Here Comes the Data Economy

New companies are creating services using government data on health care, education, and more.

Steven VanRoekel, U.S. Chief Information Officer.

Steven VanRoekel, U.S. Chief Information Officer.


We’re living in the exabyte age, where the actions of billions of humans using the Web and their mobile devices are creating massive amounts of big data to collect, store, analyze, and put to work.

If big data is a strategic resource, as has been suggested, then many national and state governments have public reserves that can be tapped for the public good in this young century’s version of the industrial revolution. Given that the United States economy is still coming out of the worst recession and financial shock since the Great Depression, supporting civic and tech entrepreneurs enjoys political support from both sides of the aisle.

Entrepreneurs, big and small, are mashing up data from the rapidly expanding collection of sources and building new businesses on it or improve their existing services, like Zillow or Google Maps or Consumer Reports or Bloomberg Government. In a time when job creation is critical, using public sector information to create jobs isn’t an aim to dismiss lightly, although the terms and conditions under which such activity occurs must be clear to all actors involved, to avoid the creation of new monopolies based upon artificial scarcity.

My publisher, long-time open source and open government advocate Tim O’Reilly, has asked how government can act as a platform to enable people inside and outside government to innovate on top of it. One answer is certainly releasing open data. In that context, open data and application programming interfaces, more commonly known as APIs, increasingly look like fundamental infrastructure for digital government in the 21st century.

There’s good reason to think that open data could have an overall effect on the economy akin to open source and small business. Gartner, the IT research analysis firm, recently highlighted how open data creates value in the public and private sector.

You may not realize it, but services you use on a daily basis have been built upon data released by the government. Weather data collected by the National Oceanic and Atmospheric Association has an annual estimated economic value of $10 billion, according to U.S. Chief Information Officer Steven VanRoekel and U.S. Chief Technology Officer Todd Park. NOAA data sets are used by, Weather Underground, and the Weather Channel—and the nation’s farmers consult these forecasts to manage both their crops and the risks of loss. VanRoekel and Park estimate the annual economic value of the data from the U.S. global positioning system at some $90 billion. From companies like TomTom or Garmin to dashboard GPS systems to smartphones and associated location-based applications, GPS data sets are baked into an expanding number of services and products.

Now, as Park seeks to scale open data across the federal government, we’re on the verge of the next generation of services driven by open data, which will involve everything from energy to health care to consumer finance to transit sectors. The challenge is that the cities and federal agencies that hold vast amounts of data may not always understand the value of the information they hold or how to create or sustain businesses using it. That’s where open innovation in the public sector and the dynamism of entrepreneurs will play an important role in making the people’s data more useful to the people.

BrightScope is a notable example of what dogged persistence can create. The California startup made a profitable business using government data to help the American people understand the fees associated with their 401(k)s. Last May, BrightScope went further, launching financial adviser pages based on open government data from the Securities and Exchange Commission and the Financial Industry Regulatory Authority, the largest independent securities regulator in the United States. Previously, financial adviser profiles could only be found through exact queries at an obscure URL on the regulators’ websites. Now, information that citizens care about—the records of financial advisers in their geographic region—is available where they’re looking for it: in search engine results.

Just as labor and regulatory data fuels BrightScope’s business, there’s an expanding number of startups that are tapping into other data released so-called “smart disclosure” initiatives. 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 information to use. Startups like and Hello Wallet are already using a combination of private sector and public sector data to enhance consumer finance decisions. The success of such consumer finance startups suggests an important lesson: The most successful apps and services will combine government, industry, and user-generated data.

The key open data story to watch in the federal government, however, centers on health care. McKinsey and Associates estimates the annual economic value of big, open liquid health data at about $350 billion annually. The explosion of mHealth apps are just the beginning of the disruption in health care from open health data. The effort to revolutionize the health care industry by making health data as useful as weather data is still in its infancy—but the early results are promising. iTriage, which was acquired by Aetna, is enabling people to make better mobile health care decisions where and when they need to do so. It uses a combination of government and private sector data to evaluable symptoms or conditions and point users to nearby medical care. Another startup, Castlight, is analyzing health care data to empower patients, acting like for those who want more transparency about costs. In May, Castlight completed a $100 million round of financing.

But for these sorts of initiatives to take off, entrepreneurs and regulators will have to work together to get contextual consent right and inform patients about the reuse of their data. Transparency is crucial to building a health data commons and thriving startup ecosytem based upon it.

If that balance can be struck, there’s considerable potential for entrepreneurs to create better civic interfaces for many digital services. If open government data have helped build new tools, open data disclosed by private companies could create even more value for citizens. But currently, few businesses release anonymized data in an open, usable format. It will soon be time for the government to step in, convene stakeholders, and answer some key questions: How can we create uniform standards that will allow entrepreneurs and developers to innovate? When should data be licensed? Most of the big data releases we have seen come from finance, with bank records or stock trades. But there are significant opportunities to help both entrepreneurs and empowered consumers in health care, energy, education, and telecommunications, to name just a few.

Just as the glowing blue dot on the maps in our smartphone screens revolutionized how we navigate the world, similar “blue dots” could emerge for health care, finance, energy, and any product or service that is regulated or cataloged by government and industry. First, however, they’ll need to open the data.

Also in the Future Tense package on government and open data: why Yelp and the government should share data; what a burger mob tells us about the future of democracy; and how Mexico is using open data to move beyond its authoritarian past.