Keeping Up with the Quants: Your Guide to Understanding and Using Analytics

You probably sympathize with Galton’s struggle with the concept of regression. Indeed, the statistician David Freedman used to say that if the topic of regression comes up in a criminal or civil trial, the side that must explain regression to the jury will lose the case. Why is it so hard? The main reason for the difficulty is a recurrent theme of

“From the beginning, I thought it was awesome how many people in the top of the leaderboard were what could be called ‘amateurs.’ In fact, our group had no experience with [product recommendations] when we started, either. . . . It just goes to show that sometimes it takes a fresh perspective from outside the field to make progress.”

The procedure I adopted to tame the halo effect conforms to a general principle: decorrelate error! To understand how this principle works, imagine that a large number of observers are shown glass jars containing pennies and are challenged to estimate the number of pennies in each jar. As James Surowiecki explained in his best-selling The Wisdom of

“There are countless strategies that can be applied to any predictive modeling task and it is impossible to know at the outset which technique or analyst will be most effective.”