July 2010

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Smart Energy and the End of Privacy

There is now no reason ever to throw out information. Operational data will be the new battleground for privacy.

Toby Considine
Toby Considine
TC9 Inc

The New Daedalus

Contributing Editor


Back in the early 90’s, there was a national conversation on privacy, and transactional data, and e-commerce. It was an effort to adapt traditional notions of privacy for today’s digital world, in which no information every really goes away, ever. Today, a new generation is wrestling with these issues, but without the fundamental understanding those conversations created.

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The first assumption in the national conversation was that it was simply good business to expect privacy and discretion. Many early e-commerce successes were tied to what might be called embarrassing purchases. Birth Control. Sexy lingerie. Flowers for your girlfriend – or girlfriends. Pornography. Vinyl cat suits or fuzzy costumes. Whatever it was, it could be shipped in a plain brown wrapper with a nondescript return address. Without privacy, these businesses did not exist.

A certain level of information sharing is necessary. Credit card companies must be able to track a charge, and report it on the end of the month bill. Companies incorporated under non-descript names. Hotels have built a huge business around movies appearing on the hotel bill only as “In-Room Entertainment”. Without a business process built around what is in effect a clearly stated privacy policy, some business does not exist—yet without sharing the transaction does not exist.

Las Vegas was an early leader in understanding their customers. Casinos carefully tracked profitability by customer. Las Vegas understands privacy, and each casino knows that maintaining privacy is maintaining a competitive edge; it would be foolish to share personal information with another casino. Las Vegas understands that privacy is good for business; the whole town has the motto “What happens in Vegas, stays in Vegas”.

The best retail sales forces have long known much more about the customer than can be found in the sales record. Discretion has long been a requirement for retail. A good salesman knows his customers, may remember birthdays and anniversaries, and watches where they spend time in the store. He asks them how they liked their last purchase. He uses this information to guide customers to new products they will like. Even so, discussing customer preferences was understood to be a firing offense.

In e-commerce, click stream analysis stood in for this good salesman. A clothing store might note the man that always checks out the underwear product lines before buying his wife a sweater. At least one of the “scientific” dating sites carefully tracks which potential mates customers click on, or even mouse over, refining their recommendations far beyond the compatibility questions featured in their marketing.

The privacy commission called this detailed information transactional metadata and they assigned a higher responsibility for privacy in handling this data. A web site could use this information internally, just as the salesman used this information in retail stores. The commission urged that this information not be shared outside the original business; in conglomerates, this information should not be shared even with other lines of business within the same corporation.

Today, as we live our lives on-line and connected, there is a new urgency to privacy issues. Digital storage costs have plummeted more than six orders of magnitude; there is now no reason ever to throw out information. Operational data will be the new battleground for privacy.

Tweets and cell calls place us always on line, but cell tower operations data tracks our every move; the US Department of Justice has just argued that this information does not require a warrant. With tracking and record-keeping essentially free, there is really no reason for the government not to track everyone, all the time and keep that information forever.

Smart grids may soon be able track every move we make in the privacy of our home. It is more than a decade since researchers demonstrated that electrical signatures could distinguish whether a waterbed in a house was occupied or vacant, and whether those occupants were active or quiescent. Should an insurance company be able to access how often you use your home exercise equipment? Do you feel better or worse if a national health service can? Should your employer be able to check what time you come home at night? Who else should be able to buy this information?

Strato Automation Flaws in grid power regulation can even place your home videos and audio recordings. Earlier this year, British police convicted a murderer using "electrical network frequency analysis" (ENF). ENF tracks frequency variations in the electricity supplied by the grid. Over short periods, the variations form a unique signature. These variations influence phone recorders, CCTV, and camcorders that are plugged in or even located near the mains. It is reported that these variations are induced even in recordings made by battery-powered devices.

Cheap and powerful search matched to cheap and boundless storage means nothing ever goes away. Student teachers have been fired for that beer blast photo from their freshman year. Hiring managers easily research potential hires; in skilled hands, these searches easily find politics, sexual preferences, and old relationships as well as youthful indiscretions. At least two new companies sell their research services to bankers to factor into lending decisions.

Without privacy, the social contract is changed. Zero tolerance combined with no privacy removes every civil right we have. The CEO of Google has stated “Privacy is dead, get used to it.” On the other hand, the German high court recently mandated early deletion of all cell tower data, web traffic, IM tracking, and other “personal acts.” The battle for privacy is already publicly engaged. The more people know, the more people are going to care.

There will be opportunities in smart energy for those who can help people find privacy. Shifting load, and shifting usage are also misdirecting the attention of the watchers. Managing an internal microgrid will also manage the traces left in the digital artifacts that make up our lives. Customers who understand this, and care, will pay a premium. These customers may be the critical high-margin early adopters we need to launch green-tech. This opportunity will be open only to those who take privacy seriously, and understand its import, understand its value.

I write this a few days before the Fourth of July. The US has always been the land of the frontier. “Go West, young man!” Horace Greeley famously spoke. West was where you could make something of yourself, perhaps a new something that was not what you once were. The West was where you went to start over. The west was the creator of a classless world, one where your parents did not matter because no one had a past. Failure to protect privacy is the final closing of the frontier.

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