Data Has Become Reality

It becomes very difficult to accept the notion that data actually is reality, and that this reality dominates modern life.

A common view of data is that it is a record of an observed fact. This is the data of science, and what the economic data we are deluged with every day is supposed to be. Because almost everyone thinks that this is what data is, it becomes very difficult to accept the notion that data actually is reality, and that this reality dominates modern life.

But this is in fact the case. Consider what concerns us every day of our lives: our money, mortgage, insurance policy, bank account, driving license, credit cards, overdrafts, examination results, to name a few. These are not records of observed fact in the physical world. They are actual realities.

If I get an overdraft notice in the mail, and I tear it up, does that mean the overdraft no longer exists? If I lose the plastic driving license from my wallet, does that mean I have lost my driving privileges? Not at all. The bank will happily send me another overdraft notice, and I can reapply to the State of Florida (in my case) for another plastic driving license.

The Case of The Bank Account

The situation becomes clearer when we think of a bank account. The balance in my bank account is known with infinitely greater accuracy than our best estimate of the speed of light. In fact, it is exact, not accurate. It is data, but it is not data recorded about some physical reality, like the temperature inside my refrigerator. There is no corresponding reality of my bank account. It itself is reality.

The reality of my bank account is kept intact by the computerized systems that manage my bank account. No human is actually managing my bank account. This differs from the time before computers when clerical staff updated ledger books to manage bank accounts.

This is possible because the bank and I agree on the rules by which my bank account is managed. Or at least I think I agreed when I signed the contract to open the bank account - albeit without really reading the contract very thoroughly. As for the bank, I had my account opened by one of their employees, who I assume was authorized to represent the bank. I have no idea if this individual was familiar with the exact set of rules by which my account would be managed. Anyway, it was all in the contract – I think. Furthermore, these rules have all been instantiated in the software environment that manages my bank account in the computerized hardware infrastructure in which it ultimately resides. I just hope it is not too buggy.

Philosophical Perspective

There have been philosophers who have taken an interest in this kind of thing and tried to explain it. Perhaps the most notable is John Searle in his book “The Construction of Social Reality”. For Searle, realities like money are just an extension of biology. He states that symbolism is a biological capacity to make something mean or express something. As someone with a Ph.D. in biology, and who studied under some of the most famous luminaries in the field, I was astonished to learn this. Searle goes on to claim “there is a continuity in collective behavior between lions attacking a hyena and the Supreme Court making a collective decision”. Maybe I was asleep when this was being taught. No doubt there are biologists who would support the idea, but it seems difficult to prove scientifically.

At least Searle tried to provide an explanation of how social reality came to be. However, I do not think we necessarily have to wait for such an explanation to appreciate that a major class of data is reality.

Data As Reality

One surprising aspect of data being reality is that types of things that have no equivalent in physical reality are represented by this data. I worked with Asset Backed Securities, which nearly blew up the global economy in 2008. There is no such thing as an Asset Backed Security in the physical world. It is a bond backed by a pool of receivables such as mortgages or auto loans. There are legal documents for the bond which describes how it is supposed to function. These rules can then be used to develop software to sustain the bond. Features such as a payment priority waterfall are characteristics of the bond. There is no equivalent in the physical universe.

What Can Go Wrong

We take the physical universe for granted. It works according to metaphysical rules that apply even when things get chaotic, such as in natural disasters. The reality in which data exists differs, however, as the equivalent of metaphysics is whatever humans decide it is.

For instance, in the real world the first law of metaphysics states that a given entity cannot both have and not have a given attribute in a given relationship at a given time. This is the Law of Noncontradiction. But an Asset Backed Security may have a bond rating of AAA when a significant number of the underlying loans in it are in default. Or the same loans may be pledged not just to one Asset Backed Security, but to many – something known as rehypothecation.

So yes, much of the current reality we have to deal with may be constituted as data, but it can go wonky, like the world of Alice in Wonderland where logic falls apart. Sometimes this is due to internal inconsistencies, and at other times it can be due to fraud.

The pervasiveness of data as reality in the modern world is perhaps the ultimate argument for good data governance. However, the whole concept goes against the idea of modernity derived from The Enlightenment, which is that there is only time, space, matter, and energy – essentially what Searle was positing. So we may need to wait until the time of Modernity has passed to get the true level of data governance we need.