Is Information a Commodity?

Brian J. PERRY, O.B.E., D. Tech. (1)
Former Director, British Library Research and Development Department

(1) "Heiwa" 10 Crossingfields Drive, Exmouth, Devon EX8 3LP, U.K. Fax: +44-1395-266448 The paper was delivered at the Karuizawa Inose Lodge on Wednesday October 20th, 1999

What is Information?
What is a Commodity?
Yes it is!
No, It isn't!
Conclusion - Should It Be?


That information, knowledge and wisdom have financial value has been acknowledged for many years. If I may quote from the Christian Holy Bible:

"Happy is the man that findeth wisdom
and the man that getteth understanding
For the merchandise of it is better than
the merchandise of silver and the gain
thereof than fine gold"

This is extracted from the "Book of Proverbs", whose compilation started eight hundred years before the present era. In spite of this, the idea that information (as opposed to the information carriers such as manuscripts and books) is something that should be paid for is not something that has been apparent to the general public, except in the cases of military and industrial espionage. One of the first thinkers to posit the coming of the "Information Age" was the economist Fritz Machlup and his predictions generally included the proposition that information was an important commodity which would form the basis of a new economic force.

For quite some time, there have been attempts to identify the information component of products and to cost out the value of these. Peter Drucker, the management guru, for instance has pointed out that in new industries information, as opposed to parts and labour, is increasingly forming inputs to products. The cost of an automobile, for example, is 40% material and 25% labour, whilst for a silicon chip the cost is 1% materials 10% labour and 70% information. Even in the case of an automobile, the proportion of information that is input to its manufacture is rising rapidly.

In the UK in the 1980's there was a heightened awareness of the commercial value of information with the publication of a report entitled "Making a Business of Information" which had been produced by an advisory group to the Government's Cabinet Office called the Information Technology Advisory Panel (ITAP for short). The recommendations of this report were warmly welcomed by the Government since it provided further sources of profit, capitalized on a resource which the British were good at exploiting and provided a further example of public resources (i.e. government information) that could be exploited by the private sector. Mrs. Thatcher herself is alleged to have said that she was greatly in favour of the "free flow of information but not the flow of free information".


What is Information?

Since there are two concepts implicit in the title of my talk, I would like to define what I intend to cover. First, information - theoretically, any signal that can be transmitted and received is information and, as far as human beings are concerned, anything that can stimulate any of the senses is information. Information can be transmitted for the purposes of culture, leisure, work, research and everyday life. I shall mainly consider the use of formalised textual information, produced and transmitted for a definite purpose. Within this paper, any of the following categories can be included in the concept of information:

  1. Listings - a list identifying various carriers of information (i.e. books, journals, journal studies, videos, films, records), without much digestion of the information contained in them and with little or no classification.
  2. Bibliographic references - these are detailed descriptions of the information carriers. The descriptions are standardised and allow for easy identification of the carriers in question. There may or may not be keywords or classification to indicate the content of the material.
  3. References organised for information retrieval. This category covers the indexing and abstracting services and contains sufficient information to select the carriers required. Abstracts, especially, frequently have sufficient information to be used as surrogates for the information carrier itself.
  4. The information carrier or a copy thereof- i.e. the actual book, journal article, film, manuscript, database entry etc.
  5. Information extracted from the carrier or carriers and presented without comment.
  6. Intelligence - information processed and digested and presented in an analysed form to meet specific needs.
  7. Advice - information that is interpreted and presented, together with appropriate experience, to meet a specific application.


What is a Commodity?

The "New Oxford Dictionary of English" defines commodity as:

  1. "a raw material or primary agricultural product that can be bought or sold, such as copper or coffee
  2. a useful or valuable thing such as water or time".

The "Concise Oxford Dictionary" has:

  1. "an article or raw material that can be bought or sold, especially a product as opposed to a service.
  2. a useful thing".

The "Chambers Dictionary" offers:

"an article of trade; (in plural) goods, produce; profit, expediency, advantage, convenience or privilege (archaic)"

I doubt that any of us here would argue against the idea that information is a "useful thing". For the purposes of this paper, I intend to define a commodity as "an item that can be bought or sold". Under this definition, then the answer to the question posed in the title must be "yes - information is a commodity" although I propose not to search, at least in this paper, for a definition of an "item" of information.


Yes it is!

The realisation that information had become a commodity really dates from the moment that information as opposed to financial and scientific data went on-line. Before then, the purchase of a book or journal was virtually the purchase of rights in the information and ideas within that carrier for the whole of the time that it was in your possession. With on-line information you are presented with the possibility of a charge every time that you access that information.

On-line had its beginnings in the 1960's with the key event of the introduction of the service - then called MEDLARS - now called MEDLINE. Ironically, the program behind MEDLARS was first conceived as a computer-aided typesetting program to provide the printed indexing service "Index Medicus", but, to all intents and purposes the printed version was superseded by the electronic version because of improved cost, searching efficiency and flexibility (which allows a variety of services to be generated from the single database). These, of course, are three of the characteristics that make electronic services preferable to print-based ones for a great many users.

There was a sudden spurt in the provision of on-line databases mostly derived from existing secondary publications (i.e. abstracting and indexing services) and this was the beginning of electronic publication. Fairly soon afterwards, full-text machine readable databases started to become available - such services for instance as LEXIS (legal material) and NEXIS (newspaper material).

Surprisingly, in view of the fact that computers had been used for many years in the production of books and journals, publishers were originally very wary about the possibilities of full electronic publishing. They feared loss of income, especially from advertising (which forms a great part of revenue of scientific, technical and medical journals) and also feared that electronic versions would not be as profitable as the print versions. They were also afraid that there would be illegal down-loading of material for which they held the copyright and for the use of which they required payment.

All this has changed drastically over the past ten years and there has been a noticeable acceleration in the rate of transition either from print to electronic versions or the production of both electronic and print versions - a process known as "parallel publishing".

The major types of publication that come within the arena of electronic publishing are databases (especially banking and other financial information), geophysical data, information retrieval systems (including abstracting and indexing services), full text databases and reference materials (such as encyclopaedias). Other, less formal, publications are growing in importance - the subject-specialised bulletin boards, for instance, which in some cases may replace the more traditional journals. The High Energy Physics bulletin boards run at Los Alamos, for example, is one of the most common places for physicists to try out new ideas.

The opening-up of the Internet has accelerated the growth in the availability of on-line information and in its use at previously unbelievable rates and this looks as if it is going to continue to accelerate far in the future.

Incidentally, it is a good question as to how large is the information resource that is on the Internet - we know that there are about two million host computers on the Internet and getting on for about 45 million web-sites and that millions of new pages are being added every few months, ranging from personal web-sites to university archives. Yet, how much does this add up to? Much to my surprise, research by an American company called Alexa Internet reckons that in 1998 the world wide web was a mere three trillion bits of information. The only other recent estimate that I have seen is in a recent article on the database TerraServer which states that it contains half the information stored on the Web and that it currently stores 950 gigabytes. (i.e. leading to an estimate of l 5.2 trillion bits).

My interest in statements about the size of the Net/Web, is because it does seem that (except for well organised sites) it is getting more difficult to retrieve information efficiently from the Web. Research carried out over the past two years by the NEC Research Institute has indicated that retrieval on the Internet has become less effective during the years the study has been carried out. In 1997 the researchers estimated that there were 320 million pages on the Web and that the best search engines then indexed about a third of them. In July 1999, the team reported that there were about 800 million pages and even the best search engines only indexed about 16 per cent. True if you used a metasearch, submitting the same enquiry to as many search engines as possible, there was a total coverage of about 43 per cent, but this is hardly something of which to be proud! Perhaps more worrying is the response of the managing director of Lycos (a well-known search engine) when faced with these research results: "It's actually a good thing if you have a search engine that doesn't have 100% of the web pages out there, because a lot of them, quite frankly, are not worth looking at". I would agree with his statement about the value of many of the pages on the Web but, if I am paying for a search, I would like to decide what is rubbish and what is not.

Whatever the size or the efficiency of searching, progressively more and more of the world's information, in both primary and secondary form, is going on-line and progressively more and more people (or, more usually, their organisations) are paying for access to it. In spite of what I have said about the change in the model for charging for information, it may actually turn out to be cheaper to buy information on-line than in the printed form, especially if the much quoted "every journal article has one reader" is true - there will be savings on the non-storage of printed material, savings in user time in searching and the budget will have to pay only for information that is required.

That information is not only a commodity but one in which trading will produce a profit (eventually, if not always now) is evidenced by the frantic maneuverings seen over the past few years by the firms that own information in their efforts to extend their holdings of content, including that in visual and aural domains, and by the firms that own electronic distribution networks to purchase content as well.

Not surprisingly, knowledge and wisdom are concepts that are also considered to be of great value, especially in the context of the recently much publicised "Knowledge Management" - yet another concept for the Information Professional to add to their armoury. It would be presumptuous of me to define too deeply what Knowledge Management is in the country from which the concept originated, but perhaps I should attempt an exploration for the benefit of any member of the audience who is not au fait with the concept. Basically, it is the idea that knowledge has a value to an organization and that the people who have that knowledge should share their skills and information with their colleagues. Part of the exercise of introducing Knowledge Management into an organisation consist of trying to put a value on intangible assets that include knowledge tied up in the heads of people. As Bill Gates said, in a recent article in Business Strategy Review "Our primary assets, which are our software and our software-development skills, do not show up on our balance sheet at all". The Chief Executive of British Telecom, Sir Peter Bonfield, in writing about Knowledge Management made the point that $100 invested in Microsoft is worth about $1 in fixed assets and that the other $99 worth of assets was tied up in the heads of people working in the company. Just for interest, I would like to quote values for the Knowledge Capital for a few American pharmaceutical companies, as derived by Dr. Baruch Levi of New York University (the values are quoted in billion dollars):

Market value Knowledge Capital
Merck 139.9 48.0
DuPont 87.0 26.4
Dow Chemical 21.8 10.2

Note that the Knowledge Capital does not necessarily bear relationship to the market value.

The growth of interest in Knowledge Management should be a great consolation to those in the Information Profession who thought that the Internet might put them out of a job.


No, It isn't!

In spite of the fact that a large part of the information business can, and does, treat information as a commodity, there is still a huge amount of information that is provided free. Nowhere is this truer than on the Internet, where a large number of users would be very surprised by the concept of paying for access to information. Most magazines and newspapers that are on the Net offer at least (sometimes all) of their content for free. Statistics and advice are provided free by business service companies and by share dealers and even lawyers and accountants (traditionally the most parsimonious of professionals) publish some free material. The user can download filmclips, free music and even full novels often by the best of writers and artists. It is also possible, of course, to get some very useful software free on the Internet. True, much of what you can access for free is rubbish but equally much of it is useful. The Internet is a market place that illustrates as well as any that "cost is no indicator of value".

The reasons why potentially very saleable material is available at no charge are many and varied. A major one is that some public-spirited cybercitizens make their Information available free "for the public good". Other information on the Net is free in order to act as an inducement to buy other services. Other free information is put up to establish a "presence" on the Net. In some cases, the collection of relatively small sums of money for the information that is downloaded would be too tedious and too expensive to administer.

However, in this current era, where profit is the bottom line and where there is no such thing as a free lunch, I fear that we shall soon see charges introduced for many services which at present are offered free. This will almost certainly start with the newspapers.

In connection with making charges for material that is currently for free, it is interesting to note a warning given by the senior vice president of Warner Brothers On-line to the Hollywood production industry: "Entertainment companies are mortgaging their on-line future. They're giving away their content in exchange for exposure. But the entertainment companies are basically underwriting these Internet companies by throwing away their intellectual currency".

When it is realised how few Internet companies are really making money, as opposed to having their share prices pushed up, then one can expect that in the fairly near future there will be a change in policy on free information.


Conclusion - Should It Be?

I have come to the sad conclusion that information is a commodity that can be traded and can, in fact, be bought and sold to make profit. It is still, however, also provided for free even in established organisations. For instance, a beneficient management purchases information from the providers and then makes that information available, free of charge, to its staff. Good colleagues will readily exchange information between themselves for their mutual benefit and researchers, whether from the same organization for not, will gladly supply information to one another. I would say, in passing, that the dictum "Knowledge is Power" is only true if that knowledge is shared and put to use, knowledge that is hoarded is useless.

My main concern in closing this brief talk is to ask myself if there is any information that should remain free of charge and to which there should be easy and ready access. To this, my answer is a very firm "Yes!". There has been much debate about electronic communication making worse the division between the Information Rich and the Information Poor and I have no doubt that this is very possible.

At the very minimum, every person should be guaranteed, free of charge, all the information that they need to make their everyday life decent, happy, efficient and as prosperous as they are able. This calls for both Information Professionals and Governments to bend every effort to identify what information is needed to ensure this (and I would suggest that we still do not know definite answers to this) and to then make sure that this information is provided.

In the mid-eighteenth century in Europe there arose the concept of the "Social Contract" - the idea that government authority derives from an agreement between ruler and ruled in which the former agrees to provide order in return for obedience from the latter. I would truly like to see "and information" added after "order", so that all Governments not only have a "Social Contract" with their citizens, but also an "Information Contract".