Raja Jasti’s Blog - Renaissance Thinking

Bruce Schneier, a noted information security expert, wrote an interesting post in WSJ on the security risks involved in cloud computing.

Do you know what your data did last night? Almost none of more than 27 million people who took the RealAge quiz realized that their personal health data was sold to drug companies, who in turned used that information for targeted e-mail marketing campaigns.

There’s a basic consumer protection principle at work here, and it’s the concept of “unfair and deceptive” trade practices. Basically, a company shouldn’t be able to say one thing and do another: sell used goods as new, lie on ingredients lists, advertise prices that aren’t generally available, claim features that don’t exist, and so on.

RealAge’s privacy policy doesn’t mention anything about selling data to drug companies, but buried in its 2,400 words, it does say that “we will share your personal data with third parties to fulfill the services that you have asked us to provide to you.” They maintain that when you join the website, you consent to receiving pharmaceutical company spam. But since that isn’t spelled out, it’s not really informed consent. That’s deceptive.

Cloud computing is another technology where users entrust their data to service providers. Salesforce.com, Gmail, and Google Docs are examples; your data isn’t on your computer — it’s out in the “cloud” somewhere — and you access it from your web browser. Cloud computing has significant benefits for customers and huge profit potential for providers. It’s one of the fastest growing IT market segments — 69% of Americans now use some sort of cloud computing services — but the business is rife with shady, if not outright deceptive, advertising.

Cloud computing services like Google Docs, and social networking sites like RealAge and Facebook, bring with them significant privacy and security risks over and above traditional computing models. Unlike data on my own computer, which I can protect to whatever level I believe prudent, I have no control over any of theses sites, nor any real knowledge of how these companies protect my privacy and security. I have to trust them.

This may be fine — the advantages might very well outweigh the risks — but users often can’t weigh the trade-offs because these companies are going out of their way to hide the risks.

Of course, companies don’t want people to make informed decisions about where to leave their personal data. RealAge wouldn’t get 27 million members if its Web page clearly stated, “this information will be sold to pharmaceutical companies,” and Google Docs wouldn’t get five million users if its Web page said, “we’ll take some steps to protect your privacy, but you can’t blame us if something goes wrong.”

And of course, trust isn’t black and white. If, for example, Amazon tried to use customer credit card info to buy itself office supplies, we’d all agree that that was wrong. If it used customer names to solicit new business from their friends, most of us would consider this wrong. When it uses buying history to try to sell customers new books, many of us appreciate the targeted marketing. Similarly, no one expects Google’s security to be perfect. But if it didn’t fix known vulnerabilities, most of us would consider that a problem.

For markets to work, consumers need to be able to make informed buying decisions. They need to understand both the costs and benefits of the products and services they buy. Allowing sellers to manipulate the market by outright lying, or even by hiding vital information, about their products breaks capitalism — and that’s why the government has to step in to ensure markets work smoothly.