Date: Wed, 27 Oct 93 17:13:48 EST Errors-To: Comp-privacy Error Handler From: Computer Privacy Digest Moderator To: Comp-privacy@PICA.ARMY.MIL Subject: Computer Privacy Digest V3#063 Computer Privacy Digest Wed, 27 Oct 93 Volume 3 : Issue: 063 Today's Topics: Moderator: Dennis G. Rears (1 of 3)/Why Privacy Issues Arise More Frequently The Computer Privacy Digest is a forum for discussion on the effect of technology on privacy. The digest is moderated and gatewayed into the USENET newsgroup comp.society.privacy (Moderated). Submissions should be sent to comp-privacy@pica.army.mil and administrative requests to comp-privacy-request@pica.army.mil. Back issues are available via anonymous ftp on ftp.pica.army.mil [129.139.160.133]. ---------------------------------------------------------------------- From: Rob Kling Subject: (1 of 3)/Why Privacy Issues Arise More Frequently Newsgroups: alt.privacy,comp.society.privacy Date: 27 Oct 93 05:27:58 GMT [Moderator's Note: This was split into three parts by me. ._dennis ] How the Marriage of Management and Computing Intensifies the Struggle for Personal Privacy Rob Kling and Jonathan P. Allen Department of Information & Computer Science and Center for Research on Information Technology and Organizations University of California at Irvine, Irvine, CA 92717, USA kling@ics.uci.edu (714-856-5955) 1/31/93 Draft 3C Note: This is a working draft for review and comment. Abstract Why is the continuing development of information technologies which seem to impinge on personal privacy a continuing struggle in contemporary advanced industrial societies? One important line of explanations focusses upon changing social conditions in which many modern organizations deal with enormous clienteles. Environmental factors such as social mobility and computer improvements cannot completely explain the diversity of surveillance technology uses across industries, and even between organizations. We link the adoption and use of new computer technologies for large-scale record keeping to a set of social practices we refer to as information capitalism. Information capitalist explanations focus on the active attempts of coalitions within organizations to organize corporate production in such a way as to take advantage of changes in society and information technology. The internal structure of organizations has been transformed by the rise of professional management, trained and rewarded to pursue managerial strategies that depend upon data-intensive analysis techniques. This internal structure is an important institutional explanation of modern society's push to increase the surveillance of indirect social relationships. These information capitalist practices are tied to key policy debates about computerization and privacy, with examples of commercial uses of surveillance technology that illustrate the ramifications of information capitalism for changes in public surveillance. Introduction In the early 1990s Lotus Development Corporation announced plans to market a CD-based database of household marketing data, Marketplace:Household. Lotus Marketplace:Household would have given anyone with a relatively inexpensive Apple Macintosh access to personal data on more than 120 million Americans. Lotus Marketplace:Household was withdrawn from the market in 1991 after receiving over 30,000 complaints from consumers about the privacy implications of the product. This interesting story of a victorious consumer revolt has been told many times, but how are we to understand why this kind of technology with substantial surveillance potential was developed in the first place? Was this product a strange, one-time attempt to introduce a piece of technology that could change corporate surveillance and social control practices in our society, or was it merely a highly visible example of a larger societal trend? And how do we explain why some modern organizations might find it attractive to develop and use this kind of technology? Why is the continuing development of information technologies which seem to impinge on personal privacy a continuing struggle in contemporary advanced industrial societies? Most studies of computers and privacy focus on the problems surrounding a particular law, kind of system (e.g., credit reporting) or kind of practice (e.g., computer matching)(Laudon, 1986; Lyon, 1991). Even broad ranging studies, like The Politics of Privacy (Rule, et. al. 1984). Protecting Privacy in Surveillance Societies (Flaherty, 1989), or The Rise of the Computer State (Burnham, 1983), focus on describing the rise of elaborate social surveillance systems and their legal and administrative frameworks. When authors explain the link between new technologies and changes in surveillance at the broader societal level, they tend to focus upon the needs of bureaucracies, public and private, to improve the fairness of their services, and to better control their clientele and environments. Classic works such as Rule's (1974) Private Lives and Public Surveillance, stress the mandates of various organizations to enforce norms of behavior -- to make their clients' behavior more predictable and more acceptable. We argue that explaining the development and adoption of commercial surveillance technologies such as the ill-fated Lotus Marketplace:Household database will require more than a generic "need" to enforce norms of client behavior, or to improve bureaucratic efficiency. It would be enticing to have one overarching logic to explain the development of new surveillance systems of all kinds. But we examine how the expansion of existing information systems and the development of newer commercial systems may be driven by a different social dynamic. Laudon makes a valuable distinction between "environmental" and "institutional" explanations of the adoption of computer technologies by organizations (Laudon, 1986). Environmental explanations portray organizations as responding rationally to objective uncertainties created by their environments, such as having a large number of clients or facing severe financial losses from doing business with specific people who are not well known to their staffs. Institutional explanations, however, suggest that technology adoption strategies may operate independently of environmental pressures to be efficient. Institutional explanations focus on the ways that organizations computerize seeking to maintain legitimacy and external support, or the way that computerization reflects the values and interests of specific organizational actors. In his study of the adoption of a nationwide criminal records database, Laudon found that although the initial adoption of the technology was well explained by environmental models, institutional explanations provided a better understanding of how that surveillance technology was ultimately implemented, routinized, and used. Explaining the expanding use of surveillance technologies in commercial organizations more generally, we argue, will require an institutional explanation as well. We link the expansion and use of new computer technologies for large-scale record keeping to a set of social practices we refer to as information capitalism. Information capitalist explanations focus on the active attempts of coalitions within organizations to organize corporate production in such a way as to take advantage of changes in society and information technology. Information capitalist practices are made efficacious by some of the major social transformations in industrialized society over the past century: the increasing mobility of populations, the growth of nationwide organizations, and the increasing importance of indirect social relationships. Information capitalist practices are also encouraged by the development of more cost-effective technologies for managing large-scale databases. But environmental factors such as social mobility and computer improvements cannot completely explain the diversity of surveillance technology uses across industries, and even between organizations. The internal structure of organizations has been affected tremendously by the rise of professional management, trained and rewarded to pursue managerial strategies that depend upon data-intensive analysis techniques. Organizations selectively adopt technologies which serve the interests of coalitions that can afford them, and are considered legitimate. The internal configuration of symbolic analysts inside of organizations, dynamically and opportunistically pursuing information capitalist practices, is an important institutional explanation of modern society's push to increase the surveillance of indirect social relationships. We examine the link between information capitalism, computerization, and the surveillance of indirect social relationships in the rest of this essay. The first section elaborates on information capitalism as an institutional explanation of computer and privacy practice in the commercial world. The second section discusses some of the major social transformations that enable information capitalist practices to be rewarding for participants, combined with the important role of quantitatively-oriented professional management in disseminating information capitalist strategies. In the final section, information capitalism is tied to key policy debates about computerization and privacy, using Lotus Marketplace:Household, supercomputer purchasing pattern analysis by American Express, and the rise of "data brokers" as examples of the link between surveillance technology use and information capitalism. The Engine of Information Capitalism In the next 20 years, we expect computer technologies designed to support large-scale personal databases to be absorbed into and then accelerate an interesting social trend -- the expansion of information capitalism. Information capitalism refers to forms of organization in which data-intensive techniques (including computerization) are key strategic resources for corporate production (Luke & White, 1985: Kling, Olin & Poster, 1991; Kling, Scherson and Allen, 1992). The owners and managers of agricultural, manufacturing, and service firms increasingly rely upon imaginative strategies to "informationalize" production. Computerized information systems have joined factory smokestacks as major symbols of economic power. As an organization shifts its managerial style to be more information capitalist, analysts organize, implement, and utilize information systems to improve marketing, production, and operations. Information systems multiply, as cost accounting, production monitoring, and market surveys becomes a key resource in advancing the organizations' competitive edge. Capitalism is a dynamic system, and the information capitalism metaphor joins both information and the traditional dynamism of capitalist enterprise. The information capitalist metaphor is expansive because this style of management and organization is also used by non-profit organizations such as public agencies, special interest groups, and political campaigns. Information capitalism is a useful metaphor because it marries information with capitalism's dynamic and aggressive edge. Capitalism, as an institutional system depends upon structures that facilitate reinvesting profit into a developing organization. Capitalism is nourished by the hunger of entrepreneurs, their agents, and their customers. Capitalism is stimulated when consumers lust after lifestyles of the rich and famous rather than when they rest content by emulating the lifestyles of the happy and innocent poor. Capitalism can reward the kind of entrepreneurial angst that stimulates some players to develop a new product, or a more effective way to market it or sell an older one. While there are numerous complacent managers and professionals in capitalist economies, there are often the prospects of good rewards for their competitors who can develop a more clever angle on making a business work. This underlying edge to capitalism comes from the possibility of good rewards for innovation and the risk of destruction or displacement when the complacent are blindsided by their competitors. A byproduct of the way that capitalism civilizes and rewards greed is a system in which some participants opportunistically innovate in the "search for more." Information capitalists innovate in numerous ways, including the development of more refined financial management, market analyses, customer service, and the sales of information-based products. Only a small fraction of these diverse innovations enhance the surveillance capacity of organizations. But this is an important fraction. The concrete forms of capitalist enterprises have changed dramatically in industrialized countries in the last 200 years. Until the late 1840s, capitalist enterprises were usually managed by their owners. While some firms, such as plantations, hired salaried supervisors, managerial hierarchies in businesses were small and numbered in the dozens at their largest. In contrast, some of the largest US firms today can have over a dozen levels separating the salaried Chief Executive Officer from the lowest level employee, and they can be managed by tens of thousands of specialized managers. Alfred D. Chandler, the business historian, characterizes this newer form of capitalism as "managerial capitalism," in contrast with the older and simpler "personal capitalism." (Chandler, 1984). Managerial capitalist enterprises were large enough producers to give countries such as the United States, Germany and Japan strong presence on world markets. A more recent shift in the organization of US industrial firms to manufacture most or all of their products overseas, often in Asia and Mexico. Robert Reich refers to this emerging shift in capitalist organization as "global capitalism" 28 (Reich, 1992). Information capitalism refers to a different, but contemporary, shift in the ways that managers exploit information systematically. Firms which are organized by these various forms of capitalism co-exist in the same economy. There are numerous small businesses which are managed only by their owners at the same time that the US industrial economy is increasingly characterized by global capitalism. Similarly, the shift to information capitalism is most pronounced in certain organizations, especially those who have thousands of customers or clients. But the larger organizations that employ an information capitalist managerial approach are most likely to effectively exploit the use of sophisticated computer-based surveillance technologies, such as database systems. Computerization promises to provide more in the particular ways that information can help inventive entrepreneurs, managers and professionals reach out in new ways, to offer new products and service, to improve their marketing, and to tighten their control over relations with their customers (McFarland, 1984: Ives & Learmouth, 1984). But the key link between information capitalism and technologies for large-scale databases is the possibilities for enhanced information processing that it provides to analysts whose managerial strategies profit from significant advances in computational speed and or in managing huge databases. Point-of-sale terminals, automated teller machines, credit cards, and the widespread appearance of "desktop computing" are some of the visible byproducts of information capitalism. Platoons of specialized information workers -- from clerks to professionals -- are hidden behind these information technologies which have become critical elements for many businesses and public agencies. Chain fast-food restaurants provides one good kind of example of information capitalism in action. Viewed as a service, fast-food restaurants simply sell rapidly prepared food for relatively low prices, and stimulate a high rate of customer turnover. They are simply furnished, provide no table service, and are staffed by low paid workers (often teenagers) to keep costs low. It is a traditional service managed in traditional ways to act as a low cost service provider. Fast-food chain restaurants differ from other low cost restaurants by buying in immense volume, advertising with standard menus, serving food through drive-up windows and walk-up counters, and franchising their outlets in special ways. From the vantage point of information capitalism, fast-food restaurant chains are especially competitive and successful when they have an infrastructure of skilled information professionals and technologies. The information component helps them to select restaurant sites, to alter their menus to match the changing tastes of their clienteles, to audit the services of each establishment, and carefully to monitor costs, cash-flows, inventory, and sales. Their operational efficiencies hinge on information technologies as much as on economies of scale--from the microphones and audio systems that make it easier for drive-through customers to order food to the simplified electronic cash registers that automatically calculate costs and change so that less skilled, high speed, teenage workers can be relied upon as labor. The skills of back-stage professional analysts consuming bytes of data expedite the large scale sale of bites of food. Fast-food restaurant chains have not shifted from selling bites of food to selling bytes of information, but their operations have become intensively informationalized. Information capitalism gives certain organizations greater leverage than their less technologically-sophisticated precursors. An interesting concrete example is the Mrs. Fields Cookies chain. It utilizes an expert system to guide store managers in several areas of business (Ostrofsky & Cash, 1992). Its database of historical sales for each store at various times during the day helps tailor advice about the quantities of different kinds of cookies to bake at specific times during the day. Other modules guide managers in sales strategies when sales are slow, and prompts them with questions to ask prospective employees in employment interviews. Mrs Fields Cookies employs young managers who usually have no previous experience in bakeries or in managing fast food outlets. While they could send their novice managers to a special school, similar to MacDonald's Hamburger U, the firm profited handily in the first few years of its growth by substituting their expert system for longer term managerial training. The fine grained monitoring of sales in the Mrs. Fields system, however, has the potential to provide benchmarks for controlling managerial and employee performance as well. Of course, Mrs. Fields' does not keep records of the customers who buy and eat their cookies. But many sales systems do track information about customers, for differing reasons. Some organizations, such as automobile dealerships, are legally required to track specific sales. Others, such as home furnishing stores, want delivery addresses. Some organizations, such as insurance companies, maintain a continuing relationship with their customers. An emerging technology, two-way interactive television, would enable people to purchase numerous services, and the telecommunications firms to collect rich data about home shopping (Kling, in press). Many sales tracking systems, it would be difficult to separate the surveillance of organizational performance from the potential surveillance of customers. An application designed for one purpose could easily spill over to the other. The appetite of information capitalist practices for data-intensive marketing analysis is not respectful of organizational boundaries. The way that Mrs. Fields organizes work illustrates one trend which we believe that advanced computing technologies may extend. Behind their expert systems are a group of diverse and highly skilled symbolic analysts at corporate headquarters who design, refine, and maintain them. The stores are operated by a much less sophisticated and less well paid cadre of workers who are very unlikely to join the symbolic analysts at the corporate headquarters in Utah. Mrs. Fields shares the same environmental conditions as other franchised cookie stores. But their institutional configuration differs significantly, leading them to pursue information capitalist strategies more intensively. Institutional explanations of surveillance technology adoption such as information capitalism place more weight on the internal configuration of organizations, and the strategies and interests pursued by coalitions within them, than on objective external "needs" for surveillance. The information capitalist model would predict, for instance, that the number and kind of symbolic analysts would be a better predictor of usage patterns in individual organizations than a measure of their environmental uncertainty. It would also place much greater importance on investigating how the values and strategies of information capitalist practice are transferred to commercial organizations through education, professional associations, consultants, popular literature, and specific production technologies such as computers. Information capitalism, as a set of practices for organizing corporate production, has evolved in the context of important social transformations and technological advances that encourage and reward, but do not determine, information capitalist strategies under certain conditions. Some of these social transformations are discussed in the next two sections, along with the rise of quantitatively-oriented professional management education that played a major role in bringing information capitalism into organizations. ------------------------------ End of Computer Privacy Digest V3 #063 ******************************