Wednesday, July 16, 2014

More on Business Rules vs Statistical Models

In a post Predictive Modeling vs Intuitive Business Rules, we described advantages of data-driven models over intuitive rules. The limitations of our thinking are nicely described in a free book written by a former CIA veteran, Richards J. Heuer Psychology of Intelligence Analysis. It is one of my favorite books and I highly recommend it.I have found often we are too confident about our perception and intuition and not aware that we are wrong. (For example, some fraud detection analysts use her intuitions/experience to reject statistically derived optimal fraud scores). Data-driven statistical models are powerful tools to resolve the limitations in our mental processes.

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