Happy Friday lunch time! I sit nearly alone in the office as it is 12:45 pm and nearly everyone has scurried out as if a school bell has gone off to dismiss everyone to their nearest favorite cafe or food truck for the midday breather. Onboarders are quick to debate the economics of a local lunch, creating elaborate arguments for the top spots based on equations of price/value ("their salads have unlimited toppings" "but you have to pay extra for avocado"), customer service ("the sandwich guys are rude so I'd rather go to the taco truck") and opportunity cost ("yeah but then you have to stand outside and freeze in line"). One thing we don't have to debate about is free lunch - it doesn't exist in the Financial District! It's been a long time since the original "free lunch" prompted economists to remind us there's no such thing as one. Saloon patrons in the late 19th century were often treated to a free meal in exchange for a drink. In turn, the saloon raked in the cash as lunching patrons munched on heavily-salted foods like crackers and ham and cheese and ordered more and more rounds of beer. (I'm sure you've noticed this is still in practice today; Destination's mac and cheese Mondays here in NYC get me every time.)
Not quite as long ago, but a solid 5 years ago (geez) our CEO Marc Siden reminded us of the price of "free" data:
"Let’s play a game of what if's shall we? What if Mercedes started putting used parts in their cars because it saved money? What if they replaced the wood panels with plastic and the leather seats with vinyl? What if they cut out their exceptional service? What if they did this for a year, and when the economy turned around, they went back to being the best at what they did? Would we look at them the same?"
Much has changed in the scope of the local data market, but the principles remain the same. Free and low cost data flows free, but who is winning here? In January we talked about what websites lose when they implement a "free" widget. Today, I'll argue that our industry is plagued by challenges similar to what happens to privacy on the ad-supported "free" internet. At the WSJ Data Transparency Code-a-thon last April, a team sought to demonstrate what that price is through a browser calculator they created. As their team explained:
"The 'free' internet is an example of 'deceptive framing,' the presentation of an “incomplete and biased representation of a decision problem that misleads their perception and analysis of the problem, and thereby misleads their entire decision-making process.' Deceptive framing enables one to, 'present a narrow way of thinking that focuses on only one or a few aspects of a more complex decision problem…'"
Free and low cost services have a way of seducing us to behave irrationally, as my favorite behavioral economist Dan Ariely points out time and time again.
We've heard too many stories of clients who've come to us from a pile of data they didn't know how to turn into information. My sole suggestion today, no matter what stage you are in that project: don't rule out the opportunity costs that will inevitably come from investing less up front.