What is smart disclosure?

"Choice engines" are helping consumers make smarter decisions through personal and government data.

Citizens generate an enormous amount of economically valuable data through interactions with companies and government. Earlier this year, a report from the World Economic Forum and McKinsey Consulting described the emergence of personal data as of a new asset class.” The value created from such data does not, however, always go to the benefit of consumers, particularly when third parties collect it, separating people from their personal data.

The emergence of new technologies and government policies has provided an opportunity to both empower consumers and create new markets from “smarter disclosure” of this personal data. Smart disclosure is when a private company or government agency provides a person with periodic access to his or her own data in open formats that enable them to easily put the data to use. Specifically, smart disclosure refers to the timely release of data in standardized, machine readable formats in ways that enable consumers to make better decisions about finance, healthcare, energy or other contexts.

Smart disclosure is “a new tool that helps provide consumers with greater access to the information they need to make informed choices,” wrote Cass Sunstein, the U.S. administrator of the White House Office of Information and Regulatory Affairs (OIRA), in a post on smart disclosure on the White House blog. Sunstein delivered a keynote address at the White House Summit on smart disclosure at the U.S. National Archives on Friday. He authored a memorandum providing  guidance on smart disclosure guidance from OIRA in September 2011.

Smart disclosure is part of the final United States National Action Plan for its participation in the Open Government Partnership.” Speaking at the launch of the Open Government Partnership in New York City last September, the president specifically referred to the role of smart disclosure in the United States:

“We’ve developed new tools — called ‘smart disclosures’ — so that the data we make public can help people make health care choices, help small businesses innovate, and help scientists achieve new breakthroughs,” said President Obama. “We’ve been promoting greater disclosure of government information, empowering citizens with new ways to participate in their democracy,” said President Obama. “We are releasing more data in usable forms on health and safety and the environment, because information is power, and helping people make informed decisions and entrepreneurs turn data into new products, they create new jobs.”

In the months since the announcement, the U.S. National Science and Technology Council established a smart disclosure task force dedicated to promoting better policies and implementation across government.

“In many contexts, the federal government uses disclosure as a way to ensure that consumers know what they are purchasing and are able to compare alternatives,” wrote Sunstein at the White House blog. “Consider nutrition facts labels, the newly designed automobile fuel economy labels, and ChooseMyPlate.gov.  Modern technologies are giving rise to a series of new possibilities for promoting informed decisions.”

Smart disclosure is a “case of the Administration asking agencies to focus on making available high value data (as distinct from traditional transparency and accountability data) for purposes other than decreasing corruption in government,” wrote New York Law School professor Beth Noveck, the former U.S. deputy chief technology officer for open government, in an email. “It starts from the premise that consumers, when given access to information and useful decision tools built by third parties using that information, can self-regulate and stand on a more level playing field with companies who otherwise seek to obfuscate.” The choice of Todd Park as United States CTO also sends a message about the importance of smart disclosure to the administration, she said.

The United Kingdom’s “midata” smart disclosure initiative is an important smart disclosure case study outside of the United States. Progress there has come in large part because the UK has a privacy law that gives citizens the right to access their personal data held by private companies, unlike the United States. In the UK, however, companies have been complying with the law in a way that did not realize the real potential value of that right to data, which is to say that a citizen could request personal data and it would arrive the mail weeks later at a cost of a few dozen pounds. The UK government has launched a voluntary public-private partnership to enable companies to comply with the law by making the data available online in open formats. The recent introduction of the Consumer Privacy Bill of Rights from the White House and Privacy Report from the FTC suggests that such rights to personal data ownership might be negotiated, in principle, much as a right to credit reports have been in the past.

Four categories of smart disclosure

One of the most powerful versions of smart disclosure is when data on products or services (including pricing algorithms, quality, and features) is combined with personal data (like customer usage history, credit score, health, energy and education data) into “choice engines” (like search engines, interactive maps or mobile applications) that enable consumers to make better decisions in context, at the point of a buying or contractual decision. There are four broad categories where smart disclosure applies:

  1. When government releases data about products or services. For instance, when the Department of Health and Human Services releases hospital quality ratings, the Security and Exchange Commission releases public company financial filings in machine-readable formats at XBLR.SEC.gov, or the Department of Education puts data about more than 7,000 institutions online in a College Navigator for prospective students.
  2. When government releases personal data about a citizen. For instance, when the Department of Veterans Affairs gives veterans access to health records using at the “Blue Button” or the IRS provides citizens with online access to their electronic tax transcript. The work of BrightScope liberating financial advisor data and 401(k) data has been an early signal of how data drives the innovation economy.
  3. When a private company releases information about products or services in machine readable formats. Entrepreneurs can then use that data to empower consumers. For instance, both Billshrink.com and Hello Wallet may enhance consumer finance decisions.
  4. When a private company releases personal data about usage to a citizen. For instance, when a power utility company provides a household access to its energy usage data through the Green Button or when banks allowing customers to download their transaction histories in a machine readable format to use at Mint.com or similar services. As with the Blue Button for healthcare data and consumer finance, the White House asserts that providing energy consumers with secure access to information about energy usage will increase innovation in the sector and empower citizens with more information.

An expanding colorwheel of buttons

Should smart disclosure initiatives continue to gather steam, citizens could see “Blue Button”-like and “Green Button”-like solutions for every kind of data government or industry collects about citizens.  For example, the Department of Defense has military training and experience records. Social Security and the Internal Revenue Service have the historical financial history of citizens, such as earnings and income. The Department of Veterans Affairs and Centers for Medicare and Medicaid Services have personal health records.

More “Green Button”-like mechanisms could enable secure, private access to private industry collects about citizen services. The latter could includes mobile phone bills, credit card fees, mortgage disclosures, mutual fund fee and more, except where there are legal restrictions, as for national security reasons.

Earlier this year, influential venture capitalist Fred Wilson encouraged entrepreneurs and VCs to get behind open data. Writing on his widely read blog, Wilson urged developers to adopt the Green Button.

“This is the kind of innovation that gets me excited,” Wilson wrote. “The Green Button is like OAuth for energy data. It is a simple standard that the utilities can implement on one side and web/mobile developers can implement on the other side. And the result is a ton of information sharing about energy consumption and in all likelihood energy savings that result from more informed consumers.

When citizens gain access to data and put it to work, they can tap it to make better choices about everything from finance to healthcare to real estate, much in the same way that Web applications like Hipmunk and Zillow let consumers make more informed decisions.

“I’m a big fan of simplicity and open standards to unleash a lot of innovation,” wrote Wilson. “APIs and open data aren’t always simple concepts for end users. Green Buttons and Blue Buttons are pretty simple concepts that most consumers will understand. I’m hoping we soon see Yellow Buttons, Red Buttons, Purple Buttons, and Orange Buttons too. Let’s get behind these open data initiatives. Let’s build them into our apps. And let’s pressure our hospitals, utilities, and other institutions to support them.”

The next generation of open data is personal data, wrote open government analyst David Eaves this month:

I would love to see the blue button and green button initiative spread to companies and jurisdictions outside the United States. There is no reason why for example there cannot be Blue Buttons on the Provincial Health Care website in Canada, or the UK. Nor is there any reason why provincial energy corporations like BC Hydro or Bullfrog Energy (there’s a progressive company that would get this) couldn’t implement the Green Button. Doing so would enable Canadian software developers to create applications that could use this data and help citizens and tap into the US market. Conversely, Canadian citizens could tap into applications created in the US.

The opportunity here is huge. Not only could this revolutionize citizens access to their own health and energy consumption data, it would reduce the costs of sharing health care records, which in turn could potentially create savings for the industry at large.

Data drives consumer finance innovation

Despite recent headlines about the Green Button and the household energy data market, the biggest US smart disclosure story of this type is currently consumer finance, where there is already significant private sector activity going on today.

For instance, if a consumer visits Billshrink.com, you can get personalized recommendations for a cheaper cell phone plan based on your calling history. Mint.com will make specific recommendations on how to save (and alternative products to use) based on an analysis of the accounts it is pulling data from. Hello Wallet is enabled by smart disclosure by banks and government data. The sector’s success hints at the innovation that’s possible when people get open, portable access to their personal data in a a consumer market of sufficient size and value to attract entrepreneurial activity.

Such innovation is enabled in part because entrepreneurs and developers can go directly to data aggregation intermediaries like Yodlee or CashEdge and license the data, meaning that they do not have to strike deals directly with each of the private companies or build their own screen scraping technology, although some do go it alone.

“How do people actually make decisions?  How can data help improve those decisions in complex markets?  Research questions like these in behavioral economics are priorities for both the Russell Sage Foundation and the Alfred P. Sloan Foundation,” said Daniel Goroff, a Sloan Program Director, in an interview yesterday.  “That’s why we are launching a ‘Smart Disclosure Research and Demonstration Design Competition.’  If you have ideas and want to win a prize,  please send Innocentive.com a short essay.  Even if you are not in a position to carry out the work, we are especially interested in finding and funding projects that can help measure the costs and benefits of existing or novel ‘choice engines.’” 

What is the future of smart disclosure?

This kind of vibrant innovation could spread to many other sectors, like energy, health, education, telecommunication, food and nutrition, if relevant data were liberated. The Green Button is an early signal in this area, with the potential to spread to 27 million households around the United States. The Blue Button, with over 800,000 current users, is spreading to private health plans like Aetna and Walgreens, with the potential to spread to 21 million users.

Despite an increasingly number of powerful tools that enable data journalists and scientists to interrogate data, many of even the most literate consumers do not look at data themselves, particularly if it is in machine-readable, as opposed to human-readable formats. Instead, they digest it from ratings agencies, consumer reports and guides to the best services or products in a given area. Increasingly, entrepreneurs are combining data with applications, algorithms and improved user interfaces to provide consumers with “choice engines.”

As Tim O’Reilly outlined in his keynote speech yesterday, the future of smart disclosure includes more than quarterly data disclosure from the SEC or banks. If you’re really lining up with the future, you have to think about real-time data and real-time data systems, he said. Tim outlined 10 key lessons his presentation, an annotated version of which is embedded below.

When released through smart disclosure, data resembles a classic “public good” in a broader economic sense. Disclosures of such open data in a useful format are currently under-produced by the marketplace, suggesting a potential role for government in the facilitation of its release. Generally, consumers do not have access to it today.

Well over a century ago, President Lincoln said that “the legitimate object of government is to do for the people what needs to be done, but which they cannot by individual effort do at all, or do so well, for themselves.” The thesis behind smart disclosure in the 21st century is that when consumers have access to that personal data and the market creates new tools to put to work, citizens will be empowered make economic, education and lifestyle choices that enable to them to live healthier, wealthier, and — in the most aspirational sense — happier lives.

“Moving the government into the 21st century should be applauded,” wrote Richard Thaler, an economics professor at the University of Chicago, in the New York Times last year. In a time when so many citizens are struggling with economic woes, unemployment and the high costs of energy, education and healthcare, better tools that help them invest and benefit from personal data are sorely needed..

tags: , , , , , , , ,
  • http://www.ibn7.com richer

    ALEX

    how to assure the privacy of users belonging to the different countries, every nation wants to assure the privacy of their citizens online. i think this will be a problem with sharing content on web2.0 sites.