The Data Angle

#investors

For leaders and investors, a strong data game is a strong investment game. Despite the prolific amount of information out there these days, the key questions have not changed much. The basics of healthy skepticism and keeping an open mind about new facts keeps your skills fresh and ready for the next wave of data.  Sometimes, we just need to make small adjustments to score. 

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In the last 10 years, investing habits have changed for the better in some ways, and arguably regressed in others.  It Is not a new phenomenon that investors work to capture available information on companies to make the best, most informed decision on how to trade a stock.  This is the realm of collecting data, and it lives squarely in the domain of fundamental research:   

• How much did they sell?  

• What did it cost to buy goods?  

• Where is the underlying product demand for good or service trending?  

• Looking out, what factors are likely to change demand?  

• Are subscriptions priced effectively?  

• Is competition impacting growth?  

• Are consumers in need of innovation to sustain demand?  

• Has the value proposition changed?  

• How do regulatory factors, government policies, tax rates or international regimes impact financial outcomes?  

• Are borrowing costs manageable?  

And on it goes… 

There are occasionally new business questions to ask, but not too many.  The above list is largely as relevant today as it was 10, 20 or 50 years ago.  Maybe things move a little faster, but those are often opportunities to exploit the market’s overreactions, not a reason to fear data ingestion as a critical part of any sustainable investment process.  Throwing one’s hands up and saying, “It all moves too fast! The alternative data signals are commoditized and useless!  The competition’s army of data scientists or quants create unfair advantage! I can’t compete with AI!” is all an overtly lame cop out.  It merely creates a venue for the larger, and in this case smarter, investors to clean your clock, beat you to the punch, take the winning trades, and leave you gaping and whining. It is also highly analogous to saying, “I don’t need to meet with management, study company financials or build my own models”.   Some would call it malpractice.  I would just call it lazy.  Do the work. Adapt. Most of the data is written in numbers you have seen and language you understand.  Instead of maligning it, study it.  Instead of ignoring it, catalogue it. The trends and impacts you measure will not be all that surprising.  Sometimes beats and misses are correctly tagged, other times not so much.  It’s pretty much like all other kinds of work and analysis one performs on public companies where all information is not known and markets are not efficient. Stop blaming the data for mythological problems and start finding a mythological solution.  

Ride the dragon.   

Thrones gave us dragons, and with them a rock-solid competitive advantage in any good fight with White Walkers or Lannisters. You can build some ornate catapult arrows and try to compete against a dragon, but fire breathing, well, that wins.  To me, this is data.