Payback time is coming. Our personal contact information is now the asset base of the bubble companies, and soon they will be pressed to monetize their assets.

I don't think it will take the bubble companies long to learn that targeted banner advertising is hardly more effective than conventional banner advertising in generating sales. They will turn to the one proven revenue model for personal information--direct marketing. Your phone number, address, and email address are going to be sold six ways from Sunday.

Do you think that you are immune? Are you proud of yourself for studying the privacy policies on the sites you visit?

Privacy policies are meaningless. No matter what the privacy policy of the site, they probably use third-party ad servers, or they link you to sites that use third-party ad servers. These third parties, such as DoubleClick, have very different privacy policies. Their policies in fact are to correlate where you surf with your physical name, address and phone number, which they have obtained from other sources.

In the next twelve months, if you are home between 6 and 8 PM, I would strongly suggest that you get caller ID or an answering machine. If the IMpersonalization trend is headed where I think it is, you won't want to pick up the phone yourself.