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As Computer Programs Choose To Buy Or Sell, Wall Street Looks To Data

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As Computer Programs Choose To Buy Or Sell, Wall Street Looks To Data

As Computer Programs Choose To Buy Or Sell, Wall Street Looks To Data

As Computer Programs Choose To Buy Or Sell, Wall Street Looks To Data

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  • <iframe src="https://www.npr.org/player/embed/523534042/523534043" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

Big investment firms on Wall Street are replacing human stock pickers with computer programs. That has created a big demand for data to feed into the computer programs.

RACHEL MARTIN, HOST:

There is a shift happening on Wall Street. When it comes to picking stocks, humans are so passe. Instead, firms are experimenting more with having computers make those investment decisions. Our Planet Money team is reporting on this shift all week. Today, Alex Goldmark tells us about one key piece of this shift - the business of buying and selling data.

ALEX GOLDMARK, BYLINE: With the right data, a computer program buying and selling stocks can make a lot of money. So the right data is worth paying for.

KEVIN MCPARTLAND: Ten million dollars for a data set might seem like a lot, but if you can spend $10 million to make a hundred, $10 million suddenly doesn't seem like a lot of money anymore.

GOLDMARK: Kevin McPartland is a researcher at Greenwich Associates. He studies the data sets that investors are using. And he says this data, it can be almost anything, images of shopping mall parking lots - computers can count the number of cars in the lot and decide what it means for retail stocks - or comments on Twitter about new products - computers can analyze those comments to figure out which products are going to be hot this season and then invest.

Data is everywhere, all kinds of companies have it. And as Wall Street investors have gotten more and more eager to get their hands on new kinds of data, more and more companies have started selling it. McPartland gave me an example. He told me about this one company he works with. It's an older company, been around a long time, and it gathers all kinds of information about small businesses around the world, even businesses so small that you can't buy stock in them directly. But what happens to these small businesses can affect the stock price of bigger businesses. So McPartland's client saw an opportunity.

MCPARTLAND: They were starting to get more and more inquiries, you know, from investors that said, hey, wait, we've got some other interesting things we can do with this information.

GOLDMARK: Some of those small businesses in the data set, they sell to really big businesses, like Apple. And if one of those small businesses is in trouble - about to go bankrupt or falling behind on payments - it could delay the launch of the next Apple product - the next iPhone - and hurt Apple's stock.

MCPARTLAND: Suddenly, a light bulb went off for someone and they thought, wait a second, this could be really, really helpful in trying to understand Apple's supply chain.

GOLDMARK: McPartland's client is now offering that data set to investing firms. Lots of other companies with data are realizing they can also sell it to hedge funds and investing firms. It's changing Wall Street. It's changing the stock market and who works there and who's making money off the market. And tomorrow, the team at Planet Money tries to get in on the game. Alex Goldmark, NPR News.

(SOUNDBITE OF DEPAKOTE'S "CALCULATOR")

MARTIN: Tune in tomorrow as Planet Money tries to build stock trading computer programs on their own. You can start following their progress now on Twitter - @BOTUS. That's @BOTUS, or at npr.org/botus. That is B-O-T-U-S.

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