The Internet of Things (IoT) is a stunning advancement of technology. Like a lot of us, I follow it closely, and the details of how things are done have held me in their thrall. But there are times when I need to step back and look at the big picture – and this is one of those times. After all, when we’re building these systems, it helps to know who we’re building them for.

Let’s start with the notion of the market – a really amazing concept when it works. In theory, you have a bunch of consumers who want something. You then have entrepreneurs who learn what consumers want and innovate to provide the best possible solution. “Best” includes things like price, so, inevitably, there are tradeoffs, and part of the game is figuring out the best tradeoffs.

Consumers then get to reward the companies that do a good job of meeting their needs by buying their products; companies that do a poor job either disappear or go back to the drawing board to do a better job. On average, you’ll have a rich array of companies doing a reasonable job, and each will have its consumer adherents – since consumers aren’t a monolithic group.

So when you see something like, “You’re going to have to accept some feature you don’t want on new products because you’ll have no choice,” it’s an immediate indicator that the market isn’t working. If the consumer no longer has any say over product characteristics, then that means either that competitors are colluding to force features (which would be illegal) or that there are too few competitors (so they can “agree” on behavior without being explicit about it) or that the channels are broken. An example of the latter would be if a dominant retailer refused to carry products without this undesired feature. In all of these cases, the consumer has no power. And a market isn’t a market if the consumer has no power.

My eyebrows ticked up over the last few months when I saw headlines like, “The ‘internet of things’ is going to invade your home, whether you like it or not.” There was more than one such piece. There’s this sense of, “You’re not going to like it, but you have no choice.” Free markets shouldn’t work that way. Yeah, these are urgent click-baity headlines, but, still, it got me thinking:

• What are the benefits – to consumers – of these unavoidable features?
• What other motivations exist for these features (aside from consumer demand)?
• If I put on my consumer hat, what rules would I set for making purchases?

To be clear, we’re talking about the consumer Internet of Things (IoT) here – smart homes. We’re not talking about the Industrial IoT, where motivations and return on investment are very different.

The Value of a Smart Home

If you read the breathless hype about what you can do with a smart home, it’s hard to imagine how we managed to survive this long without one. When you look closer, the value isn’t always as evident. The classic poster child for smart appliances is the smart refrigerator. The linked article talks about the wonder of a fridge that can text you when you’re out of milk!

OK, let’s break that one down a bit. I take the carton of milk out of the fridge and pour it into a glass, emptying the carton. I toss the empty carton. I then receive a text saying that I’m out of milk. Um… duh… I just emptied it.

I could see some value in helping to populate a grocery list, but there are ways to implement that both with and without the Cloud. And, at least speaking for myself, managing shopping lists is not high on my list of problems that need solving.

An internet-connected toaster lets us… make toast? Are algorithms needed for that?

Some time back I did some analysis to see if algorithms might save us money on a clothes washer by optimizing the amount of soap and water used. The idea there was to figure out what level of monthly service fee might result in a net savings to the consumer – and whether that fee would provide a sufficient RoI to the developer. The result was not clear-cut.

Probably the most laughable recent example was the Juicero – a $400 machine (apparently initially priced at around double that amount) that did what you could pretty much do by hand (squeezing juice packets). (People were too busy chuckling to address the obvious packaging waste of the packets in the way they’ve been criticized with coffee…)

Lest I sound like some old, curmudgeonly naysayer cursing the modern world even as it trespasses on my lawn, I can definitely think of useful smart-home applications. For example, I preserve food using a pressure canner. That requires me to apply heat until the pressure reaches a specific level, and then turn the heat down to maintain that level for a specified time. It’s actually surprisingly hard to do – definitely not a set-it-and-forget-it thing. It would be great if the pressure canner could talk to the stove to handle that automatically. No real algorithms needed; just a conversation similar to the one the thermostat has with the heater and air conditioner.*

Garden irrigation is another area where I look forward to future cost-effective solutions. So I can definitely see value in smart devices; it’s just that I don’t usually see the applications I’m interested in getting much press.

But let’s also break this down a different way. If I have a connected device, what is the role of that connection? I see four likely alternatives:

• Communicating with another local device. This could be done with a local network; internet not needed; algorithms not needed.
• Communicating with a distant device. Internet needed for the connection; no algorithms needed.
• Using the phone as a remote control. Within the home, that could be a local connection, but for a truly remote connection – while you’re away – you need the internet. Algorithms not needed. Step one of this example is where you can see info on the phone – like the temperature of a smoker; step two is where you can control the appliance from the phone.
• Connecting to the Cloud for computation that can’t be done locally. Algorithms are the value here.

There’s one other possible use: for over-the-air updates. If those updates are intended for security improvements, then… well, if that’s the only reason for the connection, then you’re saying you need a connection in order to provide security for the connection. Of course, if you didn’t have the connection, then you couldn’t get an update, but you also wouldn’t need the connection security because you had no connection. Kind of a chicken-egg thing. If you have only a local connection, then you probably still need security.

So, summarizing, it seems that there are useful applications for smart products; which ones have value will vary by consumer. And the role of the internet connection may not be obvious. But it’s also not clear that manufacturers are responding to consumer demand when deciding which appliances to provide.

The Value of Your Smart Home to Others

So if I don’t need a text telling me that I have an empty milk carton in my hand, then what’s the point? The point is the text that goes to grocery stores and milk producers telling them that a buying event is about to happen, and now’s the time for them to influence that.

There’s also the notion of Big Data. The idea here is that you measure everything that’s possibly measurable so that you can learn things that might not otherwise be learnable. Machine learning is powerful not just because of the enormous volumes of data that it digests in a way that would be impossible manually, but also because it can isolate relationships that we as humans would never think of – because it’s not biased to look for obvious things in the way humans are.

So if gobbling down streams of airplane-engine data helps us to learn when failures are likely to occur, that sounds like pretty good value. If refining the use of energy by taking into account otherwise unknowable effects helps to save money, reduce energy consumption, and reduce pollution, that sounds like a powerful tool. But for helping to make toast? Really?

When it comes down to it, much of the smart home idea seems to be about massive – I’m going to use the word – surveillance (no, I’m not wearing a foil hat). If the government were to try to measure every little thing we did in every aspect of life (more than it already does), we’d be up in arms (I think….). But we somehow seem more comfortable with the private sector peering in on the most intimate aspects of our lives. And I do mean intimate… (link may not be safe for work)

It’s one thing for such data collection to be an option, but there have been cases where this tracking hasn’t been agreed to, like with Bose headphones. It’s that absence of choice and consent that’s the problem.

Now, in all of these privacy cases, there is legal stuff underway, so whether or not it’s OK for us to be surveilled is still being sorted out; that’s not my point. My point is that this appears to be the true reason that companies want to put a connection on everything. You don’t need an algorithm or a connection to make toast, but they’d love to see what you’re doing with their toaster. More than that, they’d love a revenue stream from selling that data.

I’ve said it before, and I’ll say it again: it would appear that the biggest motivator for the consumer IoT is to gather data for advertisers. I would love to be convinced otherwise, but, so far, I haven’t seen a compelling, well-thought-through argument to the contrary.

Let’s take that pressure-canning example. It just needs a local connection (could even be BlueTooth). There are no fancy algorithms. So there’s really no interesting data to be gathered. To leverage the data angle, the canner would need to be able to figure out what it contained so that it could transmit what you’re making and how much of it you’re making.

Connections can also be abused. There’s the case of a connected garage door opener that got disabled because the owner left a poor review. Talk about diminution of consumer power…

One of the other motivators for the internet connection is to provide services. In the laundry example from a few years ago, that imagined service was optimizing the inputs to the machine to save you money and resources. But there’s also much discussion about getting away from our buying and owning appliances and, instead, licensing their use for a monthly fee.

You can imagine that, if that happens in a big way, suddenly you’d have this stack of new monthly fees. It’s not clear what would happen to purchase prices, but it also raises a parallel with social media.

Social media is all about selling your information. When criticized, the argument has always been, “The service is free, so this is the tradeoff for your getting to use the service.” Not unreasonable. But what if we paid for, say, the toaster? Should we also pay a monthly fee on top of that? And will we simply stop owning stuff?

Some years ago, candidate Mitt Romney spoke of wanting to help to support an “ownership society.” A model where we no longer own our own appliances certainly moves in the opposite direction. Of course, you also have to do the math. If you add up monthly fees plus any up-front fees, would you save money vs. buying? It’s an important question, although hard to answer, since there is no easy benchmark to say what the full purchase price should be. Is the monthly fee reduced because they get to leverage your data? Hard to say as well, but it could be.

I certainly wouldn’t want to specify that people have to do things one way or another. For someone with little cash, having a small monthly payment might make possible some appliance that they wouldn’t be able to buy outright. So it’s not about one model being good and the other evil; it’s all about transparency and being able to make a choice. Neither of those has been a watchword so far.

Four Rules for Consumers

These considerations brought to mind four rules that I would exercise in the purchase of smart-home equipment. They take into account connection utility, privacy, transparency, and choice.

1. I won’t buy a basic appliance that requires the Cloud to operate. If my thermostat or refrigerator stops working when the internet connection goes down, that’s not OK. If the company can randomly shut down my device, also not OK.
2. I won’t buy a basic connected appliance that provides no way to shut off the connection. (And, by the prior rule, it should continue to work when I do so.) If there’s no reason for a connection other than surveillance, then I want the option to operate the device stand-alone.
3. I won’t buy a basic appliance until I know specifically how to shut off the connection, should I so desire, and until I’ve seen a demonstration that it works.
4. I won’t acquire a basic appliance unless I have the option to own it outright. This is not to say that a service plan might not work for some people or that buying on payments might be good (something not novel at all) or even that renting might be a possibility. I just want the option to own if that’s the choice I make. I don’t want to cede all my control to manufacturers.

The fact that we even need to have this discussion suggests weakness in the robustness of the market. All of the characteristics I happen to like may not appeal to everyone, but, if the market is working, then observant marketing folks will spot a need – including a market for people who don’t want connections – and then satisfy it. Transparency and choice – and freedom – will be the result.

If our customers are being told that we’re making what we want to make, whether they like it or not, then the free market is definitely broken. Instead, let’s make things that will delight our end customers – not just the advertisers.

*You can find “smart pressure canners,” but they’re self-contained units with their own heating source; as far as I can tell, they’re not connected. So they’re not “smart” in the way we’ve been meaning it.