A very interesting strategy indeed. So basically these "analysts" look at a certain port or restaurant and they took down the count of cars or ships? It doesn't seem like a bad strategy to use, seeing as if a bank's parking lot is filled for the entire period that you are monitoring it, say 5 months, it seems pretty obvious that the bank is doing great. But on the other hand, this seems a very...time taking strategy. It seems like it will take a long time to gather all your "research" and there could always outliers, like say the company is having a meeting and everyone has to be in attendance so that day or even week doesn't count. It's not a bad strategy, but i don't know if i would go along with it.
In addition to what Florin was saying about how much time it takes to obtain accurate data, collecting satellite information from private companies is also likely to cost a lot of money. However, the benefits seem very advantageous. Companies who use this can predict (like the example of Wal-Mart and Target) where they would be better off building a new store. It also seems likely to benefit economists who could use the data to predict overall trade and market trends to show the economic situation more clearly.
I actually do like the strategy of spying for profits. I don't think that "time" would be a major issue for a concept like this. If a potential investor of a industrial product had at their disposal satellite pictures of customer traffic of the product, they would serve as reassurance as well as, give them a potential edge. Although Benjamin and Florin each made very strong points about the "time" and "cost" issues, I believe that using this investment technique should not be used to produce graph-like tools, but should serve more as a mere guide in the investment process. Although there may be a possible cost attached to it, it is my belief that the investor will still be able to make profits.
Personally I doubt that this would really help that much with investments Based on the infinite number of variables that effect how companies do. In order to be at all accurate there would (as Ben mentioned) need to be a lot of time, effort, and expenses paid to develop the technology. Though I think the technology would best be used as a means to understand how your competition is doing, not just overall, but in specific areas. This way companies could directly compare there information to that of there competitors. Even then, it wouldn't be very cost effective, and it could result inaccurate assumptions. Whether or not it is a smart choice for looking at competition, I don't know, but I don't think it should be used as a means for investment.
I completly agree with Eddie, Ben, and Florin. I beleive that this strategy of spying for profits is an inaccurate and time consuming process. These people who are spying generalize the data that they collect from very few regions of the world into the overall economic status of a company. In my mind, you cannot tell whether a company is gaining or losing money just by the amount of products that is sold or shipped by a few ports or stores. These stores or ports could be on the rise or decline just based on how the economy is doing in their region but it doesn't mean that those results are of how the company is doind as a whole.
Great conversation! You have all hit the major points I was hoping for. I would like to add some helpful (hopefully) perspective:
As was stated on the first slide, these specific satellite images are being analyzed and used by "hedge funds and Wall Street firms". We will go over exactly what a "hedge fund" is in detail at a future seminar, but for simplicity, a hedge fund is a money management firm that invests aggressively hoping for out sized returns (please feel free to add/change that definition as necessary to this discussion). The average hedge fund size is $150M+ under management. Consider the following hypothetical example:
Hedge Fund A: $200M under management ($10M) spent on satellite images/analysis ($5M) spent on other expenses ------ $185M left to invest $10M profit from investing in McDonalds ahead of an upside-surprise quarterly report $10M profit from investing in Target ahead of an announcement of stronger than expected sales $15M profit from betting against iron ore ahead of weak demand report etc. ----- $220M+ (19%+ profit)
Obviously nothing is for certain, and those of you who mentioned that many other factors could overshadow the "predictive ability" of this analysis are absolutely right, but this is the type of potential that hedge funds see when considering this.
The main point of the example is that when you are dealing with these enormous sums of money, and your potential profits are also enormous, the likely tremendous cost of this "spying for profits" is relatively trivial.
I might be missing a big detail here, but does anyone else see this technology as a potentially new way of auditing businesses? Things can easily sneak by the hired auditors in today's world (as the recent egg salmonella issue proved). But how much can escape the all-seeing eye of the satellite? Obviously, spying on the action within a business's walls is not very practical (and not necessarily ethical either). But could it be possible to track unaccounted transactions that questionable businesses are trying to hide... or even developing an alternative method of finding accounting errors as opposed to backtracking through pages of spreadsheets? I think I sound overly ambitious at this point, but I see this technology as an innovative start in making accounting much more efficient and less shady.
A very interesting strategy indeed. So basically these "analysts" look at a certain port or restaurant and they took down the count of cars or ships? It doesn't seem like a bad strategy to use, seeing as if a bank's parking lot is filled for the entire period that you are monitoring it, say 5 months, it seems pretty obvious that the bank is doing great. But on the other hand, this seems a very...time taking strategy. It seems like it will take a long time to gather all your "research" and there could always outliers, like say the company is having a meeting and everyone has to be in attendance so that day or even week doesn't count. It's not a bad strategy, but i don't know if i would go along with it.
ReplyDeleteIn addition to what Florin was saying about how much time it takes to obtain accurate data, collecting satellite information from private companies is also likely to cost a lot of money. However, the benefits seem very advantageous. Companies who use this can predict (like the example of Wal-Mart and Target) where they would be better off building a new store. It also seems likely to benefit economists who could use the data to predict overall trade and market trends to show the economic situation more clearly.
ReplyDeleteI actually do like the strategy of spying for profits. I don't think that "time" would be a major issue for a concept like this. If a potential investor of a industrial product had at their disposal satellite pictures of customer traffic of the product, they would serve as reassurance as well as, give them a potential edge. Although Benjamin and Florin each made very strong points about the "time" and "cost" issues, I believe that using this investment technique should not be used to produce graph-like tools, but should serve more as a mere guide in the investment process. Although there may be a possible cost attached to it, it is my belief that the investor will still be able to make profits.
ReplyDeletePersonally I doubt that this would really help that much with investments Based on the infinite number of variables that effect how companies do. In order to be at all accurate there would (as Ben mentioned) need to be a lot of time, effort, and expenses paid to develop the technology. Though I think the technology would best be used as a means to understand how your competition is doing, not just overall, but in specific areas. This way companies could directly compare there information to that of there competitors. Even then, it wouldn't be very cost effective, and it could result inaccurate assumptions. Whether or not it is a smart choice for looking at competition, I don't know, but I don't think it should be used as a means for investment.
ReplyDeleteI completly agree with Eddie, Ben, and Florin. I beleive that this strategy of spying for profits is an inaccurate and time consuming process. These people who are spying generalize the data that they collect from very few regions of the world into the overall economic status of a company. In my mind, you cannot tell whether a company is gaining or losing money just by the amount of products that is sold or shipped by a few ports or stores. These stores or ports could be on the rise or decline just based on how the economy is doing in their region but it doesn't mean that those results are of how the company is doind as a whole.
ReplyDeleteGreat conversation! You have all hit the major points I was hoping for. I would like to add some helpful (hopefully) perspective:
ReplyDeleteAs was stated on the first slide, these specific satellite images are being analyzed and used by "hedge funds and Wall Street firms". We will go over exactly what a "hedge fund" is in detail at a future seminar, but for simplicity, a hedge fund is a money management firm that invests aggressively hoping for out sized returns (please feel free to add/change that definition as necessary to this discussion). The average hedge fund size is $150M+ under management. Consider the following hypothetical example:
Hedge Fund A:
$200M under management
($10M) spent on satellite images/analysis
($5M) spent on other expenses
------
$185M left to invest
$10M profit from investing in McDonalds ahead of an upside-surprise quarterly report
$10M profit from investing in Target ahead of an announcement of stronger than expected sales
$15M profit from betting against iron ore ahead of weak demand report
etc.
-----
$220M+ (19%+ profit)
Obviously nothing is for certain, and those of you who mentioned that many other factors could overshadow the "predictive ability" of this analysis are absolutely right, but this is the type of potential that hedge funds see when considering this.
The main point of the example is that when you are dealing with these enormous sums of money, and your potential profits are also enormous, the likely tremendous cost of this "spying for profits" is relatively trivial.
I might be missing a big detail here, but does anyone else see this technology as a potentially new way of auditing businesses? Things can easily sneak by the hired auditors in today's world (as the recent egg salmonella issue proved). But how much can escape the all-seeing eye of the satellite? Obviously, spying on the action within a business's walls is not very practical (and not necessarily ethical either). But could it be possible to track unaccounted transactions that questionable businesses are trying to hide... or even developing an alternative method of finding accounting errors as opposed to backtracking through pages of spreadsheets? I think I sound overly ambitious at this point, but I see this technology as an innovative start in making accounting much more efficient and less shady.
ReplyDelete