5 ms·

Information Arbitrage: How I Invest

28 points by alexjmann 17y ago

mattmaroon 17y ago
"2. Tomorrow's ad exchanges will resemble the stock and options markets for equities." Already largely the case. See adwords. "3. Social media will simply be called "media," and viewed as a fully-integrated part of the overall media buy." I'm skeptical. I've purchased a lot of Facebook/Myspace ads and I can tell you first hand, they just don't perform as well as other types of media.
- zck 17y ago
  >I'm skeptical. I've purchased a lot of Facebook/Myspace ads and I can tell you first hand, they just don't perform as well as other types of media. Notice that you said "other types of media". So it's already coming true -- it is a type of media in the same way as newspapers, television, etc. Also, social media ads don't have to perform as well as other media to be considered media. They just have to be considered when a company is going to advertise.
  - mattmaroon 17y ago
    Social media is a subset of media. It doesn't blend into the superset (in an advertiser's mind anyway). When I purchase AdWords, that's just media. It shows up on Google, blogs, some professional content sites, etc., and I don't know or care where. If they added Facebook to that, it would drag CPMs way down so they won't,
- pradocchia 17y ago
  "2. Tomorrow's ad exchanges will resemble the stock and options markets for equities." Already largely the case. See adwords. Largely the case for online advertisement only. Traditional media is still surprisingly backwards.
  - mattmaroon 17y ago
    Is that solvable? An ad has to be placed in print long before it is shipped out. I don't think you can really hope for liquidity. Also TV advertising isn't that far from it either from what I understand.
    - pradocchia 17y ago
      Yeah, TV is almost there, next few years I figure. Liquidity w/ print might be an issue, but a larger one is transparency: what's the available inventory? In principle that should be knowable across all media types, for a particular geography, demographic, etc, with some measure of cost and effectiveness. But for now, pulling together the right buy is a real bitch.
euroclydon 17y ago
If machine driven trading continues to proliferate, will the job of the CEO be to keep the algorithms happy as opposed to keeping the investors happy? At least the investors will call you up and tell you what's on their minds, whereas the algorithms are mainly black boxes.
- Hoff 17y ago
  Algorithmic trading is already the norm with most any of the large investment organizations. And from the other side, if you're not already using program trading for your investing or otherwise investing ginormous sums, you're probably not big enough for the CEO to take your call.
- gcb 17y ago
  See: SEO vs Advertising
euroclydon 17y ago
When I read how relational databases are inadequate to store, index and process unstructured data in real time, it made me draw an analogy between the old virus/anti-virus game where it was a race between the virus writers and the anti-virus software makers, and sometimes they were accused of being in cahoots. Could we not say the same thing about the content indexing technologies (NoSql, MapReduce) and the content creating technologies (Twitter, ECommerce, Content Farms)?
masterponomo 17y ago
Geeknet (formerly Sourceforge) is trying to do a lot of what this guy describes. Aside from owning an e-commerce site and several news/community sites, they bought Ohloh.net. They are working toward understanding their user base and selling ads that target them intelligently w/o alienating them (not always successful, but that's why it's a challenge).
mark_l_watson 17y ago
That was a good article, not only for investing strategies, but also had a few good tech business ideas - very appropriate for HN.
rfreytag 17y ago
I just finished reading "The Snowball" (Buffett bio) and can recommend it highly. You get a real sense of what it takes to follow Buffett's dictums to (taken from the book): 1. not lose money 2. see rule number 1 3. never go into debt Buffett only uses a computer to play bridge, "helicopter" and read newspapers. Pretty long way from Ehrenberg's #1 - "Machine-driven trading will continue to proliferate, and represent a sustained source of alpha." I had to look up alpha http://www.investopedia.com/terms/a/alpha.asp http://www.investopedia.com/terms/a/alpha.asp I think while it is likely anything new will be computerized, overused, and consequently cause "alpha" it will not be sustained. For anything sustained will be met with a financial instrument to hedge the alpha away (see LTCM). As we saw that hedge went spectacularly wrong. Instead Buffett tries to find good management running undervalued companies that he thinks he understands to be selling something people need no matter what (and with which his substantial capital can assist). Its amazing how much personal effort Buffett has taken with his various acquisitions even when he was only a shareholder to help them through rocky times and so realize value. Such a different perspective. Another Buffett rule: "Anything multiplied by zero is zero." Meaning if you constantly accept a small risk of losing it all you eventually will. Buffett prefers a higher margin of safety and look where that got him. BTW, I bought informationarbitage.net long ago because I thought it was an interesting idea. More intersting still is to just happen across the guy that owns the .com variant posting to my daily feed.

28 points by alexjmann 17y ago

"2. Tomorrow's ad exchanges will resemble the stock and options markets for equities." Already largely the case. See adwords. "3. Social media will simply be called "media," and viewed as a fully-integrated part of the overall media buy." I'm skeptical. I've purchased a lot of Facebook/Myspace ads and I can tell you first hand, they just don't perform as well as other types of media.

zck 17y ago
>I'm skeptical. I've purchased a lot of Facebook/Myspace ads and I can tell you first hand, they just don't perform as well as other types of media. Notice that you said "other types of media". So it's already coming true -- it is a type of media in the same way as newspapers, television, etc. Also, social media ads don't have to perform as well as other media to be considered media. They just have to be considered when a company is going to advertise.
- mattmaroon 17y ago
  Social media is a subset of media. It doesn't blend into the superset (in an advertiser's mind anyway). When I purchase AdWords, that's just media. It shows up on Google, blogs, some professional content sites, etc., and I don't know or care where. If they added Facebook to that, it would drag CPMs way down so they won't,
pradocchia 17y ago
"2. Tomorrow's ad exchanges will resemble the stock and options markets for equities." Already largely the case. See adwords. Largely the case for online advertisement only. Traditional media is still surprisingly backwards.
- mattmaroon 17y ago
  Is that solvable? An ad has to be placed in print long before it is shipped out. I don't think you can really hope for liquidity. Also TV advertising isn't that far from it either from what I understand.
  - pradocchia 17y ago
    Yeah, TV is almost there, next few years I figure. Liquidity w/ print might be an issue, but a larger one is transparency: what's the available inventory? In principle that should be knowable across all media types, for a particular geography, demographic, etc, with some measure of cost and effectiveness. But for now, pulling together the right buy is a real bitch.

euroclydon 17y ago

If machine driven trading continues to proliferate, will the job of the CEO be to keep the algorithms happy as opposed to keeping the investors happy? At least the investors will call you up and tell you what's on their minds, whereas the algorithms are mainly black boxes.

Hoff 17y ago
Algorithmic trading is already the norm with most any of the large investment organizations. And from the other side, if you're not already using program trading for your investing or otherwise investing ginormous sums, you're probably not big enough for the CEO to take your call.
gcb 17y ago
See: SEO vs Advertising

euroclydon 17y ago

When I read how relational databases are inadequate to store, index and process unstructured data in real time, it made me draw an analogy between the old virus/anti-virus game where it was a race between the virus writers and the anti-virus software makers, and sometimes they were accused of being in cahoots. Could we not say the same thing about the content indexing technologies (NoSql, MapReduce) and the content creating technologies (Twitter, ECommerce, Content Farms)?

masterponomo 17y ago

Geeknet (formerly Sourceforge) is trying to do a lot of what this guy describes. Aside from owning an e-commerce site and several news/community sites, they bought Ohloh.net. They are working toward understanding their user base and selling ads that target them intelligently w/o alienating them (not always successful, but that's why it's a challenge).

mark_l_watson 17y ago

That was a good article, not only for investing strategies, but also had a few good tech business ideas - very appropriate for HN.

rfreytag 17y ago

I just finished reading "The Snowball" (Buffett bio) and can recommend it highly. You get a real sense of what it takes to follow Buffett's dictums to (taken from the book): 1. not lose money 2. see rule number 1 3. never go into debt Buffett only uses a computer to play bridge, "helicopter" and read newspapers. Pretty long way from Ehrenberg's #1 - "Machine-driven trading will continue to proliferate, and represent a sustained source of alpha." I had to look up alpha http://www.investopedia.com/terms/a/alpha.asp http://www.investopedia.com/terms/a/alpha.asp I think while it is likely anything new will be computerized, overused, and consequently cause "alpha" it will not be sustained. For anything sustained will be met with a financial instrument to hedge the alpha away (see LTCM). As we saw that hedge went spectacularly wrong. Instead Buffett tries to find good management running undervalued companies that he thinks he understands to be selling something people need no matter what (and with which his substantial capital can assist). Its amazing how much personal effort Buffett has taken with his various acquisitions even when he was only a shareholder to help them through rocky times and so realize value. Such a different perspective. Another Buffett rule: "Anything multiplied by zero is zero." Meaning if you constantly accept a small risk of losing it all you eventually will. Buffett prefers a higher margin of safety and look where that got him. BTW, I bought informationarbitage.net long ago because I thought it was an interesting idea. More intersting still is to just happen across the guy that owns the .com variant posting to my daily feed.