This content is from: Portfolio

Drones Ready to Take Off for Investors

Investors someday soon will be able to use unmanned aerial vehicles to gather data on consumer activity and other market intelligence.

At San Francisco’s AT&T Park, a drone piloted by remote control circles endlessly above the crowd. Its primary payload is not the AGM-114 Hellfire missile indelibly associated with unmanned aerial vehicles after years of remote-controlled assassinations in the Pakistani hinterlands; the ballpark drone carries just cameras. Its peaceful objective is as flighty as its altitude: to stream images of the hysterical reactions of individual Giants baseball fans to the Jumbotron. One day soon that same baseball drone over AT&T Park might just as easily be used to measure the proportion of fans taking pictures with the newest model of smartphone — the beginning of a consumer electronics trend unfolding and measured in real time.

The industry strategists quietly leading the drone game the past several years have likely spent much of their time worrying about and planning for the public outcry against an impending future of 24/7 aerial surveillance of American civilians by private corporations, preparing press strategies to respond to what would certainly be mass protests against the long-prophesied arrival of a dystopian, Orwellian society. Such mass unrest has been conspicuous only in its absence, and the American public has been surprisingly welcoming of their new flying robotic sentinels. Back at the baseball game at AT&T Park, such drones are cheered — even screamed at, to come closer — as if the robots could hear and cared.

All evidence thus far indicates that the vast majority of Americans will in the worst case shrug at skies filled with small black dots watching them with telescopic cameras. A national study released by the Institute for Homeland Security Solutions — an organization run by RTI International in cooperation with Duke University, the University of North Carolina at Chapel Hill and the North Carolina Military Foundation —found that 57 percent of the American public supports the use of unmanned aircraft for any application, whereas nearly 88 percent support the civilian use of drones for search and rescue applications. Following the well-worn symbolic path of a product’s permeation into the fabric of American culture, drones, initially adopted by professional sports stadiums, are now being used by college and even some high school sports teams. That’s right: You might one day soon find yourself complaining to your local school board that your high school is not budgeting enough money for your teenager to be recorded by a drone, whereas his friends in better-funded school districts get all the latest biology textbooks — and better drone surveillance.

We will soon live in a world in which camera-equipped aerial vehicles — flown either by pilots on the ground or driven by their own, automated navigational systems — will be more or less ubiquitous, accepted and welcomed. If drones over your local high school have left anyone unclear about that fact, perhaps an even more unambiguous sign came during the Christmas holidays, when online retail behemoth Amazon announced that it is testing the use of drones to deliver packages weighing less than five pounds through a service called Prime Air. Although it’s not likely that anyone in the financial sector will have their market reports flown to them by a drone, applications of drone technology for financial analysts are also taking off.

The first systematic civilian-commercial uses of drones will be in vital infrastructure monitoring. Energy companies will fly unmanned aerial vehicles with thermal cameras up and down critical pipelines — which mostly pass through areas of the country that are remote and hard and expensive to access from the ground — to spot leaks and outright structural failures. Energy commodity supply surveillance will be conducted alongside the work of the energy companies themselves, with private market intelligence firms flying drones over oil storage and other facilities. In an absurd twist, one day in the near future the drones in flight from market intelligence firms might actually be used to count the drones in flight from energy companies to guess and measure which areas will soon see supply problems; air-to-air combat will take on the civilian form of air-to-air industrial espionage.

Drones will just as pervasively find an analogous use in agriculture, with both large-scale farmers (such as Monsanto) and private market intelligence firms flying side by side over cotton, corn, wheat, orange, coffee, cocoa and soybean crops — some in America, some elsewhere around the world — to monitor the farmland in detail, anticipating in real time disease outbreaks and infestations and measuring factors like soil humidity.

Whereas real estate agents will use drones for more up-to-date aerial photography of high-value properties than Google Earth tends to commit to, private market intelligence will similarly attempt to collect and measure the aggregate of new construction in a city or even a neighborhood, long in advance of the official numbers that governments tend to release months after the fact.

According to the Association for Unmanned Vehicle Systems International, civilian drone applications might form a $82 billion-a-year market by 2025. Even the Federal Aviation Administration, a government agency with no vested interest in sanguine forecasts, reckons that by 2017 there could be 10,000 civilian drones flying over America’s skies.

There are still many obstacles in place. Prime Air has already been hampered because of federal regulations against certain forms of aircraft; reportedly, the company had to shoot even its promotional video outside the U.S. In addition, Amazon’s drones still require pilots, an expense that may just render the technology too pricey to make sense, just as certain parking spot counting satellites still require human eyes and brains to register them as empty or full, a service often provided by microwork firms like San Francisco–based nonprofit Samasource. Analytic software that attempts to automate such processes are still new and imprecise. On the other hand, it’s the knowledge such technologies provide, not their early-stage affordability or practicality, that may be appealing to financial analysts; the cost of maintaining a building of outsourced parking lot car-counters might add up to very little in comparison to the value of the market insight gained.

Obstacles to civilian use are also dropping like flies. Until recently, the FAA banned the commercial use of drones, but at the end of December, the FAA selected six sites at which commercial applications of unmanned aerial vehicles could be tested and refined; Alaska, Nevada, New York, North Dakota, Texas and Virginia will host the research sites, selected from a list of 25 applicants in 24 states (including two from California). Congress has already instructed the FAA to examine how to integrate commercial drones into American airspace by September 2015, and later this year the federal agency will publish its first set of rules on the use of craft weighing less than 25 kilograms (a category that covers most of the commercial applications relevant to drone-enabled private market intelligence surveillance, including the kind of supply-side snooping now expensively facilitated by helicopter).

WatersTechnology, among others, has pointed out that the “sneakiness” of hedge funds, which have from time to time employed human sleuths to gain an edge on their competitors, fits right in with the use of imaging drones. That the quest for perfect arbitrage — for trades powered by knowledge so rapid and accurate that traders can almost simultaneously trade events as they are unfolding in the physical world — will enter a new phase powered by drones is now beyond question. We are on the cusp of the next phase of a multimillennial trend (begun when the first maps of the land beyond the horizon were made) that involves more and more of the world being seen at once. At work, at play, we may all look up and see a drone looking back at us — and those working in market intelligence gathering for capital markets will be counting, and counting on it.

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