A couple of years back, ratings agency Standard and Poor’s downgraded American debt. Not because of the state of the economy, but because of an error in its original calculations… a mere US$2.1 trillion.
Nate Silver, the poster child for analytic predictions, told a recent conference the financial crisis was as much about bad modelling as greed. The ratings agencies, he said, based assumptions on past mortgages, not the amount of people who’d default after the over-exuberance of banks in giving loans to anybody and everybody.
Welcome to the world of bad data, something that’s caught on even in Australia. GS1, the agency responsible for barcoding and other product identification systems, recently released a report on the impact of bad data on the grocery industry which found bad data costs Australian grocery retailers $350m, and that 65 percent of ‘data misalignment’ problems led to lost sales.
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