In June 1815, as the Battle of Waterloo raged, Nathan Mayer Rothschild pulled off a trading move even the modern-day wolves of Wall Street would be proud of.
Rothschild had set up a Europe-wide network of messengers and carrier pigeon stations to gather information that could affect his wide portfolio of investments.
As a financier to many families and governments all over Europe, he clearly wanted to keep his eye on things.
He soon garnered a reputation for being first with the news.
Which brings me to the Battle of Waterloo.
According to popular legend, as the battle unfolded, other speculators watched Rothschild’s stock holdings in an attempt to guess who’d win.
Shortly after the battle ended, and long before anyone else knew the result, he began selling stocks.
Everyone assumed that this meant Napoleon had won and Europe was lost. Panic-selling ensued. When the crash reached a crescendo, Rothschild bought everything in sight and made a massive profit.
Like I said, Wall Street would be proud.
Data has always been valuable.
Today there is more data than ever before.
We have entered the new era of big data.
A massive increase in the volume and speed of information that is stored, recorded, processed and analysed.
It is transforming the world around you. Sometimes in obvious ways, as in the case of social media. And sometimes in more discreet ways, as with cloud computing.
There are three types of companies that you should investigate in order to potentially make money through data-led investments.
Three ways to invest in big data
The first type of company that benefits is the platform provider.
The major trend here is in cloud computing. This allows companies to use the processing power of massive third-party computer farms without all the hassle of buying, setting up and maintaining hardware.
Companies like Amazon.com, Inc. [NASDAQ:AMZN], Microsoft Corporation [NYSE:MSFT] and IBM [NYSE:IBM] are big players in the sector. They contract out virtual storage space to businesses that like the flexibility and expertise they provide.
The second type of company is the component maker.
These are the hardware manufacturers. Companies like AMD, Inc. [NASDAQ:AMD], which produce processing chips, are industry leaders in this space.
The third type of company is the industry adopter.
These are the companies that are using — or have most to benefit from using — big data strategies. Facebook, Inc. [NASDAQ:FB] is a big beneficiary of the improvement in data analysis technologies. It has allowed them to better target users in their ad-driven business model.
Another company in this mould is Tableau Software [NYSE:DATA]. They have made it easy for anyone to generate beautiful charts and graphs from their data. It’s a particular favourite in the publishing world.
If you’d invested in these types of companies over the last decade, you would have made a small fortune. And there are no signs the data revolution is slowing down. In fact, it’s speeding up.
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But there’s a new kid on the block that could shake things up. And it could disrupt the business models of current industry giants like Alphabet Inc. [NASDAQ:GOOG], Amazon, and any company that relies on free access to data.
This new force is blockchain technology. The technology behind cryptocurrencies like bitcoin.
Blockchain, as you may know, is really all about storing and transferring data, but in a new way. A way that does away with centralised data collection.
In the blockchain-driven future, your data will not belong to Facebook or Google or Amazon — or for that matter your bank or insurance provider. Instead, it will belong to you. This data will not be locked away in a corporate database like it is now.
This is a sea change in the emerging world of big data.
And it demonstrates just how fast technology moves. No sooner has cloud computing started to hit its stride than the emergence of a decentralised world of linked peer-to-peer computers threatening to change the world.
This is not to say there won’t be a place for the three types of investments mentioned above. But it could mean this will evolve. Especially in the industry adopter space.
It could mean any companies that embrace decentralised data ownership overtake the ones that don’t. Maybe Google and Facebook can change their business models to adapt. Or perhaps the blockhain revolution in big data will be slower than expected.
No one knows for sure. But two things seem set in stone.
Big data is not going away.
And, as it was for the wily Nathan Mayer Rothschild, it’s certainly an area of immense potential for investors who can create an advantage.
Editor, Money Morning
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