Private Company Information: The Opacity Conundrum

opaque-glass_w725_h553Anything that does not change hands very often becomes scarce. As much as it applies to things like art, it finds use in things that are otherwise rather fluid – financial data for example. Take the case of private company information. Private companies are not listed and hence do not have any regulatory compulsions to divulge information about themselves – especially their financial performance. A deluge at the supply side  goes on to complicate things – there are way too many private companies for anyone to create a business model to bring their data together. Data vendors have tried to solve for this problem but an optimum solution is still lurking somewhere – undiscovered

Stripped of all frills, scarce data is scarce because – one, the originator does want to readily part with the information and two, any secondary holder does not wish to pass it along. However, there does exist incentives – standalone incentives for both parties to change their going-in stance. For example, a private company may need bank funds for working capital and for that will readily share quarterly sales and inventory numbers with the bank. The Bank (in our definition, the holder of this information) will also share the same information onwards if there is an effort by someone to securitize these working capital loans. So incentives exist – but they are not shared incentives

I believe there is space for creating a clearing house of sorts for private company data. The platform provider – the clearing house that is – must invest in either creating shared incentives or invent shared economics for fluidity to resume in the dataset. In a manner of analogy (not a very tight one, I must warn), app stores are equivalent vehicles that bring the supply and demand side for apps together by creating shared incentives (and economics). As this platform builds up and the dataset becomes richer, the economics will tilt towards transactions that happen on the platform based on the data. This is something that traditional data vendors should understand – the data by itself (like unmined natural resources) have little value. The value of data is unlocked by actions of economic agents and these actions make economics. Facilitating economics will facilitate the fluidity in private company – and other such scarce – information

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