The Friends and Family Dilemma

You’ve chosen to be private. But companies are getting revealing data about through your friends and family on social media.

The following is a summary of a story that originally appears on the Fuqua School of Business.

Social media platforms can access information about us based on our online interactions with others, even if we want to keep that information private, according to a study by Ali Makhdoumi, professor at Duke University’s Fuqua School of Business.

Economists refer to this indirect access of online users’ personal information as “data externalities.”

“So, imagine that … I want to be very private, so I go to the basement of my house, not sharing any data,” Makhdoumi explained.

“So, does that mean that my personal data, and you know, my personal taste will be protected? Not really. So why is that? Because [of] the fact that my friends, family and colleagues who have similar tastes are sharing data that reveals something about me as well.”

Makhdoumi pointed to his findings on the podcast “Duke Fuqua Insights” in October while discussing his paper, “Too Much Data: Prices and Inefficiencies in Data Markets,” which surveyed the unintended consequences of how personal data is bought and sold.

Makhdoumi co-authored the paper with 2024 Nobel Prize winner Daron Acemoglu.

Makhdoumi says that the collection of data is at a crossroads. Since individual control alone cannot ensure privacy, stronger regulation is needed to create fairer data markets. “If we continue down the current path — unregulated data markets — we’ll see worsening privacy conditions and increasingly distorted market incentives,” he said, “and it’s going to keep reducing the user’s welfare.”

To learn more about Makhdoumi’s research and listen to the podcast go to the Fuqua School of Business website.