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It’s all about data these days and the increasingly used term “big data.”
So in the May/June issue of Foreign Affairs, there is a story titled: “The Rise of Big Data: How It’s Changing the Way We Think About the World,” by Kenneth Cukier, Data Editor of The Economist, and Viktor Mayer-Schoenberger, Professor of Internet Governance and Regulation at the Oxford Internet Institute.
“Everyone knows that the Internet has changed how businesses operate, governments function, and people live. But a new, less visible technological trend is just as transformative: ‘big data.’ Big data starts with the fact that there is a lot more information floating around these days than ever before, and it is being put to extraordinary new uses. Big data is distinct from the Internet, although the Web makes it much easier to collect and share data. Big data is about more than just communication: the idea is that we can learn from a large body of information things that we could not comprehend when we used only smaller amounts.
“In the third century BC, the Library of Alexandria was believed to house the sum of human knowledge. Today, there is enough information in the world to give every person alive 320 times as much of it as historians think was stored in Alexandria’s entire collection – an estimated 1,200 exabytes’* worth. If all this information were placed on CDs and they were stacked up, the CDs would form five separate piles that would all reach to the moon.
*Ed: an exabyte is two to the sixtieth power bytes. According to “SearchStorage,” an exabyte of storage could contain 50,000 years’ worth of DVD-quality video.
“This explosion of data is relatively new. As recently as the year 2000, only one-quarter of all the world’s stored information was digital. The rest was preserved on paper, film and other analog media. But because the amount of digital data expands so quickly – doubling around every three years – that situation was swiftly inverted. Today, less than two percent of all stored information is nondigital.”
“When it comes to generating economic growth, providing public services, or fighting wars, those who can harness big data effectively will enjoy a significant edge over others. So far, the most exciting work is happening at the municipal level, where it is easier to access data and to experiment with the information. In an effort spearheaded by New York City Mayor Michael Bloomberg (who made a fortune in the data business), the city is using big data to improve public services and lower costs. One example is a new fire-prevention strategy.
“Illegally subdivided buildings are far more likely than other buildings to go up in flames. The city gets 25,000 complaints about overcrowded buildings a year, but it has only 200 inspectors to respond. A small team of analytics specialists in the mayor’s office reckoned that big data could help resolve this imbalance between needs and resources. The team created a database of all 900,000 buildings in the city and augmented it with troves of data collected by 19 city agencies: records of tax liens, anomalies in utility usage, service cuts, missed payments, ambulance visits, local crime rates, rodent complaints, and more. Then, they compared this database to records of building fires from the past five years, ranked by severity, hoping to uncover correlations. Not surprisingly, among the predictors of a fire were the type of building and the year it was built. Less expected, however, was the finding that buildings obtaining permits for exterior brickwork correlated with lower risks of severe fire.
“Using all this data allowed the team to create a system that could help them determine which overcrowding complaints needed urgent attention. None of the buildings’ characteristics they recorded caused fires; rather, they correlated with an increased or decreased risk of fire. That knowledge has proved immensely valuable: in the past, building inspectors issued vacate orders in 13 percent of their visits; using the new method, that figure rose to 70 percent – a huge efficiency gain.
“Of course, insurance companies have long used similar methods to estimate fire risks, but they mainly rely on only a handful of attributes and usually ones that intuitively correspond with fires. By contrast, New York City’s big-data approach was able to examine many more variables, including ones that would not at first seem to have any relation to fire risk. And the city’s model was cheaper and faster, since it made use of existing data. Most important, the big-data predictions are probably more on target, too.”
“Ultimately, big data marks the moment when the ‘information society’ finally fulfills the promise implied by its name. The data take center stage. All those digital bits that have been gathered can now be harnessed in novel ways to serve new purposes and unlock new forms of value. But this requires a new way of thinking and will challenge institutions and identities. In a world where data shape decisions more and more, what purpose will remain for people, or for intuition, or for going against the facts? If everyone appeals to the data and harnesses big-data tools, perhaps what will become the central point of differentiation is unpredictability: the human element of instinct, risk taking, accidents, and even error. If so, then there will be a special need to carve out a place for the human: to reserve space for intuition, common sense, and serendipity to ensure that they are not crowded out by data and machine-made answers.
“This has important implications for the notion of progress in society. Big data enables us to experiment faster and explore more leads. These advantages should produce more innovation. But at times, the spark of invention becomes what the data do not say. That is something that no amount of data can ever confirm or corroborate, since it has yet to exist. If Henry Ford had queried big-data algorithms to discover what his customers wanted, they would have come back with ‘a faster horse,’ to recast his famous line. In a world of big data, it is the most human traits that will need to be fostered – creativity, intuition, and intellectual ambition – since human ingenuity is the source of progress.
“Big data is a resource and a tool. It is meant to inform, rather than explain; it points toward understanding, but it can still lead to misunderstanding, depending on how well it is wielded. And however dazzling the power of big data appears, its seductive glimmer must never blind us to its inherent imperfections. Rather, we must adopt this technology with an appreciation not just of its power but also of its limitations.”
Wall Street History will return in two weeks.