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Conquering Complexity in the 21st Century
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Quantellia announces release of The System Dynamics of Aid: Understanding the Carter Center's CJA Program in Liberia
<div id="AdnTop"><div class="AdnTopLeft" style="float:left"></div><div class="AdnTopRight" style="float:right"></div><div style="clear:both"></div></div><center><iframe src="//www.youtube.com/embed/rVHVF1ZWOFg" style="height: 383px; width: 601px" frameborder="0"></iframe></center>
<p><span style="font-size: small;">In the fall of 2012, Quantellia was approached by <a href="">The Carter Center</a> to study a breakthrough program in Liberia. The Carter Center was </span><span style="font-size: small;"><a href="" target="_blank"> <img style="height: 298px; width: 277px; margin-left: 20px; margin-top: 20px; float: right;" src="" alt="The System Dynamics of Aid" width="300" height="324" /></a></span><span style="font-size: small;">using Community Justice Advisors (CJAs)—legal paraprofessionals from local communities—to support plaintiffs and defendants as they navigated through two legal systems in Liberia:</span><span style="font-size: small;"><a href=""> </a></span><span style="font-size: small;"> the "formal", or Monrovia-based state-run system; and the "customary" system used in more rural areas. </span></p>
<p><span style="font-size: small;">Since the ultimate goal of this program was peacebuilding, Quantellia</span><span style="font-size: small;"> built a systems model to explore how spending dollars on this approach, which had substantially lower infrastructure costs than more centralized programs, could help the country to "do more with less", and to move from a "vicious cycle" of conflict to a "virtuous cycle" of economic prosperity and peace.</span></p>
<p><span style="font-size: small;">This paper, and the model shown in the video above, contains our findings. Interestingly, the model showed that a consistent injection of aid along a number of fronts was necessary to overcome the "energy" in state space to move from one phase to another of this complex system. After this injection, the system can become self-sustaining under certain conditions. However, if the aid is not timed correctly, then the system enters a third state of "catch-up", where government money is exhausted on peacekeeping, and is not available for other purposes as the democracy grows. This proof-of-concept model shows these and other dynamics, indicating that this might be the reality in Liberia; extensions include connecting the model to accurate data and cause-and-effect connections.</span></p><div id="AdnBottom"><div class="AdnBottomLeft" style="float:left"></div><div class="AdnBottomRight" style="float:right"></div><div style="clear:both"></div></div>
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Tue, 28 Jan 2014 00:44:00 -0400
Development
Economics
Modeling
Politics
Sustainability
Systems analysis
World Modeler
Lorien Pratt
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Modeling Energy Strategies for the Cable Industry
<div id="AdnTop"><div class="AdnTopLeft" style="float:left"></div><div class="AdnTopRight" style="float:right"></div><div style="clear:both"></div></div><div style="text-align: left;"><span style="font-size: small;"><em>Cable operators, like many companies, are facing the prospect of steep increases in the cost of energy in the coming years. In response, they are looking at alternative energy sources. However, navigating the transition to this new world contains hidden dangers, so an evidence-based modeling approach can make a big difference.</em></span></div>
<div style="text-align: left;"><span style="font-size: small;"><em> </em></span></div>
<div><span style="font-size: small;">[youtube:zaH5gohQQT0]</span></div>
<div><span style="line-height: 115%; font-size: small; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;"> Energy in the United States is changing: the cost of on-grid, coal- and petroleum-generated energy is expected to rise rapidly, while the availability of renewable and distributed power sources such as solar, wind, and hydrodynamic energy is decreasing. <span style="mso-spacerun: yes;"> </span>These changes are altering the landscape for energy-intensive industries across the world.<span style="mso-spacerun: yes;"> </span>Amongst them: U.S. cable operators, who face a sea change in the profile of energy costs, as subscribers grow more hungry for video and bandwidth at the same time that the cost of power to support a typical cable operators’ plant is expected to grow steeply. </span></div>
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: left;"> </div>
<div><span style="line-height: 115%; font-size: small; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;"> Cable operators have an opportunity to “get ahead of the curve” through structured decision analysis of choices about energy usage.<span style="mso-spacerun: yes;"> </span>Quantellia’s Mark Zangari and Tim McElgunn, Chief Analyst <a href="" target="_blank">Bloomberg BNA Broadband advisory services</a>, presented on this topic at the <a href="" target="_blank">Society for Cable Telephone Engineers (SCTE) Smart Energy Management Initiative (SEMI) forum</a> earlier this year in Atlanta.<span style="mso-spacerun: yes;"> </span>Through a combination of data provided by Bloomberg BNA and modeling provided by Quantellia, Zangari and McElgunn were able to demystify some of the important factors involving this complex decision making process.<span style="mso-spacerun: yes;"> </span>McElgunn also authored an accompanying </span><span style="font-size: medium;"><a href=""><span style="color: #0000ff; font-family: Calibri;">analysis report, which is available to Bloomberg BNA subscribers.</span></a><span style="font-family: Calibri;"> </span></span></div>
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<div><span style="line-height: 115%; font-size: small; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;"><span style="line-height: 115%; font-family: "Calibri","sans-serif"; font-size: 11pt; mso-fareast-font-family: "Times New Roman"; mso-fareast-theme-font: minor-fareast; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA; mso-ascii-theme-font: minor-latin; mso-hansi-theme-font: minor-latin; mso-bidi-font-family: "Times New Roman"; mso-bidi-theme-font: minor-bidi;">Says Bloomberg BNA’s McElgunn, <strong>"</strong></span><strong>Within the next five years, the cost of energy to power the U.S. cable industry will become the single largest network cost component.” </strong>As shown in the accompanying video and as we’ll discuss below, operators who make good decisions stand to benefit substantially. </span></div>
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<h1>
<div><span style="line-height: 115%; font-size: small; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;"> <strong> Background – The Energy Cost of Success for Broadband Providers</strong></span></div>
</h1>
<div><span style="line-height: 115%; font-size: small; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;"> As explained by Zangari and McElgunn, in recent years, U.S. cable operators have steadily expanded their service offerings to both consumers and businesses in such a way that energy demand and associated costs will continue to increase.<span style="mso-spacerun: yes;"> </span>Bloomberg BNA research shows, for example, that over three quarters of U.S. internet service customers subscribe to “bundles” of two or more services, which may include pay TV, home phone, and wireless service in addition to high-speed data.</span></div>
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<div><span style="line-height: 115%; font-size: small; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;"> Cable operators are responding to this increasing demand by building new data centers and expanding existing ones.<span style="mso-spacerun: yes;"> </span>These data centers contain equipment with increasingly lower energy footprints – to as low as 3 watts per server blade.<span style="mso-spacerun: yes;"> </span>However, the total growth in energy demand exceeds the benefit from these technology improvements.</span></div>
<div><span style="line-height: 115%; font-size: small; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;"> </span></div>
<div><span style="line-height: 115%; font-size: small; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;">For these reasons, cable operators face difficult decisions in a complex environment.<span style="mso-spacerun: yes;"> </span>Where should facilities be located?<span style="mso-spacerun: yes;"> </span>How should existing local and/or regional infrastructure be leveraged?<span style="mso-spacerun: yes;"> </span>How should cooling and heating be planned?<span style="mso-spacerun: yes;"> </span>Should operators consider alternative energy sources to utility-delivered power?</span></div>
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: left;"> </div>
<div><span style="line-height: 115%; font-size: small; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;"> Says McElgunn, “The U.S. cable industry has effectively transitioned to an all-digital video plant, and is preparing for an eventual transition to an all-IP network.”<span style="mso-spacerun: yes;"> </span>A digital network is less costly to operate than an analog one, however, HDTV impacts this trend in important ways.<span style="mso-spacerun: yes;"> </span>Says McElgunn, “By the end of 2014, essentially all new television sales in the U.S. will be HDTV-compatible, increasing the number of HD-fed sets per home. <span style="mso-spacerun: yes;"> </span>Bloomberg BNA estimates that approximately 40 million U.S. cable households will subscribe to HD tiers in 2017, with 1.5 HDTVs connected per home. “A large number of these HDTV sets will be displaying HD linear channels, as well as video-on-demand (VOD).<span style="mso-spacerun: yes;"> </span>A single HD video stream consumes approximately 8 Mbps, and there are multiple simultaneous such streams delivered to essentially every video household for some portion of each day.<span style="mso-spacerun: yes;"> </span><strong style="mso-bidi-font-weight: normal;">“This leads to massive demands on the network,</strong>” says McElgunn, “This will impact both distribution and access plant and the resources required for content generation and formatting.”</span></div>
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<div><span style="line-height: 115%; font-size: small; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;"> In addition, U.S. cable operators offer services to businesses, which place additional demands on networks, and the energy required to operate them.<span style="mso-spacerun: yes;"> </span>However, McElgunn and Zangari write that “<strong style="mso-bidi-font-weight: normal;"><em style="mso-bidi-font-style: normal;">Current architectures and software designs require that generation and transmission resources that are preparing and delivering all of that video operate at full power virtually 24 hours a day every day.”<span style="mso-spacerun: yes;"> </span></em></strong>This applies to multiple parts of the cable plant: headends, data centers, and outside plant facilities, which together will require substantial growth in energy to power them.<span style="mso-spacerun: yes;"> </span></span></div>
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<h1>
<div><span style="line-height: 115%; font-size: small; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;"> <strong> Modeling a Solution</strong></span></div>
</h1>
<div><span style="line-height: 115%; font-size: small; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;"> Quantellia’s Mark Zangari worked with Bloomberg BNA to prepare a model that integrates forecasting data with a systems model to allow cable operators to quickly and precisely determine if a proposed energy usage strategy exposes the operator to unacceptable financial and/or technical risks, and to visualize how adjusting specific decision parameters impacts desired outcomes. </span></div>
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<div><span style="line-height: 115%; font-size: small; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;"> Among the variables included in the model are expansion of Network DVR, balancing increasing server efficiency versus equipment replacement costs, evolutionary network and facilities design changes, and energy price changes over time. </span></div>
<div><span style="line-height: 115%; font-size: small; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;"> </span></div>
<div><span style="line-height: 115%; font-size: small; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;">Some findings were as follows:</span></div>
<ul>
<li><span style="font-size: small;"><strong>Capital costs are a substantial component: </strong>Each additional watt of power consumption adds incremental costs due to the increased quantity of energy the operator needs to supply.<span style="mso-spacerun: yes;"> </span>However, each additional watt also increases infrastructure needs, and the annualized capital costs resulting from higher power consumption can be significantly greater than the effect on power supply charges. </span></li>
<li><span style="font-size: small;"><strong> Moore’s Law effects are mitigated by power issues: </strong>As illustrated below, although the cost of delivering a given unit of computing performance has been dropping rapidly over the years, the cost of <em style="mso-bidi-font-style: normal;">power</em> required to deliver that performance has not been dropping at the same rate.</span></li>
</ul>
<div><span style="mso-spacerun: yes;"> </span><img src="/BL1/image.axd?picture=2013%2f6%2fx.png" alt="" width="593" height="302" /></div>
<ul>
<li> <span style="font-size: small;"><strong> Timing is everything: </strong>Operators who take too long to change their energy contracts face steep competition through decreasing margins as costs increase. </span></li>
<li><span style="font-size: small;"><strong>Sleep mode versus peak shaving:</strong> Policies that invoke "sleep mode" for idle equipment can reduce energy usage, but it's important to keep in mind that capital-intensive infrastructure must be built to support the "peaks" of usage, so "peak shaving" is also an important cost containment strategy.</span></li>
</ul>
<h1>
<div><span style="line-height: 115%; font-size: small; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;"> <strong> Organizational Challenges </strong></span></div>
</h1>
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: left;"> </div>
<div><span style="line-height: 115%; font-size: small; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;"> Despite the cost benefits from making good decisions about energy usage, says Quantellia’s Zangari, “most U.S. cable operators have separate organizations with independent budgets for the establishment and operation of facilities, and the operation of the network equipment housed in those facilities.<span style="mso-spacerun: yes;"> </span>While power and its supply and assurance is managed as a facilities function, network equipment and its performance falls under the operational and financial responsibility of the Network organization.”<span style="mso-spacerun: yes;"> </span><strong style="mso-bidi-font-weight: normal;">Therefore, there is no single department within a typical cable operator with a holistic view of energy management.</strong><span style="mso-spacerun: yes;"> </span></span></div>
<div> </div>
<div><span style="font-size: small;">A model like the one discussed here, provides this kind of cross-organizational view and equips decision-makers with access to all the factors relevant to measuring, understanding, forecasting, and minimizing the cost of energy. </span></div>
<div><span style="font-size: small;"> </span></div>
<div><span style="font-size: small;"><strong>About Bloomberg BNA's Broadband Advisory Services (BAS)<span style="font-family: Times New Roman; font-size: small;"> </span></strong>
<div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: left;"><span style="color: black; font-size: medium;"><span style="font-family: Calibri;">The task of transforming energy supply and consumption is complex and is dependent on a huge number of known and unknown variables. These complexities create significant financial and operational risk for MSOs. </span></span></div>
<span style="font-family: Times New Roman; font-size: medium;"> </span>
<div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: left;"><span style="color: black; font-size: medium;"><span style="font-family: Calibri;">Beginning with our May 2013 report, "Cable Industry Energy Management Strategies", Bloomberg BNA’s Broadband Advisory Service is adding service provider energy strategy to our areas of focus. We will provide ongoing analysis of developments in this space and deliver recommendations based on our research and incorporating data and insight from other divisions within Bloomberg. </span></span></div>
<span style="font-family: Times New Roman; font-size: medium;"> </span>
<div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: left;"><span style="color: black; font-size: medium;"><span style="font-family: Calibri;">In future reports, we will investigate activities spearheaded by the cable industry’s CableLabs research and standards-setting consortium in the areas of energy efficiency for set-top boxes, DVRs, cable modems/EMTAs, and other CPE. We will also assess advances in fleet management and technology and assess the state of the industry’s efforts to approach zero-landfill equipment sourcing and replacement.</span></span></div>
<span style="font-family: Times New Roman; font-size: medium;"> </span>
<div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: left;"><span style="color: black; font-size: medium;"><span style="font-family: Calibri;">Broadband Advisory Services subscribers have full access to these reports, along with our extensive portfolio of reports and databases covering the U.S. broadband services market. </span></span></div>
<span style="font-family: Times New Roman; font-size: medium;"> </span> </span>
<div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: left;"><span style="color: black; font-size: medium;"><span style="font-family: Calibri;">Information on subscribing to the BAS library is available at </span><span style="font-size: small;"><a href=""></a><a href="."></a>.</span></span></div>
<div class="MsoNormal" style="margin: 0in 0in 10pt; text-align: left;"><span style="color: black; font-size: medium;"><span style="font-family: Calibri;">You <span style="font-size: small;"><span style="font-family: Verdana;">can also visit </span><a href=""><span style="font-family: Verdana;"></span></a><span style="font-family: Verdana;"> </span><span style="font-family: Verdana;">to learn more.</span></span></span></span></div>
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Fri, 14 Jun 2013 16:11:00 -0400
Business and Management
Modeling
Politics
Cable
Sustainability
Telecommunications
quantellia
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Big decisions, small data
<div id="AdnTop"><div class="AdnTopLeft" style="float:left"></div><div class="AdnTopRight" style="float:right"></div><div style="clear:both"></div></div><div style="text-align: left;"><span style="font-size: small;"><em>Conquering the most important problems faced by complex organizations often requires great <span style="text-decoration: underline;">models</span>, not “big data”: in many situations, better decisions can be made with imperfect or incomplete data.</em></span></div>
<div style="text-align: left;"><span style="font-family: arial,helvetica,sans-serif; font-size: small;">
<p><img src="/BL1/image.axd?picture=2013%2f6%2fFrustrated+guy+with+screens+of+data-small.jpg" alt="" width="246" height="131" /></p>
</span><span style="font-size: small;"><span style="line-height: 115%; mso-bidi-font-size: 11.0pt; mso-fareast-font-family: Calibri; mso-fareast-theme-font: minor-latin; mso-ansi-language: EN-US; mso-fareast-language: EN-US; mso-bidi-language: AR-SA;">As storage and processing costs plummet, high-bandwidth networks become cheaper, and data analysis methods become mainstream, organizations have mined a rich store of information—“Big data”— primarily about the behavior of their customers and details of operations.<span style="mso-spacerun: yes;"> </span></span>However, outside of these arenas, big data often looks like an answer looking for a question.<span style="mso-spacerun: yes;"> </span>Paradoxically, big data is most effective for the <em style="mso-bidi-font-style: normal;">smallest</em> decisions that an organization makes, but that it makes very often, and must therefore be able to be made at almost zero cost. <span style="mso-spacerun: yes;"> </span>An example: “what discount plan should I offer this customer?” or “what other product should I recommend to this customer who’s just purchased this book?”</span></div>
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<p class="MsoNormal" style="margin: 0in 0in 0pt; text-align: left;"><span style="font-size: small;">By contrast, big decisions have different characteristics that are often not as well-supported by big data.<span style="mso-spacerun: yes;"> </span>Here, agility and human insight are often more important than automation.<span style="mso-spacerun: yes;"> </span>Smart organizations know that smaller, well-crafted data sets, along with powerful <em style="mso-bidi-font-style: normal;">models</em>, are the basis for the best decision outcomes. </span></p>
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<div class="MsoNormal" style="margin: 0in 0in 0pt;"><span style="font-family: arial,helvetica,sans-serif; font-size: small;"><strong style="mso-bidi-font-weight: normal;"> </strong> </span></div>
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: left;"><span style="font-size: small;"><strong style="mso-bidi-font-weight: normal;">Avoiding the dangers of big data over-analysis</strong></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: left;"> </div>
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: left;"><span style="font-size: small;">Organizations must recognize the difference between situations that require massive amounts of highly detailed information (requiring time-consuming migration and cleansing efforts), and those situations where agility is at a premium, and where imperfect or incomplete data sets are a better choice.<span style="mso-spacerun: yes;"> </span>Without such a distinction, we can fall prey to “gratuitous data cleansing”: an expensive, risky, and time-consuming exercise. <span style="mso-spacerun: yes;"> </span>Omitted from the brochure of “big data” management products is a dirty secret: the enormous cost—often based on highly manual effort— that gathering, cleansing, and unifying data requires as a precondition before the benefits of big data can be realized.</span></div>
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: left;"> </div>
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: left;"><span style="font-size: small;">“The decision is only as good as the data that supports it” is an often-misunderstood claim.<span style="mso-spacerun: yes;"> </span>For example, a pollster can reliably predict an election result based on interviews with a tiny percentage of the electorate.<span style="mso-spacerun: yes;"> </span>And gathering data on eye color is unlikely to improve the accuracy of a credit score. There is a law of diminishing returns on the quantity of information, and not every piece of information is critical to every decision.<span style="mso-spacerun: yes;"> </span>Without a good model, we can succumb to a costly fixation on data: <span style="mso-spacerun: yes;"> </span>focusing on excessive or unimportant information at the cost of agile and effective decision making. The good news: understanding how to make great decisions with small data requires just a few simple principles, as I’ll explain below.</span></div>
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: left;"><span style="font-size: small;"><strong style="mso-bidi-font-weight: normal;"> </strong> </span></div>
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: left;"><span style="font-size: small;"><strong style="mso-bidi-font-weight: normal;">How did we get here?</strong></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: left;"> </div>
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: left;"><span style="font-size: small;">To understand the road forward beyond big data, it helps to understand its history.<span style="mso-spacerun: yes;"> </span>The cost per megabyte of storage has dropped from close to <a href=""><span style="color: #0000ff;">$200 to about 122 megabytes for a penny</span></a>—that’s over 2.4 million percent—from about 1984 to 2010.<span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span>Since it’s so cheap to store and transmit, governments, the internet, and even machines, are generating huge data sets.<span style="mso-spacerun: yes;"> </span>The new Boeing 787, for instance, generates <a href=""><span style="color: #0000ff;">half a terabyte of data per flight</span></a>, and the US Federal Reserve alone produces <a href=""><span style="color: #0000ff;">73,000 economic statistics</span></a>. This explosion of information has, in turn, driven new analytics technology to make sense of it.<span style="mso-spacerun: yes;"> </span></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: left;"> </div>
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: left;"><span style="font-size: small;">The business value of big data is like the song of the mythical sirens, whose sweet voices lured sailors to their doom.<span style="mso-spacerun: yes;"> </span>It has created a focus on the parts of a business in which data is plentiful. <span style="mso-spacerun: yes;"> </span>However, <em style="mso-bidi-font-style: normal;">the location of easy data availability in an organization does not correspond to the most important business problems.<span style="mso-spacerun: yes;"> </span></em>This is why strategic decision makers will follow a pattern where they “pore over the data, then set it aside to argue”, instead of reaching a decision by following a more structured or systematic process.<span style="mso-spacerun: yes;"> </span>On the flip side, it is often the case that expensive data management projects produce little business value.</span></div>
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<div style="text-align: left;"><span style="font-size: small;"><strong style="mso-bidi-font-weight: normal;">Small Data Principles</strong></span></div>
<div class="MsoNormal" style="margin: 0in 0in 0pt; text-align: left;"><span style="font-size: small;">The answer, simply put, is that smart organizations have a secret: They know how to use <span style="text-decoration: underline;">small</span> data to drive their most important decisions.<span style="mso-spacerun: yes;"> </span>As a result, they produce great outcomes quickly and cheaply.<span style="mso-spacerun: yes;"> </span>Here’s how.</span></div>
<div class="MsoListParagraphCxSpFirst" style="margin: 0in 0in 0pt 0.5in; text-align: left; text-indent: -0.25in; mso-list: l0 level1 lfo1;"> </div>
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<div class="MsoListParagraphCxSpFirst" style="margin: 0in 0in 0pt 0.5in; text-indent: -0.25in; mso-list: l0 level1 lfo1;"><span style="font-size: small;"><strong style="mso-bidi-font-weight: normal;">Recognize the difference between operational and analytical data, and treat them differently.</strong><span style="mso-spacerun: yes;"> </span>For our purposes, with operational data, every byte matters, but analytical data can be imperfect or incomplete.<span style="mso-spacerun: yes;"> </span>Examples: the size of a bolt on an airplane, or the costs on your phone bill:<span style="mso-spacerun: yes;"> </span>operational. The likelihood of civil war in a country given its poverty level: that’s analytical, which requires a different—and often much less expensive and time-consuming— approach to data management than if every byte was analyzed.</span></div>
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<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 0.5in; text-indent: -0.25in; mso-list: l0 level1 lfo1;"><span style="font-size: small;"><strong style="mso-bidi-font-weight: normal;">Understand that great decisions can be made from uncertain data.</strong><span style="mso-spacerun: yes;"> </span>If you’re sure that your customers will prefer your product as long as your price is at least $5 less than your average competitor, then you don’t need to know if your competitor charges $6 more or $600 more: huge uncertainty in the data that leads to a nonetheless highly confident decision.<span style="mso-spacerun: yes;"> </span>Many situations are like this.</span></div>
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<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 0.5in; text-indent: -0.25in; mso-list: l0 level1 lfo1;"><span style="font-size: small;"><strong style="mso-bidi-font-weight: normal;">Understand the sensitivity of your decision to key assumptions.</strong><span style="mso-spacerun: yes;"> </span>Often, decisions are made based on a number of “key assumptions”: those data elements that both have uncertainty as well as to which the decision is highly sensitive.<span style="mso-spacerun: yes;"> </span>If you’re launching a new product into Europe, and your competitor’s launch there would substantially change your prospects, and you’re not sure if they will: that’s a key assumption.<span style="mso-spacerun: yes;"> </span>Focus all of your data gathering and cleansing effort on these key assumptions—often a “small” set of data compared to big datasets— and deemphasize the rest.</span></div>
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<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 0.5in; text-indent: -0.25in; mso-list: l0 level1 lfo1;"><span style="font-size: small;"><strong style="mso-bidi-font-weight: normal;">Don’t overlook the value of human expertise.</strong><span style="mso-spacerun: yes;"> </span>Somehow, big data hype has led us to ignore our most important asset: between the ears.<span style="mso-spacerun: yes;"> </span>We swing between two extremes: projects either ignore this most important asset or rely exclusively upon it: ignoring the data altogether.<span style="mso-spacerun: yes;"> </span>But a structured decision modeling approach can produce the best of both worlds, where human expertise substitutes for data when it is missing, and vice versa.</span></div>
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<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 0.5in; text-indent: -0.25in; mso-list: l0 level1 lfo1;"><span style="font-size: small;"><strong style="mso-bidi-font-weight: normal;">Promote your modelers.<span style="mso-spacerun: yes;"> </span></strong>A good modeler is an employee who understands your business, understands your data (along with its limitations), and has a good head for seeing the pattern in the noise.<span style="mso-spacerun: yes;"> </span>They’re worth their weight in gold, and can help you to overcome the <a href=""><span style="color: #0000ff;">shortage of data scientists</span></a>.<span style="mso-spacerun: yes;"> </span>Nate Silver predicted the outcome of the most recent presidential election in all 50 states.<span style="mso-spacerun: yes;"> </span>Probably the world’s first “celebrity modeler”, Silver <a href=""><span style="color: #0000ff;">used a small data set, not a big one</span></a>.</span></div>
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<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 0.5in; text-indent: -0.25in; mso-list: l0 level1 lfo1;"><span style="font-size: small;"><strong style="mso-bidi-font-weight: normal;">Use visual analysis.</strong><span style="mso-spacerun: yes;"> </span>Many modelers come from a quantitative background, and so are most comfortable with math and spreadsheets.<span style="mso-spacerun: yes;"> </span>Yet non-modelers often have to work very hard to understand them.<span style="mso-spacerun: yes;"> </span>Encourage a cross-disciplinary team to use create visual models to make the invisible, visible, and shared in an aligned, collaborative way.</span></div>
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<div class="MsoListParagraphCxSpMiddle" style="margin: 0in 0in 0pt 0.5in; text-indent: -0.25in; mso-list: l0 level1 lfo1;"><span style="font-size: small;"><strong style="mso-bidi-font-weight: normal;">Understand systems. </strong>Core to the modeler’s toolkit is an understanding of systems dynamics: feedback loops, winner-take-all dynamics and the like.<span style="mso-spacerun: yes;"> </span>The distinction between your organization being in a downward spiral versus enjoying the “invisible engine” of a <a href=""><span style="color: #0000ff;">positive network effect</span></a>, matters much more than specific data about your situation.</span></div>
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<div class="MsoListParagraphCxSpLast" style="margin: 0in 0in 0pt 0.5in; text-indent: -0.25in; mso-list: l0 level1 lfo1;"><span style="font-size: small;"><strong style="mso-bidi-font-weight: normal;">Be agile.<span style="mso-spacerun: yes;"> </span></strong>Near-term data is often the most accurate, and least costly to obtain.<span style="mso-spacerun: yes;"> </span>When long term information is suspect, or in short supply, you can substitute for it by moving from “Titanic” to “white water rapids” mode: steer your business frequently as new information becomes available.<strong style="mso-bidi-font-weight: normal;"> </strong></span></div>
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<div style="text-align: left;"><span style="font-size: small;"> Underneath the big data hype is an important assumption: that the future is like the past.<span style="mso-spacerun: yes;"> </span>Modelers know different: they understand the limitations of historical data, the <a href=""><span style="color: #0000ff;">mistakes we make when we don’t understand those limitations</span></a>, and how to assemble historical data together with human expertise to build models to drive business value in a rapidly changing future.</span></div>
<div style="text-align: left;"> </div>
<div style="text-align: left;"><span style="font-size: small;">By building an accurate model of a decision, and “baking in” expert knowledge, we can build a framework that can guide us towards the data that has the highest value for decision making, and avoid wasting time and effort on data gathering, storage, migration, and cleansing projects that don’t matter.<span style="mso-spacerun: yes;"> </span>By doing this, we can transcend the often high cost of “big data” and move towards an organization-wide discipline of better decision making . </span></div>
<p><span style="font-size: small;">Want to know more about how great models can drive value for your organization? Drop me a line at <a href="mailto:lorien.pratt@quantellia.com">lorien.pratt@quantellia.com</a> and/or visit <a href=""></a> to learn more.</span></p>
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Tue, 04 Jun 2013 16:04:00 -0400
Business and Management
Modeling
quantellia
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Understanding the US 2012 Presidential Election Result: How Models Triumphed over Big Data
<div id="AdnTop"><div class="AdnTopLeft" style="float:left"></div><div class="AdnTopRight" style="float:right"></div><div style="clear:both"></div></div><p>[youtube:G2spCny2zOk]</p>
<div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-family: Calibri; font-size: medium;">Today, opinions of what happened in the 2012 presidential election are beginning to settle.<span style="mso-spacerun: yes;"> </span>Since history is often written from the perspective of the winners, many commentators have attributed the American right’s pre-election false confidence to a sort of blindness or group-think.<span style="mso-spacerun: yes;"> </span>But there’s another truth.<span style="mso-spacerun: yes;"> </span><strong style="mso-bidi-font-weight: normal;">Given what was known ahead of the election,</strong> <strong style="mso-bidi-font-weight: normal;">the prediction that Romney would win was more defensible than the prediction that Obama would be re-elected</strong>.</span></div>
<div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-family: Calibri; font-size: medium;">The video above shows why.</span></div>
<div><span style="font-family: Calibri; font-size: medium;">The reason is simple. Take a look at this graph, reflecting data published by the social science data analysis network (SSDAN).</span></div>
<div><img src="/BL1/image.axd?picture=2012%2f11%2ffirst-pic-election-blog.png" alt="" width="668" height="352" /></div>
<div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-family: Calibri; font-size: medium;">As you can see, the percent of African Americans who voted in 2008 is a clear departure from the historical trend. <span style="mso-spacerun: yes;"> </span>It’s reasonable to assume that Republicans concluded that the pattern would revert to historical levels, which given the overwhelming amount of data going back over 30 years, is a completely rational, “big data” conclusion.<span style="mso-spacerun: yes;"> </span>(Read Nobel laureate Daniel Kahneman’s “Thinking Fast and Slow” for a clear and deep analysis of this phenomenon, which is called <em style="mso-bidi-font-style: normal;">Regression to the Mean</em>). </span></div>
<div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-family: Calibri; font-size: medium;">An alternative explanation, of course, is that in 2008, something exceptional happened. And that pattern continued into 2012.<span style="mso-spacerun: yes;"> </span>Predicting the future requires an additional ingredient, beyond simply projecting historical trends:</span></div>
<div class="MsoNormal" style="text-align: center; margin: 0in 0in 10pt;"><span style="font-size: medium;"><strong style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">The Future = Historical Trends + Unique events and decisions happening today</span></strong></span></div>
<div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-family: Calibri; font-size: medium;">Nassim Taleb defines a “black swan” as an event that is 1) a surprise, that has 2) a big effect, and that 3) history rationalizes with hindsight:<span style="mso-spacerun: yes;"> </span>“of course the right was ignoring the obvious”.<span style="mso-spacerun: yes;"> </span>The reason Black Swans happen: ignoring the second half of the above equation.<span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span><span style="mso-spacerun: yes;"> </span>Taleb describes dozens of historical events like this one, where misunderstanding exceptions to historical rules has led to disaster.<span style="mso-spacerun: yes;"> </span></span></div>
<div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: medium;"><strong style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">Simply put, the future is not always like the past.<span style="mso-spacerun: yes;"> </span>It is essential to know when it is, and isn’t.</span></strong></span></div>
<div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-family: Calibri; font-size: medium;">Obama’s win qualifies on all three Black Swan criteria.<span style="mso-spacerun: yes;"> </span>Since such a high percentage of blacks voted for Obama, this miscalculation can be seen as having misled many Republicans to believe in Romney’s guaranteed election, and perhaps even to have caused the loss through leading to an inappropriately small focus on the needs of blacks and other minorities. What’s missing is the ability to clearly analyze the right-hand side of the equation: <strong style="mso-bidi-font-weight: normal;">how do we know when something new is unique enough that it changes the course of history?<span style="mso-spacerun: yes;"> </span></strong></span></div>
<div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-family: Calibri; font-size: medium;">It is clear that the Democrats were masters of this “secret sauce”.<span style="mso-spacerun: yes;"> </span>They built an on-the-ground voter turnout operation to bump the curve upward from its expected value in exactly the places that would affect the Electoral College result.<span style="mso-spacerun: yes;"> </span>By being able to focus their resources on exactly where they would contribute most towards achieving victory, <strong style="mso-bidi-font-weight: normal;">the Democrats effectively out-modeled the Republicans.</strong><span style="mso-spacerun: yes;"> </span></span></div>
<div class="MsoNormal" style="margin: 0in 0in 10pt;"><span style="font-size: medium;"><strong style="mso-bidi-font-weight: normal;"><span style="font-family: Calibri;">Before the book is closed on this election, all who chronicle its history should ensure that the modelers on both sides are appropriately acknowledged.<span style="mso-spacerun: yes;"> </span>Because from now on, close elections will be won by campaigns who base their strategic decisions on models that are better than those of their competitors.
<p><span style="font-size: medium;">Want to know more about how great models can drive value for your organization? Drop me a line at <a href="mailto:lorien.pratt@quantellia.com">lorien.pratt@quantellia.com</a> and/or visit <a href=""></a> to learn more.</span></p>
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Sat, 17 Nov 2012 16:04:00 -0400
General
Politics
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Tax Policy and the Economy: Towards Better Understanding and More Productive Discussion
<div id="AdnTop"><div class="AdnTopLeft" style="float:left"></div><div class="AdnTopRight" style="float:right"></div><div style="clear:both"></div></div><div><span style="font-size: small;">It's exhausting: understanding the economy in the midst of this election season is incredibly complex. And political economics tends to be, well, adversarial. Trying to understand the likely outcomes of opposing claims about economic policy—what does each mean for the future?—is maddening. There are SO many moving parts and incomplete facts, not to mention misleading commentary. And now, here we are, at a critical point in time, at an election that could shape the economic destiny of the United States for many years to come. Yet we have few aids, other than history lessons and common sense, to cut through the complexity and grasp the real consequences. </span></div>
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<div><span style="font-size: small;">We need something to help. A way to clearly and simply decipher and weigh the alternatives and implications. How can subjective assertions be made more objective? How can relevant details be defined, tested, and considered, say from the perspective of various “what if” scenarios? Could opposing claims be compared and contrasted much more easily?</span></div>
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<div><span style="font-size: small;">The answer is yes, there IS something! If interested, read on.</span></div>
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<div><span style="font-size: small;"> First, some background: Democratic societies are founded on the idea that government is “by the people, for the people.” But today, most are far more complex than their founders could have conceived. Let’s face it, it’s difficult to determine, for example, which tax policy will really lower unemployment, reduce the deficit, or raise GDP. It seems we’re left captive to the opinions of pundits and other “experts” who may have lost their objectivity in partisanship.</span></div>
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<div><span style="font-size: small;"><strong>The good news: Using the approach suggested here, any reasonable person can recover the power to independently assess political claims</strong>. As a result, our society as a whole can recover the kind of transparent and participative democracy that keeps politicians accountable to The People as rightful authority.</span></div>
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<div><span style="font-size: small;">An invitation: After watching the video below, join the discussion. Together we can take on many tricky issues facing the world today—starting with, as in this example, economic policy. Only an informed electorate can make the sound judgments necessary to ensure a free society. Help us in enabling a greater understanding of our complex world through the use of advanced technology.</span></div>
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<div style="margin: 0in 0in 0pt;"><span style="font-size: small;"><strong>Moving forward: beyond the dull thud of conflicting ideology</strong></span></div>
<div><span style="font-size: small;">How do we create a common ground for those who are passionate both about advancing society, and yet also bring different points of view to the debate? How do we create a level playing field where we can explore different positions, where our goal is shared understanding and achievement of improved outcomes for everyone?</span></div>
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<div><span style="font-size: small;">[youtube:tdFTlMI9Rrs]</span></div>
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<div><span style="font-size: small;"> Before proceeding, we’ll confess that we don't have a comprehensive answer. What we do offer is a way to change a way that we discuss these topics. In particular, an assertion that "doing X will cause Y", or that "doing A will have benefit B" and "will not cause a negative outcome C" should be something that we can test, in such a way that we'll agree on the result. </span></div>
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<div><span style="font-size: small;">We should certainly be able to shed more light on questions like this than the dull thud that we often feel from futile collisions of conflicting ideologies.</span></div>
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<div><span style="font-size: small;"><strong>The right tools can help us argue constructively about complex things</strong></span><br /><span style="font-size: small;">Here’s an analogy. Let’s imagine two engineers arguing about the best design for a new airplane wing. One engineer thinks it should have an upward curving sh