Wall Street Data Goldrush | VPRO Documentary

[Music] maybe it was boredom as a result of the lockdowns or the low interest rate on savings but investing has become incredibly popular recently this past year millions of people have started to invest in the stock market handy apps and low fees are used to entice all of us to invest our savings in the stock market i think that the entertainment and even like kind of gamification aspect of it you're seeing a lot more people be interested in it just for entertainment but the influx of small investors is not the only change the stock markets have seen in recent years there are changes going on that are a lot more radical from the outside you can't see it newspapers or tv business channels with their focus on inflation rates quarterly figures and central bank meetings will hardly ever report about it nor do you see anything about it in the numerous applications that help us play the stock markets information is power the information is out there what has happened far from prying eyes is that some parties that trade on the stock exchanges have a lot more information than others you may have had a better view on that company's revenue than the company had itself these parties get their leads from huge amounts of data so men lie women lie the data never lies stock markets are a strange phenomenon they're a near virtual world in which real money changes hands in milliseconds they're at the heart of our financial economy they're places where people constantly vote with their money about which companies they deem to have the best chances to determine our future the stock markets are about money huge amounts of money at the blink of an eye they can make people millionaires or they can ruin them but in recent years under the radar data has changed the stock markets by intelligently delving through endless volumes of data that sometimes seem to have hardly any value some traders gain an advantage over others he knows about it and him and them and him and him too but he doesn't dare talk about it openly even though he's in the thick of it i've seen this coming for a while now i've been thinking about what this massive influx of data on the stock market might mean [Music] but i'm afraid i cannot be filmed i might have to work for a large investment bank or hedge fund down the line and speaking out will cause me trouble some in finance like to think that we are doing god's work creating fair and open markets that are as efficient as possible but unlike religion in finance spreading the word is not part of the culture because wall street has its eye on all the data about us that companies have been collecting for some 10 years now data like your location or the digital receipts in your email all of it is incredibly valuable when you trade in stocks [Music] traditionally investors use things like market data or data off corporate filings that the companies report once a quarter to make buy sell decisions over the last 10 years though companies have gone online right companies sell products online they hire employees online they use social media to market their brands online people complain about their bosses online so the side effect of all this activity kind of coming online is there's a lot of data that gets created that's really useful to knowing which companies are doing well what are prices doing in real time where are companies hiring so we build technology that collects and we organize all this data we make it useful for both investors and corporations i'm justin zen co-founder at think numb alternative data it's like alternative data can help you know something that very few people do and you know something faster and you know that's basically uh uh two of the main ways that you can make money in finance right really there's my favorite movie is a margin call where the ceo of this bank says there's three ways to make money in in finance right there are three ways to make a living in this business be first be smarter cheat so alternative data helps you become faster and smarter um it doesn't help you cheat unfortunately there's a lot of data you know or even your phone right um right now your data is being sold to someone they know that you're in this building right now and they know how long you spend in this building right so they you know if you're a retailer then i can see how long there's someone spending in my store right so uh you know so the world of alternative data is huge we think the web is the most interesting source of alternative data just due to it's it's you know its size but yeah um that's why you know our industry is growing 40 every single year because you know the amount of data continues to grow at an astounding rate i have an extreme passion with data data applications and markets you know i follow uh global markets every single day and it's really interesting when you can look at your own data and say huh you know this data point would have predicted uh what you know like what the company is announcing today and you know like it's just fascinating so so this is the wework uh where we started our business it was our very first office space yeah this is 2016. the company said they were growing really really quickly um but our data showed that their churn rate was increasing substantially and they had a social network that no one was using so they were calling themselves a technology company and you know painting this great picture of themselves so we wrote a blog post that talked about our findings of the data it got picked up by the press and then adam newman uh the ceo of wework he found out about it and he gave us 30 minutes to leave so we had 30 minutes to take all our stuff and we were forced to to leave but what justin jen saw in the data was right a few years later the flexible office space company got into trouble when the figures showed it had vastly overstated its profitability wework is now in survival mode weworks bonds slid to an all-time low this week as s p and fitch have slashed the company's credit ratings further into junk territory obviously you know the data showed that their business model wasn't sustainable but we were the very first people to call out their business model you know it took a while but the data never lies right so uh so men lie women lie the data never lies there's about 30 of investors that have heard of alternative data they've maybe explored it but they haven't actually used it so right now it's still like you know the smart to large like just think about your hedge funds that have they built data to use or they've hired engineers instead of just like your traditional analysts right most people in finance still don't know how to use alternative data so we think that over the next few years um you know firms like that are either going to have to use the data or or they're going to die out because the smartest you know and many of them are are quite big investors are using this data and it's very competitive right like finance is a very competitive industry so if everyone else is beating you to a decision then you either have to adapt or die [Music] look playing the stock markets is like playing poker suppose you're dealt ace king then you have to decide how big your bet will be for that you'd love to know which three cards the dealer will flop next if two of those are aces you're odds on to win but if there's something worse odds are you'll lose the hand and everything you bet now if you could just see those three cards beforehand the markets are like that if you're the first to know that a company has made a lot more profit or that it's going to merge with another company the kind of information that will make its stock go up you can make huge profits but like poker the stock markets have rules companies have to release price sensitive information to every player at the same time for example in a press release this prevents anyone from seeing the hidden cards before the other players can see them those who have insider information because they work at the company in question for example are not allowed to use that information to trade that's illegal but what if you can get that price sensitive information that can make stock prices rise or fall dramatically in a different way first it's very very cool because you're like you've got to be able to predict everything then you realize there's a million data sets you got to choose which ones matter and then you realize okay where are the holes in this data and then management is really where we found and i've always been fascinated with people colby howard president of paragon intel so we track basically if you think about everyone who runs a company from how do they live their life what is their personal life like what's the professional history like what have they done before at a company and how is that going to impact what they're going to do in the future everything from where are they spending their time and we do that through tracking jets their corporate jets all this is public some of it's harder than others there are receivers all over the world that and you could actually buy one and you'd set it up at your home you plug it into your ethernet cable you plug it into your wall and you could see all the aircraft within a 250 mile radius of your house you would see a tail number flying across and it would go away if you put those together all around the world you can see the location of every flight taken by every jet and every plane what you have here is really the ability to see where all the companies that we cover are in the world at any given time and see where they've been information about where ceos of publicly traded companies land their business jets appears to be very valuable for investors take two major u.s defense contractors united technologies and ryanathon when investors learn that the business jets of the ceos of both companies had been parked close together multiple times over a short period of time they concluded the companies might merge and mergers cause a lot of fluctuation in a stock's price we track right now the top three executives of everyone in the russell 1000 so the thousand biggest american companies these thousand biggest companies employ tens of millions of americans they um the exposure for pension funds the new york firefighters pension fund has their money with all these companies they're investing in the decisions of these people impact everyone in the u.s and so really starting there and saying if we can bring transparency to these specific people understand how to get it and we also do deep dive research into who they've worked for before how are they viewed by their ex-colleagues and it's really giving right now it's investors but in the future it'll be to anyone who wants this information which is not only what have they done in the past but also real-time monitoring so i think the cia calls it continuous vetting it's not and then to use the cia kind of even further the issue they're having is if they do a full background check every three years a lot happens in that three years you go bankrupt and the russians figure that out and they give you money and you start selling secrets a lot happens so how do you stay on top of someone continuously and that's really what we're doing here i'm not saying you don't deserve privacy you obviously deserve your own home and all that but you are so essential you got to see your role you're making tens of millions a year you're almost you're you are giving something up in in as a trade for where you are and that is that should be the public deserves to know it deserves to have transparency and so understanding that if you are worth 20 million dollars and you just bought a 15 million dollar house and you just had a 15 million mortgage on it like how does that's got to affect how you make decisions at your company at your company which has certain performance metric metrics and how are you thinking about getting rich quick or getting rich over the long term like these are all incentives that by understanding where they're coming from and they're making decisions for the company these all play into it alternative data obviously is is a different way of you're not beholden to the company or anyone who works at the company to provide information all of a sudden then there in the beginning days of alternative data you may have had a better view on that company's revenue than the company had itself in the early days considering it was just so sophisticated and a new source of information this week the short sellers are losing again i think i was just lucky in a way i had a background in finance it was something my parents pushed me towards since i had no idea what to do but i got bored so i doubled my finance learnings with an education in data science it was only when i finished both and wall street started to get their hands on any and all the data that they could find that i realized that i might have the perfect combination of skills and this whole new world where the financial markets were being reinvented felt great it was like being around when computers were introduced [Music] you knew instantly it would change everything the use of any and all data by wall street might even be more of a change than the introduction of computers but it is much less visible to the broader public like this anonymous data scientist some people were quick to see the value of data for stock traders people like bonang huang and nan huang these employees of the american bank capital one came up with a smart idea working in the department that researched credit card fraud they had access to all the bank's data about their credit card users the two realized this mountain of information could not just be used to fight fraud all those credit card statements also provided a perfect picture of the turnover of for example fast food chain chipotle based on the information they got from the database they bought stocks and made millions of dollars [Music] data gives the opportunity to get inside the boardroom which is which is you know really fascinating as a concept and in a lot of instances with data you can know more than the ceo or cfo of a company um so if you're mcdonald's for example if you analyze consumer transaction data geolocation data for footfall and other data sets and then meet mcdonald's the company you can have a date on their business that they mightn't be aware of my name is emmett kilduff i'm the founder and executive chairman of eagle alpha there was an article way back in april 2012 in the in an english newspaper written by a hedge fund manager at artemis who actually became our first client and in it he talked about the cost costa concordia ship sinking off the coast of i think it was italy and that news first broke on twitter there was a big gap between the news breaking on twitter and it being reported on bloomberg or the tape so if you were following tweets cleverly back then you you could have made a lot of money in that instance and that was a moment for me where i think we need to harness this information and get it into the the the right people's hands so that they can capitalize on we work with 1500 data sets across 50 countries around the world and we bring that to the firms that want to use that data whether that's hedge funds on wall street or in europe private equity firms are corporates that want to become data driven and retailers is a great example right they're sitting on a lot of consumer spending related data real hard dollar euro spend and that type of data is a huge interest to our buyer clients because you can extrapolate uh for whether a brand a product is doing well and therefore whether a company might be doing well so hard dollar spend is is our euros brand is really really helpful to um for predicting and modeling we have what's called a data hunting team the term data hunter is actually determined in cvs and job specifications now and those uh colleagues are commercially driven uh you know um data dangerous type people whose job is to find the next best data sets and to build relationships with all our 1500 data vendors good day everybody welcome to day two of our 2021 interactive conference we're always looking around the world for interesting consumer transaction data sets so for example a new fintech company or a company that helps consumers manage their cash flow they could have really interesting data on the back of that that could be of interest to our clients [Music] when you ask people what they think is being done with all the data that's collected about us from our location to the digital receipts in our inboxes they will almost all say aren't they being used to show us better ads yes they are but that's not the whole story early on sergey brin one of the founders of google already realized they had a lot more value as far back as 10 years ago he launched the idea for google to start its own hedge fund brynn realized how much data his company collected could tell about which stock to buy or sell eric schmidt the then president of google thought it was a bad idea not because he thought the hedge fund would not be profitable but because he anticipated huge legal and marketing issues [Music] everything is data and once you see that you see what possibilities lie ahead we can record and put into data points every single change that is happening in the world every cloud in the sky every time a car moves every inch of plant growth can be recorded and analyzed if we would want to it's all about how much money you are willing to fork out to obtain this data and if that is where we are it is not difficult to understand that you can get daily data on the number of coffees sold at your favorite chain or on every customer that walks into a store or every truckload that travels the road using satellite imagery or roadside trackers and this tells you so much more about a company or a stock than a quarterly earnings statement or a press release the kind of stuff we use to base our stock trades on it gives a level of transparency that the market has never had before there's all these select communities where things are common knowledge but they're not common knowledge outside of that community us bringing transparency there matters a lot i think valiant is a really great example now valiant was a pharmaceutical company in the u.s whose strategy was to buy up small pharmaceutical companies and then jack up the price and so obviously a lot of people were hurt consumers but from a investor standpoint if you look at this performance this stock did incredibly well and then fraud emerged and it tanked and so really what you see here is the ability to see a pattern of behavior so mike pearson gets hired in late 2008 and he gets a dui and his license revoked soon after he joins he ended up having a massive drinking problem he was closing deals three or four whiskeys deep that it didn't matter for a while he also said we are cutting costs we're very we're very diligent we don't spend too much and then he buys a gulfstream jet and um about two years into his tenure then he buys another one a year later and then the new gulfstream jet comes out and there's a waiting list and he ends up paying more for it to get ahead of the line so that doesn't quite square with what he's saying to the public and then he purchases a house six million dollar house he has a four million dollar mortgage all of his comp his compensation is tied up in the stock and so he has to get a hundred million dollar loan from goldman sachs against his stock he uses then that money because he wants to be portrayed as someone who's very successful 50 million dollars of that he gives to duke university so he took a loan and then gave the money the cash to somebody else he puts it in his wife's name his wife's name even though they were in the middle of a divorce so he's trying to figure that out and then goldman calls back his hundred million dollar loan he needs to sell all of most of the shares that he has to get hit on that money that's part of this plunging and then he's fired in 2016. investors lose money insurance companies that were insuring this company they're still in lawsuits there's eight different insurance companies that are suing it because for fraud you have class action lawsuits you have the companies that they bought and then fired people you have people losing their jobs when this fraud was discovered all of these things impacted so many different parts of society but this is why a lot of people went short there were people short sellers who knew all this information that goes this has to end sometime and made a lot of money when it fell meanwhile the race by investors to get as much information about publicly traded companies as possible is only limited by the technology that's available and even those limits are constantly shifting by now not just what a company's management says is under serious scrutiny the tone with which it's communicated also appears to contain valuable information [Music] what an investor is really interested in uh is understanding how to get getting a better understanding of the firm now they don't know about the firm directly they only know that the best they they can is interact with the executive so that's already a little a step away right now the executive can change how they communicate they in fact they can change the words in fact they are being coached to use certain words they may for example sound more positive in their words than what they really know about the company now this is not very good for investors because they really want to know the truth they want to know what's really going on in the firm and they don't want to know like some coached words or something that the executives are using the tone of the voice is a channel uh that very much leaks emotional information and it's very difficult for people to hide us right just imagine you uh you talk to your wife and you see that the wife may be angry because you didn't bring out the trash and you know she's angry and you look at her and you say so honey what's what's wrong and she says nothing i'm fine you know the she's not fine right so this is an example where the words say one thing the words say something that is very positive nothing i am fine uh but the tone of the voice is very negative i'm speaking rather quietly although i'm now starting to get increasingly angry and very angry indeed although i'm slowly tempering my voice one of the things we're computing is a measurement of distress how stressed out is an executive and we can do that for each earnings call and then we can see how a company is doing how how distressed an executive is over the course of several years even now let's take elon musk for example he's an open book in fact we've actually been keeping at least of the top 100 ceos with respect to how much information they give away uh in their voice guess who number one is elon musk okay he's a complete open book you know when he's mad you know when he's pissed off right you knows what you know when he is excited and of course not only do we know our algorithm knows the orders are gigantic so we have like i don't know well over half a million orders i think maybe six or six hundred thousand that's a lot basically we stopped counting i don't think it's ever been a situation in history where you buy a car and it gets way better over time just your software so in this particular example our analytics pointed to certain clues uh that were very very positive in his voice and based on that our prediction engine predicted a very strong increase in stock price for tesla about three weeks later the stock price went from 200 to 350 or so far away from the all-time high but we made a prediction that it's going to break the all-time high now a few days later elon introduced the cyber truck which was completely disastrous i don't know if you're familiar with this presentation it was one of the worst presentations he has ever actually done and what happened a few days later the stock price tapes and we're ripping our hair out because we just made this prediction but this is what happened and uh if we weren't young entrepreneurs we would actually be sitting on a line we could actually have invested on our own prediction we would have made a lot of money buying and analyzing data from unexpected sources can make investors huge profits but they pay a lot of money for them average data set cost is is somewhere between fifty thousand and a hundred thousand dollars per fund per year and but it's very hard to put a pin on it the probably the best data set in the history of alternative data was a company called mint.com the app in the states that helps people manage their their spending and so on it gave insights into consumer behavior spending behavior and not many buyers were using alternative data so it gave people a really strong read and unfortunately mint isn't selling to the space anymore but but if there are any other mints out there please do reach out um but look the battle isn't just about access knowing what the best data sets are it's about actually knowing which data sets to combine for stronger signals that's the holy grail so if the question today is um what's the future of tesla then you need specific data sets that are relate to tesla you can triangulate into a mosaic to give you that answer that's that's where the war will be won in terms of in terms of data but the big investors who continue to buy more and more expensive data sets to get better returns on the stock markets are not alone a growing number of small private investors also want their piece of the pie hedge funds are spending millions of dollars to buy up your personal data and then using it to get a leg up in the stock market that is not fair uh what we're worried about is that it may be retail investors who are kind of getting left behind and that is why we set up our company now the whole stock market is changing we want to make sure that everybody has access to the same data so that a small investor from his basement can make a good decision and then make money off of it [Music] my name is james kardatsky i'm the ceo of quiver quantitative my name is christopher kardasky and i'm the cto of clover quantitative at university i studied finance and economics and my brother studied statistics which you know as a pretty close to data science but both of us were really involved in it as a hobby more so throughout the entirety of college this is where it began for us as kids our passion for baseball led us to read moneyball it's a true story about a small team with a small budget that made it very difficult to compete with the big teams but then their manager starts taking a different approach he doesn't look at the players so much as he looks at the data points about these players and what he sees in the data is that some players are very much undervalued so they put together a team based on these statistics and they end up with a record-setting season beating all the big teams with their big budgets it did kind of introduce to me at least like the idea of data in general and like the idea that data is really starting to take over a lot of industries where maybe it didn't play a part in the past during the winter of my senior year i went to work at a hedge fund out in boston yeah i was generally aware of the fact that hedge funds were looking for kind of non-traditional ways that they could get information but yeah the internship in general really opened my eyes to exactly how that data was collected how it was being used and you know why it was so important to hedge funds we're returning office space to move the company into this summer what kind of size office are you looking for to start we're looking for about four or five people this summer so and then as we go on we'll probably look to expand a little bit more than that but to start four or five and is it expensive to rent the place the pricing wasn't too bad no yeah obviously more expensive than working from home but you know it's not too bad compared to some of the other places we've looked at less expensive than we were if we were leasing from new york i'm sure i think just generally now it's a lot more i don't know if you'd call it cool but it's definitely much more um socially common for people to invest and if your friends who are investing then and you invest it gives you something to talk about it it becomes there's sort of an entertainment factor there um being involved in the stock market the kova 19 pandemic i think was probably a big catalyst for a lot of people to come into the stock market just due to the fact that you know there's not a lot of stuff going on outside you kind of are stuck inside in quarantine or isolation you don't have much things better to do than download app on your phone and start following stocks all day when you're at home alone so i think that the entertainment and even like kind of the gamification aspect of it are definitely starting to trend a lot more and you're seeing a lot more people be interested in it just for entertainment but the influx of small private investors also plays havoc with the stock markets last year a few large hedge funds lost billions of dollars when all of a sudden a group of users of the reddit four room wall street bets short squeezed gamestop stock in a short time the price of the stock rose dramatically stop should be able to generate quite a bit of free cash flow looking over 18 24 months you know even back in december of 2020 you could start seeing that this is a company that was starting to be talked about quite a bit by people within that community so even a couple weeks before the big explosion that happened in late january we were able to publish a newsletter that basically showed people that gamestop is one company that might be you know primed for a lot of retail interest in the coming weeks as you can see here we have uh you know it's pretty been pretty static for a while just because it's the weekend right now there's not a whole lot of discussion going on in the forum but what this tracks is the most mentioned companies on wall street bets over the last 24 hours uh you can do like a search to see any company how many mentions it's had so you can see you know back in 2019 there's almost nobody talking about gamestop on wall street bets it starts to pick up quite a bit at the end of december 2020 and then even a couple weeks before this huge spike there was a lot of people who started discussing it suddenly and again you have like the huge end of january spike so right now everything on our site is free you can just go to corporatequan.com create a free account and then start using the site i was wondering how old you two are uh 21 21 yeah and we're twins so i've lost 21. and you already finished your studies yes we've both graduated now at 21 uh 20. 20. yeah last year i graduated brad chandler who is one of my former teachers has a lot of really great perspective on kind of that institutional like he has that good background in the world of finance so he has a lot of good insights on what institutions and what professional investors are going to find interesting and what they use in the day-to-day [Applause] like before gamestop rape they didn't care what happened in russia nobody what except for the people on wall street which hedge funds are following wall street bets and then let's see as they go forward which hedge funds are doing what wall street bets doing i think the question becomes though for you is you know to get out to the retail investor as much as we can or whatever what i would think you need is like more inputs that not everybody can have access to yeah i think the probably the biggest asset of the wall street that state is just the pure volume of the comments like being able to kind of cut through some of that noise there's like nine million people now on wall street bets and i think it's in up in the definitely tens of thousands maybe even upwards of 100 000 messages a day and what we do is we collect all that data kind of parse through it and provide it back to people in a form that's easily understandable and give some idea of the signal that comes through that noise um it's interesting and there's a lot of great data there but to get them to actually pay something for it and you know even if it's a small amount to cover the cost of what you're doing is like really hard to do the next challenge is going to be how to monetize that i guess whether it's like building some like super premium model or something once for you [Music] i see what these guys are doing i've been following them for a while now it's a good thing that there's people working on getting more data in the hands of retail investors and not just the large players that being said the data is derived from public sources and as soon as all relevant public sources have been made available via some easily accessible interface then all the profit potential will be locked away in exclusive data there's so many ways in which retail investors and there are so many of them now have been in the back seat from high frequency trading to the age-old idea dinner where investors and ceos of companies have informal get-togethers and exchange information that the rest of the participants on the stock market never get to see but with alternative data things have become really fuzzy there's plenty of examples where buying a couple of data sets can give you more information on a company than the ceos can ever bring up at a dinner and when these data sets are affordable to some players but not to others the small investors will not have a fair chance the retail investor won't be able to get access to this data pay for it and crunch it and so it does favor the more sophisticated institutional investors around the world i think the data will definitely bring transparency to the markets i guess a question is who does it bring transparency to first and it's probably the sophisticated investors that know how to analyze the data and so the retail investor is most likely at a disadvantage there when you think about the difference between a professional investor and a retail investor no matter how far back you go you can make the case that if you have chosen to spend your entire life all your working hours analyzing stocks you will naturally know more you raise a lot of money you have more capital at your at your disposal you have access to more resources you can find ways to know more about that company than a retail investor ever will and so there's always going to be that that gap now with all this data i think that gap widens when it comes to really understanding what makes a company valuable the ability to understand a company institutional professional investors will always understand a company far more when it comes to the fundamental data than a retail investor ever can when it comes to understanding what the stock will do that's a different thing remember how two capital one employees made millions by analyzing all the credit card statements of their bank's customers bonang huang and nan huang made a fortune because they could see whether certain companies made more or less profit before other investors that was really smart of them right but the american regulator the sec did not agree with that assessment because nan huang and bon ang huang worked for a bank they were accused of insider trading in the end they paid millions in sanctions you know what's funny about this story that exact same data can be bought from legitimate companies hedge funds do this on a daily basis you know they buy up credit card transaction data so they can see how many hamburgers mcdonald's has sold yesterday or the day before or last month and then they trade on that whether it's buying the stock selling the stock going short going long they make a lot of money but because the data is from outside sources and other people can buy this data as well you know if you have tens of thousands of dollars available uh it's all perfectly legal most of the data is publicly available and any data that's not publicly available sold by a company if it's available to be purchased by any firm and then it's effectively publicly available there have been cases in the past where data sets have been sold with sort of like exclusivity yeah so exclusivity is is illegal in the uk because it's deemed therefore to be effectively insider information because only one one firm could have it in the u.s um there definitely has been instances where um that has happened it's happening less and less because of i think my personal views the fear that the sec could could um you know have have um negative uh views on that uh as long as um if you own a really interesting data set as long as you are making that available to anyone that wants to buy it that is it moves a long way towards it being legitimate and not including insider information um even then when we put a data set in front of a buyer the legal counsel at a hedge fund our private equity firm critiques everything and they won't be allowed trial a data set until they're happy that there's no risk of material non-public information insider insider trading information yeah now but i can imagine that sort of like from the from a legal standpoint it is it's quite possible to uh make sure that it's it's not considered insider trading but as you mentioned if you can have data sets that might give you maybe even more information than the board itself has of a company it can maybe sometimes be information that is even better than information that you would get like in an insider trading situation information is power the information is out there for people to analyze or to buy it's available to anyone including the board of the corporate the hedge funds are leading the way and analyzing that information but it's available to everyone that wants to buy it i'm sure that the market for alternative data is much bigger than is reported and i think credit cards is just the best example i mean nobody knows nobody knows that these credit cards are selling your data in 2014 the money that the credit card company visa was making was masked under other revenues at 314 million dollars by 2018 this number has grown to almost 750 million dollars given these large revenue figures it is easy to see that there is a lot of value coming out of these data sets we are entering a world where new data sets emerge that remain profitable but only for a short while after which larger more detailed and more invasive data sets are needed to further squeeze profits out of the market i think it already has a big influence on the stock market there are enough investors that are able to see how well a company is doing every single day instead of once a quarter you know that's just an edge that is it's too big right um everybody is going to have to use alternative data so then in the future obviously once everyone uses alternative data then you have people that can use it better than others but you know the next step is everyone has to use alternative data and that will happen in way less than 10 years we think that you know this is greater than just us collecting data and selling it we think this is helping markets investors corporations governments invest more efficiently [Music] a few years ago before alternative data company reports earnings the stock will gap up or down depending on on how the company did now investors already know how well the company did so you see the stock already move every single day based on what they see in the data every single day and then you know there's there's people earning surprises right which is good for the market right because and investors in society can allocate how we invest in real time if this company is not doing well why do i want to wait three months to know that when i can know that today and sell my position or vice versa so it's you know it's very good to bring transparency to the markets yeah look i see most investors uh it'll become table stakes in fact the word alternative will fall away in a few years time it's just data whether it's old or new traditional or alternative isn't really the point the point is can investors make money from the data or manage risks through using the data and so at some point it'll fall away and any asset management firm that doesn't use data is going to be uncompetitive in a few years time right it's the same in the corporate world in any world with that of business so i think it's it'll become table stakes in the end it's just data alternative data is maybe a sexier term at the moment to differentiate versus the old data but it's just data and if you're not working with data then best of luck [Music] i've been thinking about what will happen if all parties on the stock market are using alternative data to base their investment decisions on and it's not all good i'm afraid the race for data sets and the all-encompassing use of publicly available data will make it very easy to game the system a future day trader might buy call options in a company and use the rest of the day to plan attacks on all the data sets that the trading machines monitor in real time this trader might send some fake tweets use freely available software to post a bunch of fake reviews online and by the time his dinner is delivered to his doorstep his options will be worth millions it's easy to be tempted to go on this path since the money is so easily made and the chances that a market authority will catch you is very close to zero these sort of attacks can be done by almost anyone with some knowledge of how the internet works not just the large wall street players but it's not going to make the market fairer it comes back to the different types of data so if a data is owned by a big german retailer it's very hard for the hackers to get in and corrupt that and if it's owned by a small fintech company and it's about people spending money again it's hard to hack that if the data is available on social media and it's sort of comments about a topic yes that could be that could be in theory manipulated it could be a bot that's actually given given the comment and then sentiment providers might analyze that data it's a small proportion of the whole overall alternative space that could be manipulated and it would take a lot to manipulate you know twitter or reddit you know um and so yes those areas could be treated with a little bit more caution social media has had an immense effect on the workings of democracies and all the data flooding into the financial markets might bear a similar cost a russian troll farm might very well try to disrupt the financial markets in the same way efforts were made to change the outcome of democratic elections i doubt the financial markets are ready for such a change and i don't see a lot of forward thinking in order to prepare for such an event [Music] [Music] you

Channel: vpro documentary

Views: 13,506

Rating: 4.9225183 out of 5

Keywords: vpro documentary, documentary channel, vpro

Id: F4_GgFE2Cm4

Length: 49min 47sec (2987 seconds)

Published: Sat Sep 25 2021