How to arbitrage data and become a leader

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If you’re unfamiliar with the word arbitrage, it means this:

In economics and finance, arbitrage is the practice of taking advantage of a price difference between two or more markets: striking a combination of matching deals that capitalize upon the imbalance, the profit being the difference between the market prices.

If you extend the idea of arbitrage – uneven levels of supply and demand that benefit someone who can transfer supply to where demand is – then data arbitrage is the idea of taking information from information-rich areas and moving it to information-poor areas.

Old money sign

If you can develop the practice of data arbitrage, there’s a very good chance you’ll have a valuable, profitable skill that few other people have. Let me give you a couple of examples to jog your brain.

Here’s a tip I often cite in my Blue Sky Factory email marketing lectures. Suppose you are responsible for your company’s email newsletter. Rather than just guess randomly at what might be a good subject line for your newsletter, why not search for the words you think people would be using on Twitter? Let’s say you’re writing a newsletter about financial aid, which was my old career. Hit up Twitter search and suddenly it becomes clear what people are talking about right now.

  • FennellaMiller: College process almost over , reviewing financial aid
  • ashCiERA: need to go see what my financial aid looking like for the summer.. !
  • jshureb: Bitin’ the bullet and sending back the financial aid letter………………..

There’s a very good chance people will respond more favorably to the words and language used by their peers rather than by something you just dreamed up one afternoon, which will in turn make your newsletter much more successful. In a very short amount of time, you’re taking data from a data-rich environment (Twitter) to a data-poor environment (your company’s newsletter) and achieving results that other people in the same role do not.

Second example: maybe you’re responsible for writing blog content for your paper business. You need to know what’s going to get people’s attention. Again, rather than just guessing or slapping together posts randomly, you head over to Quora and see what the hot topics are in paper.

  • Why are legal pads always yellow?
  • Is using 100% post-consumer recycled paper worth it?
  • What sort of things could you do to make your business card look unique, especially if you’re hand-making them?
  • What is the name of the process where a logo or text is pressed into paper?

People are asking questions, many of which you presumably have the answers to. You’ve got blog post titles and articles pre-written for you based on the questions people are asking, and as a bonus, you’ve got an audience primed to hear the answer once you’ve written it, since you’re answering their question! You’re arbitraging between a data-rich environment (Quora questions) and your blog (no questions), and then back again from your head (professional knowledge) back to Quora (people who want answers). Your blog will have content people are looking for, and as a side benefit, there’s a good chance you will achieve some impressive SEO results, since you’ll be using phrases people actually search for.

The lesson is simple: look for areas where information is rich and areas where information is poor. Find a way to broker that data between the two areas and at the very least, you’ll become an authority in the data-poor area, if not a community leader. If that community is your target audience, then there’s a good chance you’ll develop plenty of business from it as well, and at no cost other than your time and information-brokering abilities.

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One response to “How to arbitrage data and become a leader”

  1. Thanks for sharing this. In econ we learned about arbitrage and I’m thinking of looking into this some more 🙂

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