One Computer is Better at Investing than Experts
We have all probably imagined investing in a company that no one has heard of only to cash in when the company becomes huge. Ira Sager from Businessweek had this idea and so set a challenge for Quid Al’s CEO, Bob Goodson. Sager challenged Godson to program a computer that would predict the next 50 unheard of companies that would make a huge impact. This is a pretty difficult challenge for even the most seasoned of startup analysts. Not only do you need to evaluate the strength of the businesses you need to analyze whether the individual company is disrupting an existing market.
It’s been almost eight years since the challenge was set and Businessweek decided it was time to review what the machine had done. Somewhat surprisingly the list is pretty bang on. Among the top picks were Evernote, Spotify, Etsy, Zynga, Palantir, Cloudera and OPOWER. And these are just the picks familiar to a North American audience; the bot also managed to select Ibibo, the top hotel booking site in India. In 2009, Ibio only had eight employees and now it does more than $2 billion annual sales.
So on the back of such success, Goodson has reset the challenge. To begin the new challenge, Goodson found data about investments received, investor profiles location and company founding year from S&P Capital IQ and Crunchbase. From this 50,000 private companies were selected that had received venture capital or venture debt sometime in the past three years. In order to find trends and emerging markets and businesses, Goodson created a network map that illustrated where entrepreneurs had made investments. The network map had a focus on tech companies that had been founded in the 18 months before the test began. At the same time, he generated a map that examined of venture capital bets. From this Goodson was able to create a list of what they consider the most richly potential areas for investment. Rather than a list of exact private companies to throw your money at the list identifies trends that will have a huge impact on the investment market.
Goodson's Market Trends
Here is the list in a brief rundown.
- First off the bat is the impact Augmented Reality (AR) will have over Virtual Reality. Goodson encourages us to consider that AR will have have a huge impact on the general population as it is more accessible than other Virtual Reality technologies.
- Next up is noting that Image recognition and mapping technologies will be crucial as they will be an integral part of the auto industry as traditional cars transition to self-driving vehicles.
- Goodson also acknowledges that the importance of online security will only continue to increase and have more serious consequences for all sector of both private and governmental organizations.
- Education will also continue to move away from traditional school model towards digital applications that can be accessed by broader audiences.
- Unsurprisingly Drones feature in Goodson’s list especially their adoption into commercial environments.
- And finally, Wearable technologies that have inbuilt smart sensors are among Goodson's top contenders. He expects products that include sensors might be earbuds, eye authentication apps and holograms.