Silicon Valley siphons our data like oil. But the deepest drilling has just begun

Aug 25, 2017, 12:00 PM

Customers in the UK will soon find out. Recent reports suggest that three of the country’s largest supermarket chains are rolling out surge pricing in select stores. This means that prices will rise and fall over the course of the day in response to demand. Buying lunch at lunchtime will be like ordering an Uber at rush hour.

This may sound pretty drastic, but far more radical changes are on the horizon. About a week before that report, Amazon announced its $13.7bn purchase of Whole Foods. A company that has spent its whole life killing physical retailers now owns more than 460 stores in three countries.

The acquisition – Amazon’s largest ever – struck some observers as strange. But Amazon tends to run about a decade ahead of its rivals. It owes its success to big, counterintuitive moves. This is a company that saw the power of online retail in 1994, and of cloud computing in 2006. Its purchase of Whole Foods represents a similarly far-sighted incursion into a lucrative new frontier.

Amazon isn’t abandoning online retail for brick-and-mortar. Rather, it’s planning to fuse the two. It’s going to digitize our daily lives in ways that make surge-pricing your groceries look primitive by comparison. It’s going to expand Silicon Valley’s surveillance-based business model into physical space, and make money from monitoring everything we do.

Silicon Valley is an extractive industry. Its resource isn’t oil or copper, but data. Companies harvest this data by observing as much of our online activity as they can. This activity might take the form of a Facebook like, a Google search, or even how long your mouse hovers in a particular part of your screen. Alone, these traces may not be particularly meaningful. By pairing them with those of millions of others, however, companies can discover patterns that help determine what kind of person you are – and what kind of things you might buy.

These patterns are highly profitable. Silicon Valley uses them to sell you products or to sell you to advertisers. But feeding the algorithms that produce these patterns requires a steady stream of data. And while that data is certainly abundant, it’s not infinite.

A hundred years ago, you could dig a hole in Texas and strike oil. Today, fossil fuel companies have to build drilling platforms many miles offshore. The tech industry faces a similar fate. Its wildcat days are over: most of the data that lies closest to the surface is already claimed. Together, Facebook and Google receive a staggering 76% of online advertising revenue in the United States.

To increase profits, Silicon Valley must extract more data. One method is to get people to spend more time online: build new apps, and make them as addictive as possible. Another is to get more people online. This is the motivation for Facebook’s Free Basics program, which provides a limited set of internet services for free in underdeveloped regions across the globe, in the hopes of harvesting data from the world’s poor.

But these approaches leave large reservoirs of data untapped. After all, we can only spend so much time online. Our laptops, tablets, smartphones, and wearables see a lot of our lives – but not quite everything. For Silicon Valley, however, anything less than total knowledge of its users represents lost revenue. Any unmonitored moment is a missed opportunity.

Amazon is going to show the industry how to monitor more moments: by making corporate surveillance as deeply embedded in our physical environment as it is in our virtual one. Silicon Valley already earns vast sums of money from watching what we do online. Soon it’ll earn even more money from watching what we do offline.

It’s easy to picture how this will work, because the technology already exists. Late last year, Amazon built a “smart” grocery store in Seattle. You don’t have to wait in a checkout line to buy something – you just grab it and walk out of the store. Sensors detect what items you pick up, and you’re charged whe...