The Data Economy. Wealth 4.0Fundación Telefónica79The Data EconomyWealth 4.0A day-to-day and seemingly innocuous element such as data, in its multiple representations and formats, is revolutionizing the way we solve problems, face questions presented to us and approach tasks that up to few years ago were carried out manually or with limited analytical capabilities.The Data Economy is rapidly turning into a new paradigm, and data itself into a new input in the production process. Data accompanies most decision-making processes in all the relevant dimensions of our lives, both at personal and professional levels. Raising awareness of this reality, apparently invisible to our eyes, is a task that we citizens of the twenty-first century must address.Being prepared for a future that we already glimpse, materialized in one of its many facets in the information economy, is a necessary condition to take advantage and optimize the benefits that the digital transformation brings with it. Globalization requires us to speed up to keep us from lagging behind as a society in a context of increasing competition.The aim of this publication is to encourage the reader to become familiar with the basic elements of one of the most relevant pillars of growth of the digital age in which our society is immersed, populated of successive technological innovations, many of them known to the reader through science fiction literature. The purpose of such innovations is to improve our well-being via efficiency gains and the expansion of the frontiers of applied knowledge. The fast adoption of new tools, abilities and professional skills is a necessary condition so that the Data Economy can contribute widely to create wealth and welfare in our society.The Data Economy Wealth 4.0Emilio Ontiveros (dir.) Verónica López Sabater (coord.)The Data EconomyShare this publication on social mediaDirector: Emilio OntiverosCoordinator: Verónica López SabaterThis book is published by Ariel and Fundación Telefónica, in collaboration with Editorial Planeta, who do not necessarily agree with the content expressed herein. This content is the exclusive responsibility of the authors.© Fundación Telefónica, 2018 Gran Vía, 28 28013 Madrid (Spain) © Editorial Ariel, S. A., 2018 Avda. Diagonal, 662-664 08034 Barcelona (Spain) © Texts: Fundación Telefónica© Cover illustration: Jmugica © Cover design: LACASTAFundación Telefónica Editing Coordination: Rosa María Sáinz PeñaFirst Edition in Spanish: December 2017First Edition in English: April 2018This monograph is published under a CreativeCommons License Type: Attribution, ShareAlikeThis work can be downloaded free of charge in:fundaciontelefonica/publicacionesISBN: 978-84-15282-35-8 3123Introduction: the data economy1.1 Definition, evolution and current situation from an economic perspective 16Big data and its importance in the digital world2.1 Big data: description and definition 272.2 The technological component of big data 312.3 Data science: mining information from data 332.4 The data economy and big data, an essential binomial 352.5 Obstacles and adoption of big data in Spain and Latin America 37Data regulations around the world3.1 Personal data protection around the world 433.2 The European approach 443.3 Latin America 50ContentsPart I - IntroductionForeword 6About the authors 7Executive summary 84567New business opportunities in the data economy 5.1 The new business models and their fit with prevailing regulations 835.2 Intermediation: data-driven industries 90The rise of new professions6.1 New leaders: Chief Data Officer 1046.2 Big Data Engineer 1056.3 Lead Data Scientist 1066.4 Chief Information Security Officer 1066.5 Data Protection Officer 110Data ownership and residence 113Part III - Key challenges posed by the data economy4The data market4.1 Agents 554.2 Data life cycle: generation | capture | transmission | storage | analysis | processing 594.3 Where is big data stored? 674.4 Data analysis and the professionals: current situation, current demand, gap and forecasts 684.5 Trend in data volume and use in the digital economy 724.6 Open data: concept, limitations and measures taken to foster standardisations 74Parte II - Markets and opportunities589Data: privacy, sovereignty, security and transparency 8.1 Personal data privacy and security: solutions 1248.2 Data sovereignty: a global concern 1328.3 Data security 1368.4 Data transparency 140Measuring the data economys contribution to the national accounts 9.1 The methodology for quantifying the data economy 1469.2 The size of the data economy 150Bibliography 1536ForewordThis report attempts to help explore and become familiar with one of the core ele-ments - if not the core element - of economic growth in the twenty-first century: the data economy. We are all required to educate ourselves about a paradigm that, while relatively new, represents only the very beginning of a genuine industrial revolution, this time driven by data. Data we generate, store, share, analyse, data that describes us, pin-points where we are, reveals our tastes and preferences, our opinions and also those of our network of family and friends. The knowledge we refer to is more necessary than ever in order to make the most of each of the virtues associated with the op-portunities thrown up by the data economy and to learn how to protect the data, sensitive or otherwise, we put out there, consciously or otherwise.Data has become a crucial input for any economic process. In its raw state - standalone, unprocessed - data theoretically lacks value. It is its handling, process-ing and scientific analysis that yields useful and original knowledge. Never before could data be read as it can be today, thanks to innovation on the big data and data science fronts. New tools (programming languages, machine learning, data science methods), new functionality (internet on the go, the internet of things, cloud com-puting) and new professional skills in the digital arena (notwithstanding the prevail-ing skills gap) are what it is making it possible for business models previously as unimaginable as they were non-viable to flourish around data.Pushing out the knowledge frontier and, by extension, expanding the ability of individuals, enterprises and the public sector to innovate by making smart use of data is the aim of the data economy, a reality that is already omnipresent in our lives. 7Emilio OntiverosFounder and President of Afi Analistas Financieros Internacionales and Professor of Business Economics at Madrids Autónoma University.Diego VizcaínoManaging Partner of the Applied Economics area of Afi Analistas Financieros Inter-nacionales.Verónica López Sabater and María RomeroConsultants in the Applied Economics area of Afi Analistas Financieros Internacio-nales.Alejandro LlorenteCo-founder and Data Scientist at Piplerlab S.L. and lecturer for Afi Escuela de Finan-zass Data Science the Third burst onto the scene thanks to the information and communication technologies (ICT) that enabled consolidation of the now-irrevers-ible globalisation process. The current revolution is articulated around something apparently more ethereal but, as will be shown in this report, omnipresent: data. In the knowledge economy, data is a basic and key input. However, data itself does not create value unless it is fine-tuned, processed and analysed in order to give it utility. The data generated by citizens, enterprises, the public sector and, more recently (and this is just the start), objects (the internet of things, or IoT) has experienced exponential growth in recent years and the trend is unstoppable, with the rollout of 5G around the corner. It is from this exponential growth in the volume, variety and speed of data generation (hence the term big data), coupled with the grow-ing ability to capture, store, process and analyse it (using data science methods) the so-called data economy has emerged. The development of other technolog-ical advances, such as Internet 2.0 (social networks) and successive versions and cloud computing (remote data storage and processing centres), has helped reduce barriers to entry for private and public entities in terms of investing in and using digital tools to make the most of and protect their data (the seed of information and knowledge). The data economy cannot be understood without the now universally embraced ITC (smartphones, essentially), the development of biometrics and a nod to eco-nomics, psychology and sociology, among other disciplines.What kinds of questions can we answer using such vast amounts of data? In terms of value creation, big data can lead to greater insight into customer profiles, cost-cutting via detection and resolution of inefficiencies, the creation of new data 9Executive summaryproducts or services or the implementation of new businesses. Elsewhere, data sci-ence, which encompasses computational, mathematical and statistical methods, allows us to respond to questions within the corporate environment via application of scientific methods, putting theory into practice, describing, anticipating and pre-dicting developments and prescribing actions.As for how we govern data, the regulations are based on safeguarding the priva-cy of sensitive information, generally by banning the disclosure or undue use of in-formation about private individuals. The gathering and storage of personal data by public and private entities required a series of playing rules to govern its handling in light of the massive explosion of data generation triggered by the ICTs, particularly the internet. The imminent development of the IoT, underpinned by the automat-ed capture and dispatch of data by everyday objects connected up to the internet not only has security implications, it is also unearthing new concerns regarding data (in this instance not necessarily personal data) privacy and protection. In geopolit-ical terms, Europe is the region in which data protection is most stringent, whereas privacy is best protected in North America. The key principles and data protection rights for Europes citizens are enshrined in the EUs General Data Protection Regu-lation (GDPR). Markets and opportunitiesWithin the data value generation chain there is a broad range of stakeholders: from data generation firms to technology companies, analytical service providers, regu-lators and even academics. Each agents position responds to an extent to a point on the data value chain. Companies generate data in the course of using a host of technologies that are not usually integrated so that the exploitation of the data they generate is no trivial matter, even though most of the time enterprises, large or small, do not themselves constitute a source of massive amounts of data. In turn, depending on the question we wish to answer, the data available within a company may paint an overly one-sided picture that needs enhancement by using other external sources of information.Elsewhere, large data volumes imply a capacity challenge for companies. In the past, the various technologies meant that only larger companies with the where-withal to make significant investments in physical capital were able to access the information economy. However, systems such as cloud computing are not only bringing access to this input for all-sized companies, they can also be tailored to demand, offering flexibility and efficiency: transition from the bricks-and-mortar economy to the information economy. The data economy is paving the way for new business models - locally and globally - that are reconfiguring the structure of many markets and productive structures, leading to efficiency gains in production, particularly in the distribution of goods and services, whether traditional or new. Innovation and transparency