A battle for individual autonomy and the future of the human race is being waged all around you. This is because powerful early movers see what most of us don't: We are transitioning from capital to data as a means of transferring value.

In this transition there will be winners and losers. So far individuals are losing – we have ceded a huge chunk of disputed territory without even realizing the war was upon us.

Capital itself tells us what will happen. During the rise of capital, those who understood the dynamics early – the capitalists – were able to reshape the planet and human experience in profound ways. Ways that mostly consolidated that power in the hands of of those approved of by the capitalists.

Now capital is widely understood to be the primary manifestation of power in the world. The key insight is that some people saw it way early and ... capitalized (you're welcome).

Capital is the water around us and we are the fish. But we are about to evolve lungs and move onto land, via the increasing collection and use of data. And its importance cannot be overstated.

Everywhere you look, from science to media to politics, our ability to progress is bottlenecked by capital's value transfer bandwidth. It's narrow and provides very noisy signal. Data, on the other hand, is high throughput and crystal clear, making it far superior in many important ways.

Like the Newton before the iPhone, there are early attempts at making the switch without fully understanding the size of the opportunity. Like the coffee shop that gave out free coffee in exchange for personal data.

It's easier to see at play through our existing data monopolies. If Google had to give up either its data or its capital, which would it choose? I believe it would keep its data, since it's easier to see how the lost capital could be regained via the kept data rather than the other way around. Increasingly, businesses would prefer to have your data rather than a relatively small amount of your capital.

We can see the inevitability of the transition in a few key properties of both value transfer mediums.

One's capital is transient, exhaustible. If you use it, you lose it. On top of that, its ability to retain value over long periods of time is very shaky.

Data on the other hand, is inexhaustible. You can use it as much as you want without ever having less of it. Plus it's an ever appreciating asset that is endlessly replicable.

This inexhaustible property of data is, for the most part, widely understood. We can endlessly copy and paste a photo over and over again without it diminishing the original or the copies.

The part that is more difficult to see is that data inherently becomes more valuable over time. (Let's put aside the idea of bad or inaccurate data for now so we can better see this core mechanism that is at play even in the presence of bad data.)

The Golden Egg

I believe data's value accrual is something like a law of nature – which is supported by other concepts like the Law of Large Numbers, network effects, and information theory.

Data gains in value because of the universal utility of knowledge. It's more valuable to know more things. In a competitive environment, the more one knows, generally, the more of an advantage one has over anything that knows less.

But how does that make it more valuable as time passes?

When a piece of data is created, its value derives from its relation to all the previous data that exists. The fact that I weigh 165 pounds today is not very valuable. If I add the fact that I weighed 175 pounds last week, now the data starts to tell a story. What would make someone lose 10 pounds in a week?

In this example, the two pieces of data are propping up each other's value. If we separate them, their value diminishes. Not only that, but there is a temporal bias, with older data having gained more relative value than newer data.

That's because the more data there is, the more valuable each existing piece of existing data is. So as more data is added, the data that was there before has grown in relative value to what it was before.

Another way to look at it is that when a new piece of data comes into existence, it is the least valuable it will ever be.

When I weigh myself next week and my weight is 135 lbs, the weighings of 165 lbs and 175 lbs become more valuable. But compared to the value it had when it was first measured, the 175 lbs data has gained the most relative value.

The basic magic mechanism is that, in the human realm, more data exists today than yesterday. When you add more data to existing data, the existing data becomes more valuable.

All previous data becomes more useful over time because it creates more potential knowledge. Those who are able to extract that knowledge have an advantage in whatever they're trying to do. A doctor who knows I weigh 135 lbs is likely going to be way less effective than the one who knows that last week I weighed 165 lbs and the week before that I weighed 175 lbs.

Dial-Up vs. Broadband

How is capital holding up here? If we generate more capital, it's not guaranteed that it raises the value of the existing capital. In fact, there may be a bias towards devaluing existing capital since its value can often be rooted in scarcity. In some cases adding more dilutes the relative value of the existing capital.

If the economy is about transferring value across the network, data is like broadband compared to capital's dial-up speeds. More value. more market signal, and more preference is conveyed by sending data than by sending capital.

When you buy something at a store, that store will generally see that purchase as a signal of preference. It then uses that signal to derive business practices that cater to and leverage that preference. Should the store offer more things like that? What other similar or related things could it make you aware of in order to increase your frequency of purchasing? Would you buy a more expensive version of it?

But this is a very weak signal. The inferences the store makes may be wildly inaccurate and it will take them a long time to validate them. When a store gets your data, however, their inferences become way more accurate, and need way less validation to be proven correct. Costs go down because all the machinery needed to extract signal from capital is made obsolete. Revenue goes up. Growth potentially goes from linear to parabolic.

With data rather than capital, corporations, businesses and organizations can move from "wanting to know" to "knowing." that translates directly into greater amounts of capital than simply a typical capital transaction.

In this way, data actually produces capital without ever being exhausted. Google and Facebook have generated trillions of dollars off of their datasets while the data itself has only become more capable of producing capital over time.

There's a fundamental asymmetry here. While you can certainly use capital to produce data, in most cases that capital will then be used up.

For all these reasons, economic agents are beginning to prefer to hold data rather than capital. Companies already discount services, or make them completely free, in exchange for the data you generate by consuming their products.

Facebook may have even gone out of business if they collected capital instead of data. Imagine how many fewer people would use free social platforms if they cost $10 per month. Instead, Facebook and others collect user data and sell it to businesses – which takes the guess work out of customer strategies for those businesses.

Therefore social media companies are able to generate far more capital from each user than they would through a direct transaction. Plus, the value of the platform's data grows more and more valuable with each new addition.

The power difference between data and capital is even more striking when you consider the effort required to generate both. You've generated a huge amount of data during the time it took you to read this, though most of it was uncollected. How much effort was that? Now think about how much effort went into earning your last paycheck.

Show Me the Money

If we each generate data and data is more valuable than capital, why aren't we all rich yet?

Our tools to collect and process data are in their infancy. Think of all the fossil fuels that sat inert for the majority of human history until we had the tools to collect and process them. It's very early days for data.

We can get there, perhaps quickly, with the right tools. And as we build those tools, we need to ensure that the value being generated stays with the source of the data. You ... me ... us.

If individuals must continue to ask permission to access the data – from which the tool builders like Google and TikTok are extracting value – our world gets even more dystopian and unfair than it is now.

If we do it right, however, individuals will be in full control of the data they produce, and the value it generates. Then we will likely enter a currently unimaginable age of equality, innovation, and prosperity.

The Battle That Decides Everything

We view our technology choices today as frivolous and trivial. For one to care about the provenance of their devices and software is to be disconnected from what really matters.

But the stakes could not be higher. To get the data that progress demands, we can either share it freely in exchange for value, or it can be coerced from us through ever escalating aggression.

Will we collectively discover the power of data in time to keep it in the hands of individuals? Or will we only realize its power when it is used against us by those who shaped the world to capture it for themselves?

Will we all continue to be coerced into only behaviors permitted by governments and corporations? Or will those entities serve the aggregate collective needs that arise when everyone on the planet is able to pursue their natural interests and passions.