3 ms·

With all this data, I've always wondered why there isn't some sort of internal "hedge fund" at Google.

by rbinv 7y ago

StandardFuture 7y ago
I asked that same question once before here: https://news.ycombinator.com/item?id=22041205 https://news.ycombinator.com/item?id=22041205 but it only got a few responses.
crispyporkbites 7y ago
Too much noise. The costs to sift through and find an identifiable market trend that has an actual upside would be very high, and you still don't have a complete picture of the market so you'd be wrong in a lot of scenarios.
est31 7y ago
Yeah there are stories of hedge funds buying and then selling cars all over the country to find out the serial numbers so that they can estimate their sale count before the quarterly reports in a german tanks kind of fashion. Having good information is very valuable for hedge funds. However, I don't think that hedge funds are "Googly" products. They fail at the toothbrush test. They require massive capital investments, and while Google has lots of money, is it enough to drive enough revenue growth? Furthermore, there is the legal danger. With businesses using Google products, Google is likely in possession of insider information on most publicly traded information. E.g. when there is an internal meeting at a company and suddenly everyone is visiting job websites that use Google CDN hosted fonts, or maybe everyone is visiting websites looking for cars to buy or houses. Or think about internal company documents hosted on Google docs or that meeting being conducted over hangouts. How can Google ensure that their products don't accidentially use that insider info? How can they separate the toxic insider info from the okay to use non-insider info? Does that separation already constitute insider information? Lastly, Google possesses probably more information than most entities in history, and even today I'd put it into the top 10. They also have gigantic capabilities to organize that data, it's in fact the very core purpose of the company. If you possess perfect knowledge how a market will evolve, will someone want to trade stock with you? If you knew how a coin toss would turn out, would people want to make bets with you about the coin toss? Google getting into the hedge fund business might in fact not work because their buy or sell orders alone could change the stock value to a degree where Google doesn't make any money from it. I'm not an expert though, maybe there are mechanisms to counter this effect. Please correct me if I'm wrong.
tpmx 7y ago
https://dealbook.nytimes.com/2010/03/22/google-is-now-searching-for-bond-traders/ https://dealbook.nytimes.com/2010/03/22/google-is-now-search... > Sergey Brin, Google’s co-founder, once said the company should start a hedge fund because it had so much information. But Eric Schmidt, Google’s chief executive, reportedly responded, “Sergey, among your many ideas, this is the worst,” since the company would face serious legal problems in starting a hedge fund. > Regardless of Google’s plans, the company is looking for a trader of foreign government bonds, an analyst for Google’s United States government bond portfolio and a portfolio analyst for agency mortgage-backed securities, according to Business Insider.
twic 7y ago
A theory i have heard from someone in the hedge fund industry is that this use of "alternative data" is mostly marketing. Investors go to hedge funds for their genius high-alpha proprietary strategies. If you can honestly say that you are feeding tracking of honeybee movements into your model, that makes you seem like far-out geniuses with loads of alpha, so you will attract more investors. For a hedge fund, attracting investors is more important than actually doing good trades. Of course, nobody will say this out loud. This is not to say there are not some genuine users of alt data. Of course there are! But it's not happening at the scale that everyone wants to believe. This is a very similar story to the whole "big data" thing in Main Street businesses.

With all this data, I've always wondered why there isn't some sort of internal "hedge fund" at Google.

by rbinv 7y ago

With all this data, I've always wondered why there isn't some sort of internal "hedge fund" at Google.

I asked that same question once before here: https://news.ycombinator.com/item?id=22041205 https://news.ycombinator.com/item?id=22041205 but it only got a few responses.

crispyporkbites 7y ago

Too much noise. The costs to sift through and find an identifiable market trend that has an actual upside would be very high, and you still don't have a complete picture of the market so you'd be wrong in a lot of scenarios.

est31 7y ago

Yeah there are stories of hedge funds buying and then selling cars all over the country to find out the serial numbers so that they can estimate their sale count before the quarterly reports in a german tanks kind of fashion. Having good information is very valuable for hedge funds. However, I don't think that hedge funds are "Googly" products. They fail at the toothbrush test. They require massive capital investments, and while Google has lots of money, is it enough to drive enough revenue growth? Furthermore, there is the legal danger. With businesses using Google products, Google is likely in possession of insider information on most publicly traded information. E.g. when there is an internal meeting at a company and suddenly everyone is visiting job websites that use Google CDN hosted fonts, or maybe everyone is visiting websites looking for cars to buy or houses. Or think about internal company documents hosted on Google docs or that meeting being conducted over hangouts. How can Google ensure that their products don't accidentially use that insider info? How can they separate the toxic insider info from the okay to use non-insider info? Does that separation already constitute insider information? Lastly, Google possesses probably more information than most entities in history, and even today I'd put it into the top 10. They also have gigantic capabilities to organize that data, it's in fact the very core purpose of the company. If you possess perfect knowledge how a market will evolve, will someone want to trade stock with you? If you knew how a coin toss would turn out, would people want to make bets with you about the coin toss? Google getting into the hedge fund business might in fact not work because their buy or sell orders alone could change the stock value to a degree where Google doesn't make any money from it. I'm not an expert though, maybe there are mechanisms to counter this effect. Please correct me if I'm wrong.

tpmx 7y ago

https://dealbook.nytimes.com/2010/03/22/google-is-now-searching-for-bond-traders/ https://dealbook.nytimes.com/2010/03/22/google-is-now-search... > Sergey Brin, Google’s co-founder, once said the company should start a hedge fund because it had so much information. But Eric Schmidt, Google’s chief executive, reportedly responded, “Sergey, among your many ideas, this is the worst,” since the company would face serious legal problems in starting a hedge fund. > Regardless of Google’s plans, the company is looking for a trader of foreign government bonds, an analyst for Google’s United States government bond portfolio and a portfolio analyst for agency mortgage-backed securities, according to Business Insider.

twic 7y ago

A theory i have heard from someone in the hedge fund industry is that this use of "alternative data" is mostly marketing. Investors go to hedge funds for their genius high-alpha proprietary strategies. If you can honestly say that you are feeding tracking of honeybee movements into your model, that makes you seem like far-out geniuses with loads of alpha, so you will attract more investors. For a hedge fund, attracting investors is more important than actually doing good trades. Of course, nobody will say this out loud. This is not to say there are not some genuine users of alt data. Of course there are! But it's not happening at the scale that everyone wants to believe. This is a very similar story to the whole "big data" thing in Main Street businesses.