Gov. Newsom Proposes ‘Data Dividend’ for CA Residents
Gov. Gavin Newsom
My personal data is certainly worth as much as a downpayment on a home.
And if so, Gov. Gavin Newsom’s proposal that big tech companies pay a dividend to residents could, in theory, help me get one step closer to the American dream.
The governor sees a “data dividend” as a way to address a widening income gap in California, a state that boasts 92 billionaires, the most in the country. We don’t know yet how the dividend idea would work–particularly how it would replicate Alaska’s most successful state dividend.
“California’s consumers should also be able to share in the wealth that is created from their data,” Newsom said on Feb. 12. “And so I’ve asked my team to develop a proposal for a new Data Dividend for Californians, because we recognize that your data has value, and it belongs to you.”
The payout would be in exchange for something people are already giving up: their personal data. In his first State of the State address after being elected in November, Newsom said the proposed “Data Dividend for Californians” would be in exchange for access to Californians’ data.
Disparity at Historic Levels
This idea comes at a time when income disparity in California is at historic levels, according to a January 2019 report by the Public Policy Institute of California, a nonpartisan think tank. The top 10% of families make more than 10 times as much as the bottom 10% in the Golden State, which is nearly double what the gap was in 1980. At the same time, some consumers are growing more skeptical about the benefits of giving up their personal data to internet companies in exchange for free services, in light of recent data and privacy breaches like Facebook’s Cambridge Analytica scandal last year.
Forbes tracks the 400 wealthiest Americans every October. Of California’s 92 billionaires, just under 44% were in the tech industry, including Facebook’s Mark Zuckerberg (net worth: $61.1 billion), Alphabet’s Sergey Brin (net worth: $50.8 billion) and Larry Page (net worth: $51.9 billion), and Oracle’s Larry Ellison (net worth: $62.8 billion).
It’s not clear how the state could tap into this wealth beyond the traditional mechanism—taxes—or what it would do to keep billionaires from simply leaving. Newsom’s office did not respond to Forbes’ requests to elaborate.
The idea isn’t new to voters, however. Newsom’s idea is one of several fixes to surface in recent years in an effort to address widening income inequality in California, largely driven by the tech boom. Stockton, where 17.7% of the population is below the poverty line (the national average is 14%), is piloting a Universal Basic Income program in which the city will give 100 residents $500 a month for 18 months.
Alaska’s Dividend Tapped Windfall
Alaska has used an industry-based state dividend for nearly four decades. In 1974, when the Trans Alaska Pipeline was close to completion, the mineral-rich state deliberated on how to best utilize the windfall in lease income and royalties it was expecting from oil and gas companies. Two years later it established the Alaska Permanent Fund, declaring it would transfer at least 25% of all annual oil royalties into the fund. In 1982, every Alaskan started receiving a check of $1,000 or more annually from the fund.
The fund, which also makes investments in the stock market and real estate, now manages over $60 billion in assets.
But there are stark differences between oil and gas companies and tech companies. For a start, oil and gas assets are material and tied strictly to land, but data is less defined and comes from a fickle source: people.
Questions abound on how the data dividend in California would work, including how it would define “data” and how much the dividend would be.
“In Alaska, everybody gets the same amount, because the idea is that it’s a natural resource that belongs equally to all Alaskans,” says Ioana Elena Marinescu, an economics professor from University of Pennsylvania who led a February 2018 academic studyof the Alaska Permanent Fund. “But with data, the question becomes: ‘Is my data more valuable than your data? If it is, how much more and how much should each person be getting?’ It’s a hard question to solve.”
Who Will Pay?
Another issue that would have to be addressed: which tech companies would be ordered to pay up. In Alaska, the oil and gas companies don’t necessarily have to be headquartered in the state. So long as the companies have signed a lease or royalty agreement with the Alaskan government, a portion of those royalties would then get transferred to the fund.
But unlike oil and gas companies, which are tethered to land rich in minerals, there is nothing tying tech companies to California other than history and tradition. Apple, headquartered in Cupertino, posted $60 billion in profits last year. Nearby Mountain View is the base of Google parent Alphabet, which reported $31 billion in profits. Facebook, headquartered in in Menlo Park, made $22 billion last year. If unhappy, these companies could easily move to another state with a friendlier environment.
Senator Robert Hertzberg, majority leader of the California Senate, argues these tech companies may be looking for ways to buy back goodwill from consumers after the recent news cycle of data and privacy breaches. “There has been a big discussion among tech companies on what the future looks like and how they want to be responsible,” he says. “I know these folks and I think they care and will be creative with how they can come up with a solution that works.”
But Jeffrey Chester, executive director of consumer protection and privacy organization Center of Digital Democracy, felt the proposed data dividend could lead Californians to a false sense of security. “It’s a bad deal,” Chester says. “If the deal is that in order to save a few dollars you have to agree to let Google, Facebook, Amazon and others track you and target you with AI-driven digital marketing on all your devices in every moment of your life, it’s a bad deal.” (Editor’s note to Jeffrey: Aren’t they doing that already for free?)
Forbes staff writer Angel Au-Yeung said Apple, Google and Facebook did not immediately respond to her questions for comment, so we don’t yet know what they think.