Bigger, Better Data
You don’t have to be a big business to appreciate how big data is shaping our lives—or how it can help us make better-informed investment decisions.
On the “Q Factor” podcast, I spoke with Afshin Goodarzi of 1010data, the company that prides itself on being the “eyes and ears” for major multinational corporations like JPMorgan, Coca-Cola, and Procter & Gamble. It’s Afshin’s job to study how these corporations' current and potential customers live and breathe. This practice has a surprisingly long history. In fact, it dates back to well before you started to notice that if you shopped for a toaster on one website, that toaster would follow you all around the internet in the form of targeted ads.
Afshin’s company grew out of a massive dataset of New York Stock Exchange transactions from the early 2000s, which has grown to a whopping two trillion rows of data today. In mastering the storage and processing of that much data, the company’s founders built a foundation for using information, like what we can collect from cell phones, to learn all about their consumers’ behavior. To be sure, there are plenty of dangers that come hand-in-hand with big data, not the least of which are privacy, security, and human judgments and biases built into algorithms that shape our lives. It's important that companies are transparent about what kinds of information they are extracting from consumers. But what is undeniable is that it’s here to stay, and we all have much to learn from it.
Afshin’s work has some fascinating implications for understanding markets in the information age. I’ve detailed how some of this data is collected and what it means for investors like us.
New Data Sources
Afshin explained how our cell phones basically act like homing devices. Location data from cell phones can tell us where people are on a frequent basis, giving insight into where they live, work, and shop. Afshin assesses these data points for companies looking to capture new markets and optimize their sales strategies.
In addition to smartphones, Afshin has also harnessed the explosion of available sales data, which has just about rendered the quarterly report paradigm for evaluating company performance obsolete. With the help of big data, today, you can see sales numbers for many companies on a weekly—even daily—basis, which can help investors make better real-time decisions.
Real Estate
For quite a few years, I have managed a portfolio of global Real Estate Investment Trusts (REITs). Through that work, I’ve been researching more novel and effective ways of understanding population density. We have found that location density matters a great deal when it comes to determining REIT performance outcomes; specifically, that high-density locations experience higher rental growth and carry higher systematic risk than less-dense areas. The data we’ve used in the past to understand population density, from the U.S. Census Bureau and the Internal Revenue Service, might show us where homes and businesses are located, but it doesn’t give a dynamic picture of how busy or popular these areas are. It’s clear that we need much more granular data to help guide our real estate investment decisions.
Afshin explained how cell phone data can show people’s locations every 10 or 30 seconds, depending on the device, giving us a much better idea of the area’s popularity and foot traffic than we can glean from just the number of homes or businesses recorded there. By looking at the crowds of people at the beginning of the day and the end of the day, we can gain better insight into where people are living and working. For commercial real estate, cell phone data can show us where and how people are shopping—even how much time they spend browsing in a store before they check out.
Employee Satisfaction
As we’ve discussed, I believe that how a company treats its employees tells us a lot about its long-term health, not to mention its attractiveness for investment. Besides being the right thing to do, focusing on the employee experience has been shown to reduce turnover and boost innovation. Investing in employees can also signal the kind of long-term thinking that leads to good decision-making in other areas of the business.
Afshin and I discussed the power of data to better understand how well a given company is doing on these types of scores. In the past, we’ve had to rely on relatively weak methods like surveys. But some far more interesting and granular measures are emerging today. I know of one researcher using the quality of company-provided coffee to assess how much the company invests in the employee experience. That aside, there is absolutely a need for a better way to assess employee treatment we can standardize across businesses. Afshin and I were encouraged by the proliferation of metrics beyond sales that corporations are beginning to pay attention to, like scores on environmental stewardship and the pay gap between the CEO and the lowest-paid employee. We both see great potential in expanding and deepening this kind of analysis.
We even imagined a future where we can assess employee satisfaction alongside stock price to drive good corporate behaviors—with investors “voting” with their dollars on companies that are truly excelling when it comes to treating their employees well.
Afshin and I also have high hopes for health and biomedical research to harness the power of big data and collaborate across specialties and oceans—more relevant than ever as we emerge from the COVID-19 pandemic.
Listen to our full conversation: I'll Be Watching You: 1010data's Afshin Goodarzi