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Big Data: The Moneyballing of Everything is Upon Us

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BY: HANS ALBRECHT, CIM®, FCSI, VICE-PRESIDENT, PORTFOLIO MANAGER AND OPTIONS STRATEGIST, HORIZONS ETFS

May 2, 2019

You may recall the popular 2011 film: Moneyball. The story follows the efforts of Billy Beane, the general manager of a major league baseball team, who is tasked with winning games with one of the smallest player budgets in the league. He does so by reducing the evaluation of player recruits to a statistical math and prediction problem. He mines for player value where traditional yardsticks of success might fail to fully identify potential. His passion for statistics inspires him to dig deeply into how and why a certain player is able to score runs and succeed in various facets of the game, and not just the most obvious ones.

It’s a story about the power of granular analysis and the ability to analyze and identify often-overlooked stats. Sure, the obvious expensive big sluggers sell jerseys, but Billy realized that paying attention to overlooked data like ‘base-on-balls’ is crucial to the overall goal of winning games. What he essentially did is improve the process by which various players with different strengths could be identified to perform both individually and together. He ends up assembling a rag-tag team of players that performs well above their pay grade, and baseball is changed forever.

One major category of innovation is called ‘Big Data’. It is predicated on amassing, storing, and creating value from large amounts of information. Big Data is one of the five categories of technology through which investors can gain exposure via the Horizons Industry 4.0 Index ETF (FOUR). Big Data provides the foundation for the Artificial Intelligence (“A.I.”) category of Machine Learning, which focuses on looking for an edge where it might not be as obvious by manually sifting through massive amounts of data. So what is Machine Learning? Prediction.

Why now? The cost of prediction has plunged. The cost of data, chipsets, related hardware and sensors have dropped dramatically. Prediction forms the basis for much of our decision-making – now the possibilities for analysis are vast, as we realize that hardware and software can help to accomplish many of these processes. A healthcare diagnosis is based on prediction.  Netflix movie suggestions and Google search results are based on prediction. Credit card anomaly activity analysis is prediction. Credit assessment for banks is based on prediction. Hedge fund analysis of merger probabilities based on CEO travel plans is prediction. A.I. mattresses that help us to get a better night’s sleep is prediction. This list could go on and on.

As more of our lives transition online, or at least to the digital realm, more data is available for that prediction. Mobile adoption rates are high, but most importantly usage rates are expanding by the day. We conduct more of our lives via our smartphones. That powerful computer in my pocket is 100,000 times more powerful than computers of the early 1970s. Many people allow their phones, directly or indirectly, to track their likes, dislikes, whereabouts, travel plans, purchases and more.

The creation of data has been rising exponentially and will likely continue to do so. FOUR gives investors exposure to five pockets of innovation that are driving technology in these modern times – Big Data is one of them. Big Data is big money as the ‘Moneyballing’ of everything is upon us. Billy Beane might agree that investing in Big Data may just be a home run.

The views/opinions expressed herein may not necessarily be the views of Horizons ETFs Management (Canada) Inc. All comments, opinions and views expressed are of a general nature and should not be considered as advice to purchase or to sell mentioned securities. Before making any investment decision, please consult your investment advisor or advisors.

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