The allure of the ‘data is the new oil’ analogy

The commodities market is no stranger to data; a quick Google search will lead to streams of data showing price fluctuations and percentage deltas. Oil is back up to $70 a barrel and lithium is riding high on the projected growth of batteries and electric vehicles. One thing, however, that is not publicly traded on the commodities market, is data itself. A myriad of recent articles have hailed data as the new oil- the most valuable commodity over the last century. However, while the comparison of data and oil has some use, to label data as a commodity like oil is a misnomer.

The comparison is an attractive one. Data is seen as the fuel for our modern information economy. It is extracted in a raw and crude form and refined to produce something of real value. Yet, the analogy is overly simple and ignores some key differences. It is important that these distinctions are drawn to enable us to think about data and its value in the right way.

The data/oil/commodity analogy

For those of you who haven’t seen Billy Rey Valentine being condescendingly explained the commodities market in Trading Places, it’s probably good to start with a quick definition. Commodities are basic goods and raw materials that are extracted, exchanged and refined. They are agricultural products, coffee beans, gold, oil and of course frozen orange juice. As the alluring narrative goes, data too is mined and refined.

But, data lacks what economists call fungibility: the property of a good or a commodity whose individual units are essentially interchangeable. If I buy electricity from E.ON or EDF, I still expect both sets of kWhs to keep the lights on. In this case, crude oil is extracted, refined and barrelled for use in power generation and the value is the generation of power which is uniform in its output. That barrel of oil had the same teleological journey as the next one.

Data, on the other hand, is differentiated by type and quality. More importantly, the value of data comes from the insight and information one can extract from its raw form; these insights are highly subjective, largely influenced by methodology of analysis and therefore differ wildly through interpretation. Cambridge Analytica had access to a similar ‘barrel’ of data as everyone else. What they did with that barrel, the insights they drew, and their capitalisation of its value set it apart from others.

Another difference in the analogy is that once commodities are used, they often can’t be used again.  Data on the other hand is not a finite resource. It can be generated, used, reused and reinterpreted. Data can be stored and the accumulation of it is highly sought after in the modern information economy. Even when companies go bankrupt and assets get stripped, databases are often considered the most valuable assets. For example, when Caesar’s Entertainment- a gambling giant that pioneered its “Total Rewards” loyalty program- filed for bankruptcy, its most valuable asset was deemed to be this customer service database valued at $1 billion. No wonder companies are keen to get you to reply their GDPR consent emails!

So, as we have explored above, there are real limitations to the data/oil/commodity analogy. But why does it persevere to be alluring? The strength of the data/oil/commodity analogy lies in the fact that data is a valuable asset that is revolutionising business models and driving technological innovation. The ability to collect data and valorise its raw form into insight and information is the fuel of lucrative new businesses and innovative new models—much like oil was at the turn of the last century.


Data’s use

Of course, when people think about data it is the tech giants of the modern world such as Facebook, Google and Amazon that come up first. Although Facebook was slightly dented by recent events following the Cambridge Analytica revelations, data still reigns supreme. Google’s recent demonstration of their AI Assistant had people simultaneously in awe and shock at the pace of development of natural language processing and artificial intelligence.

It is not just in Silicon Valley and with internet companies where data is revered; industrial giants and deep-tech early stage companies alike are waking up to the strategic value of data and information. The two largest industrial giants, Siemens and GE are both preparing for the future of industry, where data and the services it can enable will form a key part of corporate strategy. Industrial behemoths like these are increasingly moving towards collecting data and utilising it to improve their ongoing customer relationships and open up new value-added services. This transition will lead to changing business models- a process already under way. Rather than industrial customers buying machinery (products) and maintenance contracts, the likes of Siemens and GE utilise data to provide a continued and long-term service to their customers. Contracts are no longer about just selling products, but delivering ongoing solutions that rely on data. It is an extension of Rolls Royce’s “Power by the Hour” concept developed- well, trademarked in fact- in the 1960s.

Data is spawning innovative technologies from the obvious smart algorithms to engineered hard technologies such as hydro-powered turbines to power smart water networks, novel approaches to asset monitoring and innovative ways to harvest energy to power the sensors that underpin these. Technologies span from smart approaches to data collection and methods to power sensors through to intelligent methods of analysis. The ability, appetite and vision to adopt these new technologies and develop models that the resultant data/information can enable, will lead to winners and losers across different industries. Data isn’t only the fuel of companies like Amazon and Google; it is a lucrative asset that will prove increasingly valuable industries such as energy, manufacturing and farming (to name just a few).


Data, then, can’t be called a commodity and it differs in comparison to sticky, black crude. It is an asset whereby it’s value stems from the interpretation and transformation of data into information. This information is an important component of our modern economy and will drive strategic diversification in some industries and kill of players who don’t move fast enough with it. Like oil was at the turn of the 20th century, data is a valuable asset that is changing the way our economy operates. It is no wonder that the reformist Saudi Prince, Muhammad bin Salman, pledged $45 billion to SoftBank’s Vision Fund whose focus is on the internet of things, robotics, AI and ride hailing.