How Data Can Develop Into a Competitive Moat

The example of the hedge fund Renaissance Technologies (here on wikipedia, also this excellent post ‘Jim Simons And Renaissance Technologies‘) is an excellent example of a company that has created a substantial competitive advantage from data gathering and interpretation.

The performance of the fund over decades (since 1988) has been quite impressive. The approach of the fund was to have a passionate “team of  of mathematicians whose motivation was doing exciting mathematics and science (rather than hired guns who could be lured away by money or pure trading quants, biased by the industry).”

Still, here is the interesting part: “On top of his intelligent hiring and novel approach to trading, Jim Simons recognized that an impressive data pipeline – and the technological infrastructure to digest and analyze that data was a moat to competitors. It is hard to have an edge if you use the same process and the same data as your competitors.” And from Wikipedia: “Renaissance Technologies, along with a few other firms, has been synthesizing terabytes of data daily and extracting information signals from petabytes of data for almost two decades now, well before big data and data analytics caught the imagination of mainstream technology“.

It is thus the poster-child of a company that has used data retrieval and interpretation as a moat. It is dealing with one of the most public and accessible data (financial trading data), but now the same can be done with many other kinds of user data. Data as a competitive moat is already there, has been for years, and is there to stay.

The post How Data Can Develop Into a Competitive Moat first appeared on The Fourth Revolution Blog.