[In-Depth Look] It Is Still Not Too Late

Nam Dong-jun, CEO of Tekton Investment Advisory

According to IBM's 2016 report, the amount of data newly created worldwide every day is 2.5 quintillion (2.5 x 10^18) bytes. This unfamiliar unit makes it difficult to grasp the scale. However, since 90% of the world's data has been generated in the last two years, it gives a rough estimate, though it still feels unfamiliar to fully understand. Nevertheless, it is astonishing that an unimaginably enormous change is continuously happening in the world. Even more surprising is that I myself have yet to realize or accept this fact. Especially considering that it is now 2020, and the scale of data accumulated must be much more astonishing compared to four years ago.

Data is both familiar and unfamiliar. We use it daily but rarely think deeply about it. We simply perceive it as numbers or symbols. However, the essence of data broadly encompasses all values and materials that hold information. It might be everything we know. Data remains complex, so we tend to ignore it, but reality does not let me, who never shops online, go untouched. On the contrary, it is becoming more closely connected to daily life and exerting more pressure. Every activity such as taking photos, web surfing, social media, mobile device usage, and card transaction history is being converted into data. Through sensors attached to smartphones, data is continuously and tirelessly generated and accumulated somewhere. It is accumulating exponentially every hour, every day.

What is more interesting is that data is not just accumulating. With the rapid advancement of artificial intelligence (AI), data is creating other data by itself. Accumulated data meets sophisticated AI algorithms and generates new data. The more generated data accumulates, the greater the value of data becomes through a virtuous cycle. A kind of data network effect occurs. For example, in the case of Naver Shopping service, the more people use it, the more data accumulates. Companies utilize this accumulated data to further improve the shopping service. The enhanced service attracts even more people. Through this virtuous cycle, Naver Shopping continues to grow.

Something has changed compared to about 10 years ago. Now, the necessary condition for a company’s sustainable growth is data. Of course, the sufficient condition is AI that can utilize data. In the past, conditions for sustainable growth included product functionality and market dominance. Now, 'data possession' and 'the ability to handle data with AI' have become the primary conditions. This change can also be seen in the changes in market capitalization within the global stock market over the past five years. The proportion of companies related to big data, cloud, e-commerce, AI, and so on is larger than ever before. Their growth rate far exceeds that of average market companies.

It is difficult to include the potential of invisible foundations when evaluating companies. Especially, the possibility of AI utilization is not quantitative and is not easy to apply. However, it must now be accepted as an essential condition for a company’s sustainable growth. The most important criterion for judging sustainable growth potential in corporate investment is changing. Yet, it is still not easy to change this mindset. The change is probably too rapid. Changing a solid value evaluation framework seems even more risky. Nevertheless, isn’t it time to change the framework based on the value evaluation models we have firmly believed in and learned since the 1990s? It is 2020, and it is not too late yet. Whether domestic or overseas companies, let’s spend even just 10 minutes contemplating and imagining the huge flow of change happening in the chain connected to data. I believe it will greatly help investment.

Nam Dong-jun, CEO of Tekton Investment Advisory