Prediction vs Theory
Feb 17, 2012

According to a recent nytimes article, Target has its ways of statistically uncovering your personal information:

"As [Target statistician] Pole’s computers crawled through the data, he was able to identify about 25 products that, when analyzed together, allowed him to assign each shopper a “pregnancy prediction” score. More important, he could also estimate her due date to within a small window, so Target could send coupons timed to very specific stages of her pregnancy."

Yesterday I blogged about the ethics of police using related methods to choose where to look for criminal activity. Target's goal is to predict the sort of products that customers will be interested in in the near future, and send relevant advertisements.

This sort of prediction makes me somewhat uncomfortable. Target doesn't have a micro model of pregnant mothers purchasing behavior. The company presumably doesn't know why pregnant mothers are making the product choices they do. What the company knows is that given present industry wide marketing practice, the state of the economy, and everything else, pregnant mothers buying habits are predictable. Now suppose that Target (or its competitor) changes marketing practices. Then pregnant mothers might buy a different set of products at Target, and the old statistical model may no longer hold.

If you don't understand "why?", it is hard to make accurate predictions. [HT Blattman]

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