By Bill Kelly, CAIA Association CEO
How many billionaires would you need to accumulate one quintillion dollars of net worth? If your last name is Trump you might say just one, but the non-fake news answer is a cool one billion billionaires. Whether you are dealing in alternative facts or not, this is a massive number that carries 18 zeros to the left of the decimal point. It also means something very real and very big when it comes to data.
Data is measured from its smallest incremental part known as a bit (the penny in USD parlance), which is typically assigned a value of “1” or “0.” Eight bits make a byte, which is usually considered a unit of memory size. Perhaps taking some poetic license, this is “Small Data.” The beginning point for data collection can probably be most closely linked to the origins of writing, which dates back to circa 3000 BC with the cuneiform script invented by the Sumerians. If one were to take those writings along with everything else produced in the ensuing 5,000 years, you would find yourself at the start of this millennia on top of a digital pile of data weighing in at five exabytes, which is five quintillion bytes of data. If you think that’s a lot you haven’t thought about this enough through the lens of smartphones, social media, and credit card transactions. We are now producing this much data every single day!
It is not only the velocity of this data accumulation that is remarkable, it is now more centralized, accessible, and potentially transformative in every industry. Certainly, the asset management space will not be the exception and the advent of the robo-advisor is simply the wet nose of a very large camel now in our tent.
These events are exactly why CAIA launched the Chartered Alternative Data Analyst (CADA) Institute earlier this year. While the curriculum is still very much in the development stage, more order, knowledge, and ethical standards must be part of this brave new world. Most of this data is unstructured but can perhaps foretell future outcomes before they are priced into the securities markets, and that could be a very powerful source of alpha. The analyst will clearly need to have domain knowledge, the ability to work with complex data sets, and a functioning level of mathematics, statistics, and programming. This is precisely the solution that the CADA Institute will look to deliver in the form of a relevant and comprehensive charter-based program.
As we did in the nascent days of the CAIA Association, we will once again turn to our founding principles to ultimately provide an educational solution from the vantage point of the world’s most sophisticated allocators. These conversations have begun in earnest and will continue throughout the balance of this year. Write to us at firstname.lastname@example.org or come see us at one of our upcoming events. We will be hosting an allocators stream session on this topic at the 2018 Global ARC Conference in Boston later this year and certainly more to come, as we look to size a curriculum in the rapidly developing field of alternative data.
Seek diversification, education and know your risk tolerance. Investing is for the long term.