This NASDAQ adviser thinks markets are tumbling because of data privacy changes

It’s been a volatile year for the markets. In mid-June the S&P 500 fell 3.3%, and is down 23%, its lowest since December 2020. Experts chalk it up to inflation, supply chain issues, and high interest rates. But according to Dominique Shelton Leipzig, a member of NASDAQ’s Risk and Cybersecurity Council, there’s another factor playing into the market tumbles: data privacy changes. In 2021, states proposed or passed 27 data privacy bills, an increase from two in 2018.

Fast Company chatted with Leipzig about the connection between data privacy and the markets, and what companies might do in response to the changes. This interview has been lightly edited for clarity.

Let’s dive right into it. What do you see as the connection between data privacy and the markets tumbling?

We started first noticing this in the tech sector.

During an earnings call in February, we had one particular platform that had a trillion in market cap. And due to changes in data privacy from choosing to opt out to wishing to opt in, when users were given the choice to whether they would allow apps to follow them, and track them or not 85% of them said no. This caused a miss in ad revenue. And it also impacted the entire sector, not just one company. At the end of the first quarter NASDAQ lost $1.3 trillion in market cap.

The digital advertising ecosystem is a $400 billion business. And when advertising became less precise, that shifted advertising dollars to a bunch of different sectors. It’s not just tech companies that spend on digital advertising: financial services, for example, last year, spent about a little over $20 billion, retailers spent over $30 billion on digital marketing, and consumer packaged products are somewhere in between. These shifts in the marketplace to less precision on that caused a sell-off in the market, which resulted in $1.3 trillion loss that we had. There’s certainly other contributing forces, the supply chain, Ukraine, and COVID. But what was the trigger initially, which happened in February, was data privacy.

How would you recommend companies balance customers’ right to privacy with their need for data?

I think data leadership is really key in this process. During the pandemic, I read a statistic that we’re generating globally per day 2.5 quintillion bytes of data: that’s 18 zeros behind it. And that’s everything from connected cars to connected refrigerators, voice, wearables, connected health, financial services, etc. You know, the other thing that I think is important is as big as that 2.5 quintillion bytes seems today, it’s only going to grow bigger.

Even though data does not appear on a balance sheet, it’s important for leaders, officers, and directors to think about their data as the asset that impacts their bottom line.

Companies need to begin thinking about what data is necessary for them to achieve their short-term and long-term goals, and then begin to think strategically about what steps are necessary to garner the trust of consumers and develop mechanisms for the kinds of transparency and communication that trust derives from it

What concrete steps would you advise companies to take?

I think the first thing companies need to understand and realize is that data privacy and data is no longer a compliance issue; it is a business imperative, just like any other issue that has gone from legal issue to business imperative—like antitrust, where special council to the board is a good idea. We need to bring together those that are very knowledgeable about data and those that are knowledgeable about strategy. Right now there’s a disconnect, and that leads to situations like nine-figure fines coming out of Europe. Companies should not try to go it alone and learn it on the fly. This is something that is moving our markets to the tune of trillions. And it does require immediate attention is the first thing.

The second thing is to immediately think right now about their strategy. What data do companies need to make their strategy successful? How is that data being shared, and what they’re doing to secure that data? From there a series of steps can be taken. Companies might realize that they are collecting a lot of data that’s not critical to the strategy—and this happens to a lot of companies. And they can then think about how to collect other data that’s critical to mission.

I’m looking forward to companies in the Fortune 500 taking a leadership role on and assuming that their data is their biggest asset.

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