The Unpolished Diamond: An Unconventional Perspective on Alternative Data
There’s an age-old saying, “Diamonds in the rough”, which resonates aptly with our opinion on alternative data. Alternative data is much like an uncut diamond, inherently valuable but requires refining to be truly dazzling.
The Untapped Potential of Alternative Data:
In today’s data-centric world, alternative data has made significant inroads, shaping crucial decision-making processes. However, a bold opinion I hold is that only about 10% of these data sets are primed for productive use. The remaining 90% are akin to a gold mine that has yet to be fully exploited. They are not quite ready to generate useful directional decision-making or yield a significant alpha for their end-users. The keyword here is ‘preparation’. Much like diamonds needing to be cut and polished before they reveal their true brilliance, these data sets need refining to unlock their full potential.
The Data Mosaic – A New Direction:
While it’s becoming more common to combine data sets to create stronger signals, I believe the industry hasn’t yet harnessed the full power of this approach. Consider data as pieces of a vast, complex mosaic. Each data set, like each piece of a mosaic, tells part of the story. For example, credit card transactional data provides great insights on its own. However, the real power emerges when you can combine it with other data sets, creating a detailed, holistic view or ‘data mosaic’ of trends, behaviors, and predictions.
While this is a promising direction, the reality is that no one yet has the required capacity or horsepower to analyze hundreds of alternative data sets and create this kind of comprehensive mosaic. But the future is bright, and the potential is immense. The day we fully leverage this approach, we will revolutionize how we utilize data, making it a powerful tool for decision-making.
Alternative data is like an uncut diamond – inherently valuable but requires cutting and polishing to reveal its brilliance. The future lies in the formation of a data mosaic, a comprehensive analysis approach that combines multiple data sets to create a detailed, holistic view. As the industry evolves, the potential of these unpolished diamonds is yet to be fully realized. We are on the precipice of a data revolution, and it’s a thrilling journey to be part of.