The Monetization of Big Data
The Future of Big Data
A brand new type of derivative of the future that will be traded like options and stocks.
Financial institutions like Goldman Sachs and others have a penchant for doing business solely to make money for the sake of making money. They were the ones that pushed toxic collaterized debt obligations into the banking system -- essentially a risky type of security that caused the economic meltdown of 2008 in the sub-prime mortgage field.
There are other types of so-called securities or derivatives that bankers love to bet on and make money. Blythe Masters, a banker at JPMorgan Chase invented the credit default swap. It is essentially a derivative, synthetic or derived investment instrument used for hedging loans. The way that it works is that when a loan is given, a buyer can buy a type of a bet that the loan will not default. As long as the loan doesn't default, the buyer pays a premium to the seller of the CDS. If the loan defaults, the seller must pay the value of the loan. You do not have to own the loan to participate. It is like one huge casino between financial institutions. Huge amounts swing on small margins.
Other financial derivatives are puts and calls which are a bet on whether a security (stock) will go up or down, and of course options are derivatives. These derivatives are traded like commodities in a secondary market -- meaning they are not connected to their underlying stock or companies.
The inventor of the CDS or credit default swap has been called the woman who invented financial weapons of mass destruction. The reason for this is that big money swings in the balance should an "event" occur which triggers a payout. Credit default swaps can be bought and sold as well as other derivatives.
The first to market with any type of new financial instrument is the big winner. Financial institutions cannot resist the urge to make money at any and every opportunity, and there is a big opportunity opening up.
I am here to predict the next type of derivative that will hit the market. It will be the BDD or Big Data Derivative. Big Data is defined as huge amounts of data that corporations generate. It can include machine-generated data, sales data, manufacturing data, personnel data, web visit data or any other kind of information stored.
Until the advent of fast processors, servers with almost unlimited capacity and bandwidth to kill, processing this data was almost impossible. Now there is a virtual deluge of data, and it can be extremely valuable. The cycle works like this: Data is mined for information. Information is integrated into knowledge. Knowledge is used to generate money.
Data mining is a burgeoning field, and although there are formalized methodologies to do it, it is still a wide open field and anyone who is knowledgeable in statistics and higher math can generate algorithms and formulae to tease valuable knowledge out of the data for profit. It is just like financial institutions develop proprietary algorithms for computer trading. Companies develop proprietary data mining algorithms.
I predict that Big Data will be a commodity. It will be treated like precious metal ore. A company can choose to mine and refine for their own revenue streams, or I predict that Big Data will be traded like a commodity such as copper, cotton or pork bellies. The Big Data from one company can be valuable to a whole host of other companies. Even mundane data like machine cycles in a manufacturing environment can be processed to do value engineering or economical modeling for new ventures. There are as many uses for processed Big Data as there are business endeavors. The companies that adopt the knowledge from Big Data will have a tactical edge over those who don't.
So what are some of the elements of the commerce side of Big Data? Someone will make a ton of money with classification algorithms. Other quants will come up with algorithms to value it, and it will remain the last bastion of true arbitrage, because one man's scrap is another man's gold. Some techno-freaks will invent classifiers built into edge databases or database engine structures designed for real time intelligence. There is a universe of possibilities.
There are so many possible money-making opportunities with Big Data, that derivatives will become standard instruments of trade and money-making. A white paper is currently being authored. To reserve your copy please send an email to DataPrivacy@mail.com.