
The New Gold Rush? Wall Street Wants Your Data - dwynings
http://mattturck.com/2017/01/17/the-new-gold-rush-wall-street-wants-your-data/
======
chollida1
Great article!! And i think it can probably be summed up with the sentence,
unless your product has:

\- a long history of data

\- data that has low correlation to other available data sets

\- a very small group of people who have access to this data( ie exclusive
deals with a few funds)

Then its unlikely that you will be able to sell your data for any meaningful
amount of money.

A few things the author wrote that I think deserve some attention.....

> You do hear the occasional story where a hedge fund paid a couple of
> millions a year to obtain a specific data set, and occasionally more. But
> there’s a reasonable chance that this type of price came with some kind of
> exclusive. Also, those contracts also probably have a limited shelf life, as
> the value of a data set decays over time, as per the above.

This is very true, almost certainly your data set is not worth millions a year
to any specific fund. And if it is, its because you agreed to make your data
set exclusive to a single fund.

Each data set requires its own special mess of tools for cleaning it,
integrating it, figuring out how to generate a trading signal from it, putting
it into production and then once its in production constantly monitoring it
not only to verify the data is good, but to make sure it actually benefits the
trading system.

I wrote this comment:
[https://news.ycombinator.com/item?id=13140352](https://news.ycombinator.com/item?id=13140352)
a while ago and it got a very large number of up votes for what was
essentially a rant that we're now drowing in data.

Hedge funds today share alot in common with AAA video games wrt to data. You
used to be able to make a game with 2 people, then it was 10, then it was 50,
then 100, now its 500+ for a AAA video game.

Hedge funds have the exact same issue due to the explosion of data. I know
alot of funds that are skipping on data sets, due to lack of bandwidth to
consume them all.

> First of all, unless it’s already commoditized, you probably don’t want to
> sell your data to the Bloombergs of the world.

Most hedge funds won't be your direct audience, they'll already have spent
money to buy data from Bloomberg and Reuters. The few, say top 100, that might
buy your data directly could be your market, but these funds don't exactly
have huge sales teams ready to talk to you. Which means you need to hire
someone who knows the landscape to sell your data. Your sales team might be
the best group of 25 year old Stanford grads around but they aren't getting in
the door of most quant funds without an introduction.

This is the website of one of the worlds most successful funds.
[https://www.rentec.com/Home.action?index=true](https://www.rentec.com/Home.action?index=true)

~~~
AznHisoka
Also just plain dumb luck. stocks dont trade based on logic like revenue
growth so if Trump tweets something negative about Starbucks and the stock
goes down, but your data suggested Starbucks sales went up 300% last month,
you are in tough luck.

this is also probably why your data is worth much much less than you think.
there are very few things that correlate very strongly to stock performance.
predicting human emotion is probably more important than predicting revenue
growth or number of people who went inside a Starbucks last month.

~~~
laingc
If your data suggest that the stock is trading at a discount due to
irrationality, then you have a perfect opportunity to buy lots of an
underpriced stock.

~~~
aangjie
I think the point OP was trying to make is that, that irrationality may not be
easy to capture with automated systems, therefore the value of data is limited
by your trading system/algorithm's ability to detect/predict irrational human
behaviour. Or atleast that's what I read of it.

~~~
dsacco
Yes, the grandparent comment makes a good point. You can have plenty of solid
data and still make a losing trade.

But, given enough data-informed trades that would _otherwise_ be proditable,
the law of large numbers suggests that an overall _strategy_ will still be
sound. You can afford to have the market be irrational here and there if you
really are correctly forecasting earnings in advance most of the time.

------
rcarrigan87
> When I was at Bloomberg, I used to cringe when startup founders would show
> up in hoodies, essentially destroying their credibility before the meeting
> even started.

I understand you can't roll in looking like a slob but I have to think times
have changed and the casually dressed founder wouldn't have a problem, even
with Wall Street types.

The cultural differences b/t the two industries are pretty interesting
though...

~~~
choward
People dressed up in suits lose accountability to me. It's like they are over-
compensating for something.

~~~
bogomipz
Does that include lawyers and financial advisors too?

Would you be OK with someone in jeans and a hoodie representing you in court?

Would you be OK handing your life savings over to a money manager who was
wearing a t-shirt and flip flops?

~~~
parasubcutaneor
I deeply enjoy these sorts of distinctions in decorum, and the undercurrents
of what it all must imply. It's all this subliminal signaling that tunes the
pitch of an atmosphere to cultivate ideas.

Consider the duality of U.S. Marines, contrasting dress blues against combat
BDU's. Or any military subculture for that matter.

Snappy dressers are trying to send a message about the money they burn on dry
cleaning, and how early they get up to look sharp for their morning cup of
coffee. How new their razor is, how orderly their coiffure seems. They have
the time for this sort of thing, and they might have the time to waste on
_you_ ...if you're lucky.

And then there's nerd signaling. The next twelve hours to be spent scanning
text, perched atop a swivel chair in comfortable clothes. Waking up possibly
before before noon, because yesterday's dose of caffeine and inspiration
carried through until 4:30 AM, when someone got their head bitten off in a
forum by some cranky sleep-deprived rage about abuse of notation.

Meanwhile, in a court room, lives are irrevocably altered. People being hauled
before a judge, to have their lives taken away from them, because they were
born under a bad sign. There can't be any flippant hairstyles among the
insiders of such a system. The whole point of showing up is to impress upon
outsiders that a stone faced institution housed within a forrest of doric
columns shall weigh and adjucate a decision. Clear voices in respectable,
classic outfits must deliver verbal pronoucements with the reverb of a cavern
older than the dawn of humankind. Janitors have mopped blood off these floors.
This isn't some cluttered bedroom filled with the detritus of decades old
junk.

Takes all kinds.

------
paulsutter
Suggestions:

\- Make it easy for them to get the backfile, and charge them a lot for fresh
data (somehow startups are inclined to do this backwards. They need a few
years of data before they even know it's useful, but they can't trade without
recent data. Charge them accordingly)

\- It's too hard to negotiate exclusives, but you can make them bid on
exclusive access to delays. One second, minute, hour, week, etc. it doesn't
need to be complicated but neither should you leave money on the table with
too simple pricing

~~~
arbitraryquant
Yes, if you want me to buy your data, give me all history up to last year.
Then I'll decide.

------
arbitraryquant
Throwaway for obvious reasons. I'm a quant at a quant hedge fund. I can
confirm I want your data. The longer the history, the more I want it. Don't
fuck with it much, give me clean but raw info. I don't want PII, but I'll take
aggregate and anonymized. Just whatever you do, start collecting it NOW so in
3 years you have 3 years of history to sell me.

~~~
Rainymood
Do you guys prefer a Master's or a PhD for research roles?

~~~
arbitraryquant
Majority are PhD, but definitely some have Bachelors/masters. Care more about
quality of education/skills. 4.0 undergrad at MIT vs PhD at rando state U w
unknown advisor... no question.

------
AznHisoka
"You cannot sell data you don’t own. Hedge funds care immensely about the
legality of the data."

Thats a shame as this makes this business model almost impossible for the
average reader here.

There are loads of outside data that if crawled and gathered could be useful
to hedge funds. things like:

\- growth in number of Amazon reviews for a type of product month to
month(against amazon tos to scrape them)

\- number of job ads that mention a technology or product (against indeed.com
tos to scrape them)

\- google rankings of websites (against google tos to scrape them)

\- growth in total yelp reviews for a restaurant like Mcdonalds month to month
(against yelps tos)

which means this business is only for already profitable companies with large
user bases.

~~~
arbitraryquant
The point is if you're Amazon or Indeed or Yelp (or trying to compete) you can
sell the data.

~~~
AznHisoka
thats true.

and the rich get richer..

~~~
purity_resigns
I've heard them called Siren Servers.

------
dgfgfdagasdfgfa
> The financial services world has its own strong identity, handles massive
> amounts of money, and will not necessarily be in awe of your cool startup.
> When I was at Bloomberg, I used to cringe when startup founders would show
> up in hoodies, essentially destroying their credibility before the meeting
> even started.

Who wants wall street awe? Who cares about credibility? Run a goddamn
business, not a fan club. If you cared about image, you wouldn't talk about
what people wear. It's completely irrelevant to why I'd use your product.

~~~
dig1
> Run a goddamn business,.... If you cared about image, you wouldn't talk
> about what people wear.

Let's change perspective - what do you think, how much success will have
business with web pages that looks like from 90-ties or products that looks
like they are made in basement in spare time? (sure, there are exceptions, but
well, they are exceptions :P).

Everything is about image; if I'm going to invest in you, you better be shaved
with ironed shirt and good suite. Simply, it's telling me you are serious
about your business.

~~~
existencebox
I'll challenge this statement. I stopped shaving, ironing, and wearing more
than many duplicates of one outfit explicitly so I could get serious about my
work. Time is my most valuable commodity, and I intend to use every moment I
have attacking problems I care about. I like to think that I don't look like a
slob, but by the qualities you cited, you would disqualify me off the bat, and
given the rocks I've moved in my industry tenure, that would have been an
absolutely misaligned signal and you would have lost out.

Everything is about image _in some professions_ and _in some eras_. I will
certainly stand on the side of trying to change that through my own actions,
and given that the peers and mentors I most respect have similarly chosen to
discard traditional models of image, I find myself in company I'm quite
comfortable with.

(And as sister posts have cited, the sheer existence of successful sites like
CL, Enom, and HackerNews (which for all its minimalism and polish is by no
means a "modern image"; I say this with nothing but pride to be very clear)
indicates to me that even in site design image may be a cost function but is
no substitute for quality. I have had clients JUMP at products that as you
say, look like they're from the 90s, because they solved _real issues_ that
they needed solved.)

~~~
groby_b
Image still matters. It's just that it's not the same image that matters
everywhere. Wall Street? Bring a suit. Silicon Valley? Go for the hoodie, or
the same outfit (copy) every day.

Both signal that you're part of a specific tribe. There's a reason major tech
conferences are a sea of "jeans & T" people, and it's not just the comfort.

You're completely right that image is not a substitute for quality, but when
you're selling something, you ideally want a bond with the customer. So, if
you sell to Wall St., look like Wall St. If you sell to engineers, look like
an engineer. If you don't sell, wear whatever you like ;)

That's why HN can get away with minimalist design - it's not selling anything.

------
jusq2
Labor unions maybe going extinct but maybe its time for information/data
unions.

------
hackuser
> The good news is that hedge funds are not advertisers and don't care about
> particular individuals

This sounds disingenuous; it's not hard for the author or anyone else to
imagine how Wall Street could use personally identifiable information, and the
author claims to be at least somewhat sophisticated in the 'big data' field.

Also, it's an industry that has an incredible track record of fraud, even
fixing the bedrock interest rates like Libor, prides itself on an anything-
goes atmosphere, and disdains regulation.

~~~
digler999
I could see them passing "insider consumer info" on black markets just like
they pass insider information. How handy would it be for a life insurance
company to know which of its customers is googling for "chest pain" or
"$CANCER_TYPE symptoms". A car insurance company would love to know which
drivers go to bars on saturday night, or which ones make it from point A to
point B in suspiciously low amounts of time.

Wall street could creep into this by saying to either industry: "let _our_
guys crunch the numbers and let _us_ make book on what these rates should
be...because _market efficiency_ ". It'll seem like a great idea at first, the
data will be "anonymized" (except for when it's not, like when that guy pays a
$5k to an analyst at the insurance company for the table mapping "anonymized"
customer idns to ssns.

Suddenly hedge funds get really good at guessing which pools should be
invested in, or which drivers should be packaged into the high-risk tier. A
few years later there's a moderate scandal, a fine is levied equal to ~5% of
the illicit gains made, meanwhile the funds have moved on to perpetuate their
next round of fraud.

~~~
hackuser
Also, learning information about individuals: Big clients, competitors,
employees, critics, journalists, politicians, etc. etc.

------
hackuser
> "No man is better than a machine, and no machine is better than a man with a
> machine."

This concept also is popular in the military AI R&D world where the human-
computer combination is called a 'centaur' (based on what I've read; I'm not
of that world).

