It’s now up to the Gang of 12 super-committee created by the debt deal to come up with a plan to trim the deficit. If history is any guide, we can expect a lot of rhetoric and emotionally charged debate around the Bush tax cuts, entitlement spending, big government, shared sacrifice and the like, and a disappointingly poor outcome as the result.
This is in stark contrast to the way industry handles complex, multi-variate, big data predictive analytics problems, which is essentially what we’re talking about here.
The government is spending more than it takes in, so it’s got to spend less, and/or take in more, while at the same time, counter intuitively, stimulating growth. Raise taxes too much, or on the wrong people, and we stifle growth. Cut spending too much, or for the wrong programs, and we get the same result.
At the same time, do we know even how much debt is acceptable, even healthy, given historically low interest rates (the August 12th 10 year treasury auction produced a 2.29% yield, the lowest in history)?
Yet I see hard problems like these being successfully addressed by industry every day. Investment banks and portfolio managers are performing predictive analytics to model a range of micro- and macro- economic scenarios on risk and performance. Pharmaceutical companies can simulate synergies among various compounds to model the effectiveness of potential vaccines and treatments. Online companies are crunching massive amounts of online data to probe what-if scenarios to intelligently segment and target users.
Recent advances in data processing and analytics technologies, including Hadoop, in-database analytics, database appliances, etc. are all being leveraged to apply powerful analysis and simulation techniques to address the most complex multi-variate predictive analytics problems – problems that are at least as hard as effectively managing our country’s finances. The left-right rhetoric-based, emotionally-charged approach to solving this country’s financial problems is a far cry from the sophisticated and highly effective approaches in use today throughout industry.
My advice to the “Gang of 12” – please hire some super-smart data analysts and do some math.