Uncommon Sense

What I Learned This Summer: He Who Holds the Data Makes the Rules

“Everything we do in the digital realm—from surfing the web to sending an email to conducting a credit card transaction to, yes, making a phone call—creates a data trail. And if that trail exists, chances are someone is using it—or will be soon enough.”

― Douglas Rushkoff

Chief Investment Strategist

When I was kid, one of the very first assignments at the beginning of every school year was to write a book report on one of the books you had read that summer. Here we are decades later, at the start of an extraordinary new school year disrupted by the COVID-19 pandemic, and I’m still writing a summer book report. What makes that even more hilarious is that my two teenage children always complain that they will never use any of the stuff that they learn in school. Ah, to be so young and know everything already.

I’m sure both my kids have voraciously read plenty of books this summer on the smartphones that consume so much of their time. According to a recent study by Common Sense Media, US teenagers spend an average of 9 hours and 49 minutes on their phones each day. Contrast that to the 32% of teens who said they read for pleasure less than once a month, if at all.1  Of course, teenagers everywhere, especially my daughter, will have more time for reading if TikTok gets banned in the US this November as threatened by President Trump’s recent executive order. But that might be wishful thinking as Microsoft and Walmart have joined forces to do battle with a second consortium which includes Oracle Corporation, to buy TikTok’s US operations.

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Turning back to my reading, it was impossible to choose just one summer book to write about. So I’m going to write my report on two books that share some fascinating and controversial connections.

  1. The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution by Gregory Zuckerman
  2. Mindf*ck: Cambridge Analytica and the Plot to Break America by Christopher Wylie

I promise this teacher’s pet isn’t sneakily seeking extra credit. Besides, you should be thankful that I didn’t pick any of the trashy page-turning romance novels that I read on the beach.

Don’t Know Much About History

The striking revelation that these two books highlight is that in today’s economy we are the raw materials. Our attention, behavior and data have become the most valuable commodities in the world. Therefore, it’s not surprising that a handful of companies that have excelled at commanding our attention, influencing our behavior and using our data dominate the economy. Nor is it a shock that fear of this concentrated power and influence has resulted in increased calls for regulation and antitrust investigations.

This scenario has unfolded many times throughout history. Inventions such as the steam engine, automobile, railroads and airplanes powered by the discoveries of oil, steel and electricity resulted in the incredible advancement of economic growth. Today, it’s our attention, behavior and data coursing through the veins of our technology that powers the economy. In fact, I wrote about all of this back in 2018, “What if FAANG Shrugged Instead of Atlas? A Modern-Day Strike of Today’s Men of the Mind.”  

Source: Statista as of 05/31/2020. The figures from 2021 to 2024 were calculated by Statista based on 2020 figures and the five-year compound annual growth rate (CAGR) of 26 percent provided by the source. The figures prior to 2020 are sourced from IDC. One Zettabyte (ZB) is approximately equal to a trillion Gigabytes.

With these observations, I know I risk becoming that annoying sports color commentator. You know the one, usually it’s an ex-jock that sits alongside the play-by-play analyst, saying obvious things like, “The team that scores the most points is likely going to win the game.” There’s a good chance that you have already recognized that we have become the raw materials of today’s economy — and that data is the world’s most sought-after resource. But, for me, these two books underscore the importance of examining the incredible opportunities — as well as the potential dangers — that result from the ability to collect, harness, use and misuse data.

Just like when I was a student, I’m going to keep my book report brief. I have another book I’m eager to get back to reading. Also, we all want to savor the precious little time we have left before Labor Day in the US marks the unofficial end of summer.

Simons Says It’s All About the Data

As somebody who has been trying to solve the market for more than 25 years and who worked with a quantitative investment group for nearly a decade in the early part of this century, Jim Simons’ book had tremendous appeal. Not only was the topic of great interest to me, but I had some experience in quantitative investing, too.

Unlike Warren Buffett, George Soros, Peter Lynch and Ray Dalio, Jim Simons isn’t exactly a household name when it comes to investing. That’s strange because Simons is the founder of Renaissance Technologies and the firm’s signature Medallion fund has generated the most successful investment track record in history. But Simons isn’t your typical Wall Street investor. He’s a world-class mathematician and former government code breaker.

Among the most secretive investors Wall Street has ever encountered, Simons and Renaissance employees dodge the media, refuse to attend industry conferences and avoid most public gatherings. Simons once quoted Benjamin, the donkey in Animal Farm, to explain his attitude toward publicity, “God gave me a tail to keep off the flies. But I’d rather have had no tail and no flies.” 2 Given this incredible commitment to secrecy, imagine my excitement to learn that there was a tell-all book about Simons and Renaissance Technologies. Finally, after all these years, my chance to learn how to crack the market’s code.

In the 1980s while most Wall Street analysts were chatting with corporate executives and scouring through financial statements to anticipate stock price movements, Simons was hiring mathematicians, physicists and computer scientists. Simons and his scientists believed that collecting and analyzing large amounts of data could provide them with an advantage over traditional fundamental analysis.

Simons has explained his work this way: “Some of the work is really scientific. It’s looking at a lot of data and really looking for what underlies that data. In that sense, it is kind of like astronomy. You look at a lot of data from up in the sky, you bring it down, and it’s quite dirty and you have to clean it to get rid of outliers or one thing or another. Then you hope you can analyze that data in a way that makes sense of whatever hypothesis or set of hypotheses you may have about what you are looking at.” 3

Source: IDC's Data Age 2025 study, sponsored by Seagate as of 11/30/2018.

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.

Dangerous Minds

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.

Source: Statista as of 04/30/2019 *Forecast.

After reading these two books, it’s not at all surprising to me that entities that use data to command our attention and influence our behavior have successfully garnered the money, power and influence in today’s world. Thomas H. Davenport, a writer who specializes in analytics and business process innovation, claims, “Every company has big data in its future, and every company will eventually be in the data business.”

Beyond investing and politics, the applications of data seem endless — tracking the delivery time for a package, improving patient care in hospitals, preventing cybercrimes, and serving up ads for products customers actually want. So, it’s also not surprising that with this increasingly widespread power and influence comes fear — and a pledge to regulate and control data.