Last year, around this time I shared an article on data as the new precious commodity. In case you missed it, I thought it was worth revisiting. The closing feels even more relevant today than when I wrote it. Below is the article in its entirety
Data is becoming a precious commodity.
A staggering 90% of all the world’s data (2.5 quintillion bytes per day) has been created in the past two years alone ... and its value is rapidly rising.
Rapid growth means little time to create adequate rules. Everyone’s jumping to own more data than the next and to protect their own data from prying eyes.
I see it in trading, but it’s pervasive in every industry and in our personal lives.
Having basic data and basic analytics used to be enough, but the game is changing. Traders used to focus on price data, but now you’re seeing an influx of firms using alternative data sets to find an edge. If you’re using the same data sources as your competitors and competing on the same set of beliefs, it’s hard to find a sustainable edge. Understanding the game they’re playing, and their rules are important, but that’s table stakes.
Figuring out where you can find extra insight, or where you can make the invisible visible, creates a moat between you and your competition, and it lets you play your own game.
I shot a video where I talk high-level about Data as fuel for your business. Check it out.
It is interesting to think about what’s driving the new world (of trading, of technology, of AI, etc.) and that often involves identifying what drove the old world. History has a way of repeating itself.
Before e-mails, fax machines were amazing. Before cars, you were really happy with a horse and buggy.
It’s in these comparisons that I think we can help explain the importance of data in today’s new world economics.
Petroleum has played a pivotal role in human advancement since the industrial revolution; it fueled (and still fuels) our creativity, technology advancements, and a variety of derivative products. There are direct competitors to fossil fuels that are gaining steam, but I think it’s more interesting to compare petroleum to data due to their parallels in effect on innovation.
The process of pumping crude oil out of the ground and transforming it into a finished product is far from simple, but anyone can understand the process at a high-level. You have to locate a reservoir, drill, capture the resource, and then refine it to the desired product – heating oil, gasoline, asphalt, plastics, etc.
The same is true for data.
You've got to figure out what data you might have, how it might be useful, you have to figure out how to refine it, clean it, fix it, curate it, transform it into something useful, and then how to deliver it to the people that need it in their business. And even if you've done this, you then have to make people aware that it's there, that it's changing, or how they might use it. For people who do it well, it's an incredible edge. – Howard Getson
Data can be seen as the fuel to the information economy and oil to the industrial economy. The amount of power someone has can be correlated to their control of and access to these resources ... and, leaking of these resources can lead to extreme consequences.
Why Data Is Better Than Oil
The analogy works, but it’s just that, an analogy, and the more you analyze it, the more it falls apart. Unlike the finite resource that is oil, data is all around us and increasing at an exponential rate, so the game is a little different:
Data is a renewable resource. It’s durable, it’s reusable, and it’s being produced faster than we can process it.
Because it’s not a scarce resource, there’s no urge to hoard it – you can use it, transform it, and share it knowing that it won’t diminish.
Data is more useful the more you use it.
As the world’s oil reserves dwindle, and renewable resources grow in popularity and effectiveness, the relative value of oil drops. It’s unlikely that will happen to data.
Also, while data transport is important, it’s not expensive the way oil is. It can be transported and replicated at light speed.
Using alternative data gives traders an advantage, but it doesn’t always have to be confidential or hard to find information. Traders now have access to vast amounts of structured and unstructured data. An important source that many overlook is the data produced through their own process or the metadata from their own trades or transactions.
In the very near future, I expect these systems to be able to go out and search for different sources of information. It's almost like the algorithm becomes an omnivore. Instead of simply looking at market data or transactional data, or even metadata, it starts to look for connections or feedback loops that are profitable in sources of data that the human would never have thought of. – Howard Getson
In a word of caution, there are two common mistakes people make when making data-driven decisions. First, people often end up slaves to the data, losing focus on the bigger picture. Second, even the most insightful data can’t predict black swans. It’s important to exercise caution.
The future of data is bright, but it’s also littered with potential challenges. Privacy concerns and misuse of data have been hot button topics, as have fake news and the ability of systems to generate misleading data. In addition, as we gain access to more data, our ability to separate signal from noise becomes more important.
The question becomes, how do you capitalize on data, without becoming a victim to it?
Back in June, I participated in a series of webinars for IBM. The focus was on building smart and secure financial services. My talk, specifically, was on advanced computing and the new world of trading. Challenging times drive advancement - and what better time to talk about advancements in technology (and their applications) than in the midst of a global pandemic.
You can watch a replay of the Fintech webinar here. There are several interesting presentations. If you just want to watch my presentation, it starts at the 5:16 mark.
In addition, I've uploaded a different version of just my talk that you can watch directly here.
In the past. trading used to be about people trading with people. Markets represented the collective fear and greed of populations. So price patterns and other technical analysis measures really represented the collective fear and greed of a population. If you could capture that data and figure out certain statistical probabilities, you might have had an edge. The keywords is "might have".
If you had more information than your competitors - an information asymmetry - you had an amazing edge. At one time that was being able to print out reports on stocks from that new-fangled technology called the internet. As time passed, it became harder and harder to gain an asymmetric information advantage.
The rules, the players, and the game have all changed. Today, technological asymmetry is a major factor, and your edges come from things like bigger and faster servers and low latency connections to markets.
In the future, I see those edges combining as artificial intelligence starts to leverage exponential technologies and new data sources (like alternative data and metadata feedback loops). It is easy to imagine a time when information is the fuel, but your ability to digest and parse that information is the engine.
I talk about much more in the video but boiling down the main points, ask yourself (in business, in trading, in life) are you separating the signal from the noise?
A technological advantage doesn't mean anything if you're plugging in inaccurate or biased data into it.
We've talked about it over the past few weeks with the never-ending news cycle - but it's a lesson that's infinitely applicable.
We're now two days into August. U.S. GDP is down 33% on an annualized basis, the largest quarterly decline since the series began in 1947. For context, 1% is a recession, "The Great Recession" peaked with 8.4% in December 2008, and 15% was The Great Depression.
Adding insult to injury, approximately 40% of renter households are at risk of eviction. On Friday, the federal moratorium on evictions expired. Consequently, 25 million Americans have stopped receiving their $600 weekly unemployment checks. Many states have stopped or are rolling back their reopening plans.
Jobless rates, which have been trending downward since March, and credit card spending, which had been trending upward, have both reversed. The corrections weren't nearly as pronounced as the initial shocks.
So there's the bad news, but let's try and find some silver linings:
First, the prediction for the contraction was 35%, so we're below that number, and job creation in May and June surpassed expectations by almost 12 million.
Compared to previous contractions, we entered it on a much stronger footing as a result of the long-term expansion.
As well, remember that 33% number is based on an annualized rate (which assumes the trend will continue, meaning the economy is really only about 10% smaller than in the first quarter).
Many states are still reopening, and the rest have various recovery efforts underway.
The economic consequences of the public health crisis and the measures taken in response will continue to affect the course of the economy for a long time. The recovery will be protracted. But, we're resilient, and we know how to dig ourselves out of this hole. In addition, the whole world is going through a similar crisis. For the most part, I'd rather be here than almost anywhere else. My sense is that people with capital feel the same way, and that is a very positive indicator of why our economy will suffer less and recover faster than other economies.
As I've mentioned before, fear plays as much a role in the recovery as other factors. If people believe in the future, their habits affect the economy differently than if they're at home, hoarding what they have left.
Personally, I believe we're about to see a tough time, with increased volatility and a lot of noise. It is increasingly likely that we will see another push downwards in the markets. I believe that America is well-positioned to adapt and recover. As a company, my sense is the strongest are not the most likely to survive and thrive in times like these. This is a time where adapting and responding to new opportunities and threats will separate the winners from the losers.
Fueling Alpha: A Revisitation
Last year, around this time I shared an article on data as the new precious commodity. In case you missed it, I thought it was worth revisiting. The closing feels even more relevant today than when I wrote it. Below is the article in its entirety
Data is becoming a precious commodity.
A staggering 90% of all the world’s data (2.5 quintillion bytes per day) has been created in the past two years alone ... and its value is rapidly rising.
With IoT growing from 2 billion devices in 2006 to a projected 200 billion by 2020 you can expect to see that growth continue to explode.
Data is today’s “wild west” and the battlefield of today’s tech titans.
Alphabet, Amazon, Apple, Facebook, and Microsoft all have an unprecedented amount of data (and power).
Rapid growth means little time to create adequate rules. Everyone’s jumping to own more data than the next and to protect their own data from prying eyes.
I see it in trading, but it’s pervasive in every industry and in our personal lives.
Having basic data and basic analytics used to be enough, but the game is changing. Traders used to focus on price data, but now you’re seeing an influx of firms using alternative data sets to find an edge. If you’re using the same data sources as your competitors and competing on the same set of beliefs, it’s hard to find a sustainable edge. Understanding the game they’re playing, and their rules are important, but that’s table stakes.
Figuring out where you can find extra insight, or where you can make the invisible visible, creates a moat between you and your competition, and it lets you play your own game.
I shot a video where I talk high-level about Data as fuel for your business. Check it out.
It is interesting to think about what’s driving the new world (of trading, of technology, of AI, etc.) and that often involves identifying what drove the old world. History has a way of repeating itself.
Before e-mails, fax machines were amazing. Before cars, you were really happy with a horse and buggy.
It’s in these comparisons that I think we can help explain the importance of data in today’s new world economics.
via gapingvoid
Data as the New Oil
Petroleum has played a pivotal role in human advancement since the industrial revolution; it fueled (and still fuels) our creativity, technology advancements, and a variety of derivative products. There are direct competitors to fossil fuels that are gaining steam, but I think it’s more interesting to compare petroleum to data due to their parallels in effect on innovation.
The process of pumping crude oil out of the ground and transforming it into a finished product is far from simple, but anyone can understand the process at a high-level. You have to locate a reservoir, drill, capture the resource, and then refine it to the desired product – heating oil, gasoline, asphalt, plastics, etc.
The same is true for data.
Data can be seen as the fuel to the information economy and oil to the industrial economy. The amount of power someone has can be correlated to their control of and access to these resources ... and, leaking of these resources can lead to extreme consequences.
Why Data Is Better Than Oil
The analogy works, but it’s just that, an analogy, and the more you analyze it, the more it falls apart. Unlike the finite resource that is oil, data is all around us and increasing at an exponential rate, so the game is a little different:
Using alternative data gives traders an advantage, but it doesn’t always have to be confidential or hard to find information. Traders now have access to vast amounts of structured and unstructured data. An important source that many overlook is the data produced through their own process or the metadata from their own trades or transactions.
In a word of caution, there are two common mistakes people make when making data-driven decisions. First, people often end up slaves to the data, losing focus on the bigger picture. Second, even the most insightful data can’t predict black swans. It’s important to exercise caution.
The future of data is bright, but it’s also littered with potential challenges. Privacy concerns and misuse of data have been hot button topics, as have fake news and the ability of systems to generate misleading data. In addition, as we gain access to more data, our ability to separate signal from noise becomes more important.
The question becomes, how do you capitalize on data, without becoming a victim to it?
Food for thought!
Posted at 05:42 PM in Business, Current Affairs, Ideas, Market Commentary, Science, Trading, Trading Tools, Web/Tech | Permalink | Comments (0)
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