In the beginning, Renaissance Technologies failed a lot. They couldn’t crack the code. But Simons’ conviction never wavered and his persistence eventually paid off. I’m convinced that Renaissance Technologies’ ultimate success resulted not from the great amount of data collected, but from Simons’ skill in cleaning, scrubbing and experimenting with the data. They did this better than anyone else and that likely influenced the performance results of their funds.
This book got me thinking more about the significant role that data plays beyond investments in today’s world.
I mentioned that there were some fascinating and controversial connections between the two books. While reading the Simons book, I learned about Robert Mercer. He joined Renaissance Technologies in 1993 and eventually became co-CEO. Mercer and his daughter, Rebekah, are also major contributors to many conservative political causes. Some people reasonably claim that it was the Mercers who were responsible for Steve Bannon’s inclusion in the 2016 Trump campaign. The Mercers also provided significant funding to Cambridge Analytica, a British political consulting firm that harvested Facebook users' personal data without their consent, predominantly for use in political advertising. In 2017, when he was linked to controversies surrounding Cambridge Analytica in the aftermath of both the Brexit and Trump 2016 campaigns, Robert Mercer stepped down as co-CEO of Renaissance Technologies.
Mercer’s name surfaced again as I listened to some of the Wylie audiobook with one of our salespeople while visiting clients in northern California earlier this year. Combined with my newfound curiosity about the role data plays in our economy and society, this made Mindf *ck a must-read for me this summer. And, it didn’t disappoint.
We are a couple months away from the 2020 US election and people are understandably worked up. However, I’m begging you to look beyond the disturbing moral, political, and legal ramifications of the Cambridge Analytica saga. My editor joked that some readers might not get past the word “Cambridge.” I found Cambridge Analytica’s tactics, unethical use of Facebook user profiles and loose Russian connections shocking and disturbing, too. But, I’m not here to make a political statement or enter into a vicious back-and-forth with readers and conspiracy theorists on the right or left about what happened.
Instead of rehashing all of that, I would rather remove the political nonsense and objectively share what I learned by reading the book. Christopher Wylie is an unlikely figure in this story. He’s young, Canadian, and liberal in his politics and he was the primary architect behind the data that powered Cambridge Analytica’s voter profiling. Wylie was also the whistleblower that helped bring it all crashing down.
What was eye-opening for me was that this type of data profiling of voters had been going on for years. Wylie had done work for the Obama campaign, the Liberal Party of Canada and the Liberal Democrats in the UK. Again, please stay with me. I’m not suggesting that any of that work was unethical or illegal. As Wylie insists, "Data is morally neutral. I can take a knife and hand it to a chef to make an amazing meal, or murder someone with it. The tool is morally neutral, it’s the application that matters.” 4 But Cambridge Analytica took things to a whole new morally questionable and possibly illegal level.
What struck me was that Wylie and many others were legally obtaining data profiles and information to conduct microtargeting for swing elections. While political campaigns once mailed the same pamphlets to all voters, now they could target swing voters with specific messaging developed to appeal to them. Reading about how large amounts of data were collected and used to influence political outcomes stunned me.
The World as One Big Data Problem
With Simons’ book highlighting the importance of data in the financial world and Mindf*ck emphasizing its importance in the political arena, the two books in my report combine to underscore the incredible power and influence that data has in today’s world. Technology is just the engine that transports it. Data isn’t just crucial to business — it cuts across the social, financial, political and health aspects of our daily lives. Today, it’s not about who owns or controls the most data, but rather, about how they use it. And that’s not always in ways that will make the world a better place.
As Wylie explains, “The brilliance of the Internet was that suddenly people would be able to erode all those barriers and talk to anyone, anywhere. Instead, people spend hours on social media, following people like them, reading news articles “curated” for them by algorithms whose only objective is to maximize click-through rates — articles that do nothing but reinforce a unidimensional point of view and take users to extremes to keep them clicking. What we’re seeing is a cognitive segregation, where people exist in their own informational ghettos. We are seeing the segregation of our realities. If social media is a “community,” it is a gated one.” 5
For me, Wylie’s observation is an important reminder that when it comes to investing, being objective and examining multiple points of view are critical ingredients to successful outcomes. Today, more than ever, investors need to recognize that so much of the information they receive is biased and created specifically for them by some algorithm based on their investing profile. Greater awareness about the biased information they are receiving may protect investors from the serious pitfalls that often arise from confirmation bias and tunnel vision.