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That's not really insider trading. Matt Levine pops up here all the time, and one of the really distilled mantras he has: inside trading isn't about fairness,

That's not really insider trading. Matt Levine pops up here all the time, and one of the really distilled mantras he has: inside trading isn't about fairness, it's about theft. Like the people who track flights to speculate on M&A, or use satellite and aerial imagery to look at parking lots. Gathering information isn't a crime, in fact gathering and acting on that information is explicitly what you want at an aggregate level. What you don't want is entities stealing or misappropriating information that doesn't belong to them. I think all the mentioned data categories are basically Fb's line of business, so if it's usable it seems like its pretty fair game.

laurentdc 6y ago
> track flights to speculate on M&A, or use satellite and aerial imagery to look at parking lots This is very interesting, got any source or article? Thanks edit: found this https://www.theatlantic.com/magazine/archive/2019/05/stock-value-satellite-images-investing/586009/ https://www.theatlantic.com/magazine/archive/2019/05/stock-v...
- raghava 6y ago
  > Their big break came in mid-2010, when Neil Currie, then an analyst at the investment bank UBS, bought parking-lot counts for 100 representative Walmart stores and published the results in a quarterly earnings preview. The number of cars in the parking lots, he wrote, suggested that Walmart stock was undervalued. > Currie’s prediction proved correct. As word spread that satellite images were a reliable predictor of corporate profits, a range of investment funds began buying retail-traffic data from RS Metrics. Many cargo-culting orgs can use this as an example to learn "corelation != causation". 1. Buy shares of X; or bet a high-stake deal with X's board to up the stock price by N percent within a period T. 2. Run some offers/programs - which are intended at the theater - not real revenue. Instead of usual 200 cars a day, store might see 400 a day, sales numbers and volume remaining unchanged 3. Objective achieved; use propaganda marketing to sell the idea to others 4. This ups the stock price anyway - cuz data! 5. Collect bounty from X's board for making good on promise 6. Profit! The theater might not be as simple as what's seen in this example, but this is exactly what startups in one way or other call "hustle" - and possibly the art of faking it till you make it.
- cosmodisk 6y ago
  Can't remember off top of my head but if I'm not mistaken, Muddy Waters Research did similar things with a listed Chinese company: went all the way to China just to fimd out that there's not much going on in those warehouses,while they were reporting record resuls.Shorted the stock,made tons of money.
  - titanomachy 6y ago
    Luckin coffee. Matt Levine wrote about it.
    - inasio 6y ago
      That is sort of the modus operandi for Muddy Waters, there are a few public cases like that. Given that parent talks about warehouses, it sounds to me more like the aluminum company China Zhongwang.
- laitopezz 6y ago
  Here's an article about how they can look at how much oil exists via shadows cast from the sun. https://www.wired.com/2015/03/orbital-insight/ https://www.wired.com/2015/03/orbital-insight/
freehunter 6y ago
But one argument for breaking up Amazon hinges on how they unfairly compete with their sellers by collecting data on what sells and what doesn't sell on Amazon and using that data to come up with their own in-house brands. Is that different from what Facebook can do for their funded startups?
- cortesoft 6y ago
  That is a different crime: anti-trust violation. That is when you use your dominant market position to harm consumers. This is unrelated to insider trading.
riantogo 6y ago
And that exactly is the problem. The game is rigged in favor of folks who already have access to information (or can afford to buy it), not available to regular folks. That is how billionaires double their billions faster than me essentially playing lottery/roulette with my $1000 on Robinhood.
- granzymes 6y ago
  On the other hand, incorporating exotic or unusual sources of data makes the market more efficient for everyone. The market is first and foremost a method for price discovery and rewards actors for their contributions thereto.
  - riantogo 6y ago
    It makes it beneficial to folks who can afford exotic and unusual data.
    - smabie 6y ago
      No, it benefits you too. By just holding an index fund you are freeloading on all of their work. You get efficient allocation while doing and paying virtually nothing. I think people misunderstand how great and powerful index funds are for retail investors. Moreover, I people massively overhype this alternative data thing. Using alternative data to generate alpha is mindbogglingly difficult. If you just buy from a 3rd party firm, most likely all the alpha has been sucked up. So you need to source it yourself, clean it, analyze it, etc etc. It's really fucking difficult, and very expensive. Trust me, you're not missing out. Your index fund is probably beating the returns of many firms with billions of dollars in capital and dozens of research analysts.
- ISL 6y ago
  There is probably a useful fact that you know that billionaires don't. It is probably local or related to your technical expertise. Peter Lynch famously researched companies by watching to see where his family spent pocket money. I recall reading analyses of trading performance by members of Congress -- they generally did about the same as everyone else except in companies associated with their districts. Anecdotally, it is easier to double small dollars than large dollars. Berkshire Hathaway's growth has eased for ~2 major reasons: 1) Prices have been high for the last decade+, frustrating the core algorithm of value-investing. 2) It is very difficult to put huge amounts of money to work. The alternative to a world with asymmetric information (and probably impossible to implement at that) is one with zero privacy, where all information is open to everyone always. I don't think we want to live in that world.
john-radio 6y ago
> Gathering information isn't a crime, in fact gathering and acting on that information is explicitly what you want at an aggregate level. What you don't want is entities stealing or misappropriating information that doesn't belong to them. I think all the mentioned data categories are basically Fb's line of business, so if it's usable it seems like its pretty fair game. This entire thread is getting so tangled up in what's presently legal and supportable under our exact, current implementation of capitalism that all of our brains have fallen out. We don't need Facebook to have this much power! Why should they be allowed to keep this much capital untaxed? Why should they be allowed to own and operate Whatsapp, Instagram, Spotify, and Oculus, all as one huge entity?
TeMPOraL 6y ago
A tangent, but how do you define "theft of information"? I suppose this circles back to the concept of IP, which I'm increasingly confident should be abolished in entirety.

laurentdc 6y ago

> track flights to speculate on M&A, or use satellite and aerial imagery to look at parking lots This is very interesting, got any source or article? Thanks edit: found this https://www.theatlantic.com/magazine/archive/2019/05/stock-value-satellite-images-investing/586009/ https://www.theatlantic.com/magazine/archive/2019/05/stock-v...

raghava 6y ago
> Their big break came in mid-2010, when Neil Currie, then an analyst at the investment bank UBS, bought parking-lot counts for 100 representative Walmart stores and published the results in a quarterly earnings preview. The number of cars in the parking lots, he wrote, suggested that Walmart stock was undervalued. > Currie’s prediction proved correct. As word spread that satellite images were a reliable predictor of corporate profits, a range of investment funds began buying retail-traffic data from RS Metrics. Many cargo-culting orgs can use this as an example to learn "corelation != causation". 1. Buy shares of X; or bet a high-stake deal with X's board to up the stock price by N percent within a period T. 2. Run some offers/programs - which are intended at the theater - not real revenue. Instead of usual 200 cars a day, store might see 400 a day, sales numbers and volume remaining unchanged 3. Objective achieved; use propaganda marketing to sell the idea to others 4. This ups the stock price anyway - cuz data! 5. Collect bounty from X's board for making good on promise 6. Profit! The theater might not be as simple as what's seen in this example, but this is exactly what startups in one way or other call "hustle" - and possibly the art of faking it till you make it.
cosmodisk 6y ago
Can't remember off top of my head but if I'm not mistaken, Muddy Waters Research did similar things with a listed Chinese company: went all the way to China just to fimd out that there's not much going on in those warehouses,while they were reporting record resuls.Shorted the stock,made tons of money.
- titanomachy 6y ago
  Luckin coffee. Matt Levine wrote about it.
  - inasio 6y ago
    That is sort of the modus operandi for Muddy Waters, there are a few public cases like that. Given that parent talks about warehouses, it sounds to me more like the aluminum company China Zhongwang.
laitopezz 6y ago
Here's an article about how they can look at how much oil exists via shadows cast from the sun. https://www.wired.com/2015/03/orbital-insight/ https://www.wired.com/2015/03/orbital-insight/

freehunter 6y ago

But one argument for breaking up Amazon hinges on how they unfairly compete with their sellers by collecting data on what sells and what doesn't sell on Amazon and using that data to come up with their own in-house brands. Is that different from what Facebook can do for their funded startups?

cortesoft 6y ago
That is a different crime: anti-trust violation. That is when you use your dominant market position to harm consumers. This is unrelated to insider trading.

riantogo 6y ago

And that exactly is the problem. The game is rigged in favor of folks who already have access to information (or can afford to buy it), not available to regular folks. That is how billionaires double their billions faster than me essentially playing lottery/roulette with my $1000 on Robinhood.

granzymes 6y ago
On the other hand, incorporating exotic or unusual sources of data makes the market more efficient for everyone. The market is first and foremost a method for price discovery and rewards actors for their contributions thereto.
- riantogo 6y ago
  It makes it beneficial to folks who can afford exotic and unusual data.
  - smabie 6y ago
    No, it benefits you too. By just holding an index fund you are freeloading on all of their work. You get efficient allocation while doing and paying virtually nothing. I think people misunderstand how great and powerful index funds are for retail investors. Moreover, I people massively overhype this alternative data thing. Using alternative data to generate alpha is mindbogglingly difficult. If you just buy from a 3rd party firm, most likely all the alpha has been sucked up. So you need to source it yourself, clean it, analyze it, etc etc. It's really fucking difficult, and very expensive. Trust me, you're not missing out. Your index fund is probably beating the returns of many firms with billions of dollars in capital and dozens of research analysts.
ISL 6y ago
There is probably a useful fact that you know that billionaires don't. It is probably local or related to your technical expertise. Peter Lynch famously researched companies by watching to see where his family spent pocket money. I recall reading analyses of trading performance by members of Congress -- they generally did about the same as everyone else except in companies associated with their districts. Anecdotally, it is easier to double small dollars than large dollars. Berkshire Hathaway's growth has eased for ~2 major reasons: 1) Prices have been high for the last decade+, frustrating the core algorithm of value-investing. 2) It is very difficult to put huge amounts of money to work. The alternative to a world with asymmetric information (and probably impossible to implement at that) is one with zero privacy, where all information is open to everyone always. I don't think we want to live in that world.

john-radio 6y ago

> Gathering information isn't a crime, in fact gathering and acting on that information is explicitly what you want at an aggregate level. What you don't want is entities stealing or misappropriating information that doesn't belong to them. I think all the mentioned data categories are basically Fb's line of business, so if it's usable it seems like its pretty fair game. This entire thread is getting so tangled up in what's presently legal and supportable under our exact, current implementation of capitalism that all of our brains have fallen out. We don't need Facebook to have this much power! Why should they be allowed to keep this much capital untaxed? Why should they be allowed to own and operate Whatsapp, Instagram, Spotify, and Oculus, all as one huge entity?

TeMPOraL 6y ago

A tangent, but how do you define "theft of information"? I suppose this circles back to the concept of IP, which I'm increasingly confident should be abolished in entirety.