I originally published this article in Analytics-Magazine.org. The article relates to my book, Predictive Analytics: The Power to Predict Who Will Click, Buy, Lie, or Die.
Predictive Analytics: Harnessing the Power of Big Data
Every day’s a struggle. I’ve faced some tough challenges such as which surgery to get, how to invest for my business and even how to deal with identify theft. With so much stuff coming at me from all angles, daily prosperity relies on spam filters, Internet search engines, and personalized music and movie recommendations. My mailbox wonders why companies still don’t know me well enough to send less junk mail.
These predicaments matter. They can make or break your day, year or life. But what do they all have in common?
These challenges – and many others like them – are best addressed with prediction. Will the patient’s outcome from surgery be positive? Will the credit applicant turn out to be a fraudster? Will the investment fail? Will the customer respond if mailed a brochure?
There’s another angle. Beyond benefiting you and I as individuals, prediction bestows power upon an organization: Big business secures a competitive stronghold by predicting the future destiny and value of individual assets.
For example, in the mid-1990s, Chase Bank witnessed a windfall predicting mortgage outcome. By driving millions of transactional decisions with predictions about the future payment behavior of homeowners, Chase bolstered mortgage portfolio management, curtailing risk and boosting profit.
Introducing … the Clairvoyant Computer
Making such predictions poses a tough challenge. Each prediction depends on multiple factors: the various characteristics known about each patient, each homeowner and each e-mail that may be spam. How shall we attack the intricate problem of putting all these pieces together for each prediction?
The solution is machine learning; computers automatically discovering patterns and developing new knowledge by furiously feeding on modern society’s greatest and most potent unnatural resource: data.