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Data Science v Decision Science

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Introduction: We are pleased to present to James Madison University and its business analytics program. We discuss the differences between data science and decision science for overcoming bias and noise. We walk through Definitive's decision sciences applications and provide the students access to our app, Definitive Choice. We discuss why, in a competition between data science and decision science, decision science wins easily. In fact, it is not even a fair fight!

The challenge of data science

Data science helps predict the future. It has many applications, such as:

  • The next best product to purchase on Amazon;

  • The next best movie to watch on Netflix; or,

  • The best loan product and credit risk of a borrower.

The data science algorithms, using artificial intelligence, neural networks, and machine learning, are potent and getting more powerful.

The challenge is data. Simply, data is defined as:

"The representation of our past reality."

For example, let's say you watched 20 movies on Netflix over the last year. Those 20 shows - along with your buying behavior, when you watched those shows, etc. are your "past reality" data that Netflix has stored in its database. Netflix's data science algorithms learn from that data and integrate it into its "next product" models for you and other customers.

So, does Netflix, Amazon, or any other platform have all the data of other people that look like us to help us make a "next best product" purchase decision? How do we know that the data on other people's behavior are the same as ours? Their past reality could not possibly be the same.... people are unique! People respond differently in different situations. Different social groups, genders, ethnic groups, etc have had dramatically different American experiences.

Also, what about incentives? Is Amazon incented to help me make the best decision or to help Amazon make the most money off me? Sometimes these incentives are aligned. But incentives may NOT be aligned!

Then, what about the makeup of the data, does Netflix have all the data representing their customers or just data they observe on the Netflix platform? You may be thinking "This is no big deal, if I don't like the movie Netflix recommends, I'll just move on to the next one." Good point. But what if the decision has a bigger life impact, like a loan or a parole decision?

If you are a borrower and you do not typically use the banking system, how could a bank possibly predict payment behavior accurately for people whose payment data is not in the bank's credit database? Just because the banks do not have access to your payment data, does not mean that you did not pay your bills on time. People outside the banking system may greatly benefit from loans to provide life-improving opportunities for buying a car, a house, etc.

These questions about the representativeness, incentives, and completeness of the data demonstrate the systemic bias challenge of data science. These are the sort of biases that occur when the data is not fully available to make an accurate prediction. Systemic biases may occur to anyone. They are particularly acute in social groups that have not typically been represented in the data. Think of systemic bias as walls built to help certain people and have the impact of keeping others out. As algorithms become more powerful, the systemic bias walls only get higher. Our past reality is fixed. If there is a previous bias, powerful algorithms only enhance that bias. As a result: Given the fact that racism or other "isms" are part of our past reality -- related biases, by definition, must be resident in the data. Thus, the algorithms trained on that data must also be biased.

The late Harvard scientist and system researcher Donella Meadows said:

“…. most of what goes wrong in systems goes wrong because of biased, late, or missing information.”

Decision Science as the answer

Think of decision science as a way to create your own preference model - far better than any model offered by data science. It is not really a fair fight. Think of data science as one of the blind mice trying to learn about the elephant by a single part of that elephant. Decision science is the whole elephant.

In economics, aggregate demand is a summation of all the individuals' utility for a good or service. An individual's utility consists of a set of multiple preferences about a good or service. Your preferences are a weighted collection of "what is important to me" about buying something. That something could be on Amazon, Netflix, or a loan to buy a house.

What economists do not tell you is that understanding your own utility is very challenging! Much of the challenge has to do with how our brains operate and some of our decision quirks, called "cognitive biases."

See the article: Assessing value like Warren Buffett

The challenge with data science is that no model could possibly have enough data to make an accurate prediction consistently. On the flip side, if a model has too much latent data, the model runs the risk of overfitting to a unique situation that does not persist in the future. You are unique and your preferences regularly change based on situational framing. Data looks to the past. Humans look to the future.

Decision science saves the day by providing tools to help you easily and quickly develop your personal utility model. Decision science provides the tools to help you make a confidence-inspiring decision, grounded in your personal "what is important to me" model. These tools are easily updated as your personal situation changes.

Data science models can be helpful when building your personal utility model, but only in the appropriate context. They can be a tool to help you narrow down alternatives or understand risks. Data science models can be beneficial as an input to your overarching decision science-enabled process. But data science is only a tool. Decision science has the answer for you to best understand your individual preferences in the context of making a significant purchase or financial decision.

Data science can be a tool to enable the best decision science-based process. Do not confuse data science with the best decision.


Jeff Hulett provided a presentation to JMU's Business Analytics program on March 30, 2023. Thanks to Drs. Raktim Pal and Rhonda Syler for hosting us.

Follow this link for our presentation.

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