Join Wayne Winston for an in-depth discussion in this video On the importance of analytics, part of Wayne Winston on Analytics.
I think the answer to this question depends on the benefits you derive from analytics versus the cost of performing the analytic analysis. So, let's take some sports examples on this. So you may be familiar with the MIT Sloan Conference on Mathematics and Analytics, and Sports that's run by Daryl Morey who's the head of the Houston Rockets as an NBA from MIT. And it used to be a couple of NBA teams came to this, and almost nobody from other sports. A few people came to this conference, and now it's like 5,000 people that come to this conference.
It's really mushroomed. because people see there are a lot of benefits to be obtained from analytics in sports, and the cost is not all that high. Let's look at baseball. Now, baseball, the benefits from analytics are much higher, I believe, than other sports. Now, why is that? because basically, baseball is pitcher versus hitter. It's an individual game. Basketball and football are basically team games, and it's hard to decompose basically, the effect, the effect of a player. How much is Le, LeBron James worth? That's a difficult question to answer.
How much is Tom Brady worth to the Patriots? So, you don't see that many of the football teams doing analytics, because it's really hard to get a lot of benefit versus the cost. I think in the future, this may change. But in baseball, you cannot in my mind, have a successful team in baseball without using analytics. The Yankees for a long time didn't use analytics. That was the theme of Moneyball. How could the Oakland A's spend about a third to a quarter as much money as the New York Yankees and be more success, at least as successful in the regular season? And basically, that was the, theme of that book and theme of the movie.
And basically, the Yankees got burned in the A-Rod contract and now I think they see the importance of analytics. So again, sports is a good example. You'll see much more benefit as we said, from the analytics in baseball relative to the cost and the data in baseball is readily available. But in football and basketball, we probably need better data to get the benefits we need. So the application of analytics is more costly, and at this point the benefit is not known to be as great as baseball. So you don't see as much analytics there. Then another question is, to paraphrase Nate Silver's Wonderful book, The Signal and the Noise, which was on the best seller list for several months.
Basically, when you get information, you're always getting a signal and you're always getting noise. Like is the world getting warmer. Most scientists believe the world is getting warmer, it's going to be hurt harmful to the earth. But what we have to worry about there is, is there noise in the data. In other words, is, basically, the warming of the Earth going to cause Bombay and London and New York to go under water as Al Gore predicted in his movie, An Inconvenient Truth? So basically, if the temperature goes up a little bit, some of that is a signal perhaps, the world is getting warmer. Some is just noise in the data.
How we decompose the signal to noise is really a province for advanced statisticians. But if you're really going to be good in analytics, you have to understand what was signal and what was noise. Like you watch a sporting event, you watch your favorite college football team, Oklahoma beat Oklahoma State by seven points. Okay, but you thought Oklahoma was 20 points better. They didn't win as much as you thought. So basically how should you change your opinion of those two teams' abilities? That's a very important thing. And finally in education. Okay, teachers' cost versus benefits for basically analyzing how effective teachers are.
What is the benefit to a great fourth grade teacher to be answered by a college professor. I would think the benefit to the world of a great fourth grade teacher is much greater than my benefit, although we'd like to see that quantified. And then basically, then, what, if we know for instance the benefit from a great fourth grade teache,r is he can improve a student's learning, earning capacity during his life by $400,000. Then basically, shouldn't we pay that teacher more money, just, the benefit he's creating financially. Not to mention that the student will probably have a better life in other areas.
So basically, analyzing the cost and benefit's in education is really important. Analyzing the cost and benefits in health care is really important. In other words, the benefit from the treatment doesn't justify the cost. Some of these cancer medicines cost hundred of thousands of dollars, is the benefit worth that? I mean I'm not an ethicist as the work goes, but basically these are the issues that need to be considered.
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- Predictive vs. prescriptive analytics
- What do you need to know to become an analytic professional?
- Looking at examples of good and bad metrics
- How mobile devices will shape analytics