Master of Communications Management

Ever heard of a data co-operative?

Greg Iarusso is a Public Affairs Advisor for McMaster University and a candidate in the McMaster-Syracuse Master of Communications Management program.


How to regain control of our online data and build a better economy.


In today’s digital economy we leave behind “digital breadcrumbs” that tell a detailed story of who we are and what we choose to do. This includes everything from credit card transactions and GPS locations, to phone call records and web browsing history.


I know what you might be thinking:


Why should anyone care that I ordered a new pair of jeans online and then watched YouTube videos of squirrels jumping through mazes like ninja warriors? (yes, it’s a real thing).


As it turns out, your data is amazingly powerful when it is combined with the data of millions of other people.1


Data scientists have developed creative ways of turning these vast amounts of unstructured personal data into incredibly rich insights that can be used to advance business decisions. Big tech companies like Google and Facebook have built their entire business models on this.


For instance, Google tracks your search history and GPS location (among other things) to show you personalized ads from third parties. More than 80% of Google’s revenue in 2021 (an astonishing $147 billion) came from using this business model.


Some experts are calling data the “new oil of the digital world.”


However, there is a problem…


Data is concentrated in the hands of too few.

A few select tech companies have control over vast quantities of data. This lopsided data economy creates several challenges. There are two I’d like to focus on:


Challenge #1: Individuals do not receive fair returns on the value of their data.



Artificially intelligent systems are trained using data from millions of people and commercialized for billions of dollars, yet the individuals contributing their data receive nothing in return.


Granted, these technologies have certainly benefited consumers. After all, who doesn’t appreciate having Google’s wealth of knowledge at their fingertips? Or receiving next day delivery from Amazon?


That said, when data is controlled by a handful of private companies, it is more likely to be used for chasing profits and maximizing shareholder value rather than advancing the greater public good. For example, did you ever hear the story of how Target found out a teen girl was pregnant before her father did?


Challenge #2: We have a broken model for obtaining and providing consent for data collection and use.



Nobody reads or understands lengthy service agreements. We simply scroll to the bottom of the page and click “I agree.” This is exactly how hundreds of college students agreed to give their first-born child to a fake social media company. (Don’t worry, it was an experiment).


This means that people do not understand how their personal data is being collected or used. A recent Ipsos poll found that 70% of individuals are finding it increasingly difficult to control who has access to their personal data online.  


This problem becomes even more complex when you consider that a lot of our personal data overlaps with the data of others (i.e. friends’ comments on our social media posts, email threads with work colleagues, and photographs with family).


When you give a company access to your personal data, you are therefore indirectly providing them access to the data of others in your social network. This makes it next to impossible to control where one’s data is going and how it is being used.


Introducing a potential solution: Data Co-operatives



A data co-operative is a group of individuals who voluntarily pool their personal data for the benefit of all members.2 It is very similar to the idea of a financial cooperative or a credit union, but with data instead of finances.


In 2019, a group of prominent academics. experts, and entrepreneurs released draft legislation called the Data Freedom Act which outlines how to govern and regulate data co-operatives. One year later, the European Union introduced a policy framework for data cooperatives in its Data Governance Act.

There are several data co-operatives already in existence, including Data Dividend Project, Ocean Protocol, Streamr, and Swash.


To better understand the benefits of data co-operatives, let’s revisit the two challenges with today’s data economy that I listed earlier.


Revisiting challenge #1 – Individuals do not receive fair returns on the value of their data.


Data co-operatives solve this issue by creating collective value for its members. For instance, members could choose to sell their data to advertisers for shared profit. Or, they could use their data to derive insights about their health and use this information to request better health supports from their local government.


Additionally, data co-operatives could be fertile grounds for new businesses to scale. This would create fiercer competition for major companies that currently enjoy huge advantages due to their massive network of users.


Imagine if a data co-operative with 50 million users decided to stop using Facebook and switch to an alternative platform with better privacy policies. I bet that would get Facebook’s attention…

One way to think about this is that data co-operatives increase the economic bargaining power of its members. They give more power to communities and level the playing field with large data-rich tech companies.


Revisiting challenge #2: We have a broken model for obtaining and providing consent for data collection and use.


Data co-operatives solve this issue by acting as legal fiduciaries on behalf of their members.


Members can assign the rights to their data to co-operatives who oversee the data and negotiate favourable privacy policies, terms of use, and other data-related contracts on their behalf.


Solving the challenge of overlapping data is slightly more complicated.


To recap, the overlapping data problem is that my data is tied up in the data of other people. Take the following example:

  • I am a member of Data Co-operative ABC.
  • My friend, Emily, is a member of Data Co-Operative XYZ.
  • Emily shares her data with Data Co-Operative XYZ, including a recent text conversation we had about the new Apple iPhone.
  • Data Co-Operative XYZ decides to share its members’ data with Apple Inc. for advertising purposes and the money obtained through this transaction is distributed equally amongst its members.

What happens in this situation? Do I get a say in whether Data Co-Operative XYZ shares the data with Apple? If the data is shared, do I receive money from the transaction?


The short answer is yes. The long answer is, it’s complicated.

The Data Freedom Act explains how data co-operatives can collaborate and negotiate with each other to prevent these scenarios from happening. A detailed discussion of how this would work is best saved for another time. But the interested reader can learn more in the Data Freedom Act.


Learning from economic power imbalances throughout history


Alex Pentland, a data science expert from MIT, points out that society has faced questions about the concentration of power each time the economy has shifted paradigms.


Industrialization gave rise to powerful companies that leveraged human capital to create immense value. To counteract these powerful companies, employees formed labour unions and governments instituted labour laws.


The same goes for financial co-operatives and consumer banking. The rise of powerful consumer banks has been counteracted by credit unions that maximize economic benefit of its members by providing financial services at reasonable rates.


Citizen organizations have been key to maintaining a productive balance between large and small players in the economy over the past 150 years.


The same kinds of citizen organizations can help us respond to the growing imbalances in today’s data economy. Data co-operatives can give individuals greater bargaining power to decide how their data is collected, stored, and used.


The way forward


Some experts argue that credit unions could become vehicles for data co-operatives because they already have the legal right to manage peoples’ data. Despite these claims, there is still a lot of work to be done before data co-operatives can be widely adopted.


To better understand some of the policy and legal challenges with implementing data co-operatives, take a listen to Pamela Samuelson’s thoughts in this webinar from a Policy and AI Conference at Stanford University.


Nonetheless, data co-operatives remain a fascinating concept that is worth exploring in more detail, particularly from a public policy perspective.