Artificial IntelligenceAlternative Data
The use of Alternative Data is the current super trend strongly shaping the present and future of investing. It is a revolution more important than the revolution that Artificial Intelligence will give.
The main benefit of Alternative Data (AD) is that you can have most of your important metrics faster and more accurately than ever before.
Alternative Data currently improves signal quality and reduces risk. In the future, it will be the primary source of signals. Today, it is the main source of competitive advantage in many cases to find and use these signals before others.
In addition to the current use of AD, it is imperative to create competencies in the fund to use it wisely in the future because this area will now evolve rapidly.
Thanks to AD, the signal will be received earlier. As a result, it will be better, less risky, the position will be easier to run, and the exit will be better.
I have prepared 20 examples of using alternative data. I want to show a broad spectrum of situations where AD have been used so far and can be used in the future.
It is often the case that an exciting and inspiring idea comes from a completely unexpected direction. Therefore, it is worth attending industry conferences and collecting as many case studies as possible of what others have done.
Counting cars in the Tesla parking lot
One fund applied Machine Learning (ML) tools to analyze satellite images of the parking lot in front of Tesla’s Megafactory. The tool analyzed the position of cars and their colours. The goal was to determine if and how the number of vehicles was changing. It turned out that cars quickly disappear and new ones appear in their place, which indicated that the company would keep its commitments and plans. Moreover, with this analysis, it was known weeks before the official announcement. Such information provides a substantial advantage over other market participants.
The above is a rather famous and awe-inspiring example, so it is worth commenting on it. If we look at the area around this factory (in Nevada), we can see one access road.
Setting up a car with a camera there and having someone count the vehicles leaving the parking lot would give the same result (and perhaps much cheaper) as using a whole team to machine-analyze satellite images. It is worth knowing this and looking for a way to have the same data not for a quarter of a million dollars but for 1% of that amount.
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