AI applications in Alternative Data, with Michael Maloof, Head of Marketing at Earnest Analytics

Episode Summary

In the latest episode of Signals, host Nick Mazing reconnects with Michael Maloof from Earnest Analytics, and a former Bulge Bracket bank TMT analyst. 

Michael first discussed the use of alternative data by investment funds in general, with a specific focus on credit card transaction data. The guest covers the “mosaic” approach to investing: looking at many disparate data sets to arrive at a combined picture. 

The next part of the conversation focuses on AI applications in alternative data. Alt data is a natural candidate for artificial intelligence applications given the large volume of data points. More specifically, Michael discusses the rollout of Earnest AI, the new predictive application of AI on top of Earnest data. As an example of its accuracy, the guest cited the model accurately predicting within 0.01% (one hundredth of one percent) the decline in a key KPI for a retailer while the Wall Street consensus was an increase in that KPI. The model has also enabled earlier prediction for a wider range of companies, and Michael sees the industry fully embracing the predictive power of AI.

Guest-at-a-Glance

💡 Name: Michael Maloof

💡 What he does: Director of Marketing

💡 Company: Earnest Analytics and Earnest AI release

💡 Noteworthy: Michael Maloof: Former equity analyst at Goldman Sachs, now head of marketing at Earnest Analytics.

💡 Where to find Michael: LinkedIn 

Key Insights

Earnest AI's Remarkable Accuracy in Predictive Analysis

Michael Maloof highlights the groundbreaking accuracy of Earnest AI since its August 2023 launch. This generative tool can predict reported metrics for hundreds of U.S. companies, significantly reducing the time analysts spend on predictive modeling. One standout example Michael cites is Earnest AI's prediction of a large national wholesaler's sales growth. While Wall Street anticipated positive growth, Earnest AI accurately foresaw a negative year-on-year sales print, coming astonishingly close to the actual result. This level of precision underscores the tool's potential to revolutionize data analysis in the financial sector.

The Evolution of Alternative Data with AI

Alternative data's landscape is undergoing a significant transformation with the integration of AI. Michael dives into how Earnest Analytics has been utilizing machine learning to ensure data quality. With the introduction of Earnest AI, the company has taken a leap forward, using generative artificial intelligence to derive signals from vast data sets. This AI-driven approach not only streamlines the data analysis process but also enhances the accuracy and speed of predictions, empowering investors to make more informed decisions.

The Future of AI in Alternative Data

Michael provides a glimpse into the future of AI in the realm of alternative data. While Earnest AI started with a single feature of reported metric predictions, its roadmap is expansive. Soon, it will power predictive metrics across various data sets, creating composite earnings and underpinning metrics for non-public entities. As data platforms grapple with billions of rows of data daily, AI emerges as the solution to derive meaningful signals from this vast information, marking a new chapter for companies like Earnest Analytics.