Data-driven is better: Lessons from handicapping the ponies


Data-driven is a buzzword again. It feels new and shiny but has been around for years. Yet, people still ask what it means to be data-driven. If you wonder why it’s important to be data-driven, you might ask your bookie. Yes, I said your bookie.

In thinking about when I first realized the power of data analysis in decision making, it took me awhile to arrive at the bookie. I searched through my memory for its origin. It wasn’t using analytics to fight healthcare fraud, the balanced scorecard for government, or studying Business Operations in college and learning about the genius of John Deming’s contribution to modern manufacturing. It was gambling. Specifically, it was handicapping race horses in my youth with my father.

Photo by John Maynard (author)

You are probably wondering what kind of kid handicaps race horses and what type of parent encourages this type of behavior. The answer is simple. My father liked to handicap thoroughbreds and spend a Saturday at the race track with friends. I was the mental math champion in my class, calculating in my head faster than anyone else. My father knew this. I was also a fairly hyper 12-year old boy with a chemistry set. So, he put my math skills to good use, kept the house safe and peaceful, and increased his winnings all at the same time.

In general, people make decisions based on feelings, experience, or data. Sticking with horse racing, let’s consider which is best at getting desired results.

Data vs. Feelings

We humans are an emotional group – swimming in feelings. For some, it is our feelings that drive our decisions without any consideration of experience or data. This is my mother. Mom seldom went to the race track. She never read a racing program, racing form, or paid attention to the tote board odds. She bet on horses based on things like their name, number, or the color of the jockey’s silk uniform. If these struck a chord with her and she felt good about them, she bet on that horse. However, Mom very seldom won because feelings can be wrong and have no correlation to the probability of a horse winning the race.

Data vs Experience

In life and business, many of us rely on experience. Our brains collect, process, and store millions of records. We use this experience in making decisions. At the race track, this would be my father’s friend Franco. He was not a regular, but he joined in with some frequency. In doing so, he learned about trainers and jockeys. Franco would often bet on horses ridden by jockeys that he remembered winning during his previous track visits. It may be the trainers he remembered. He won a little more often than my mother. Winning jockeys and trainers do have a greater chance of winning again over time and many races based on their skill. However, the horse Franco was betting may not have a real chance of winning that day even given its jockey or trainer.

Data-Driven Decisions

This would be my father at the track. Dad used a math-based system he inherited from a friend to score each horse. Given the number of races and horses entered per day, that is 150-200 multi-step calculations. This is how I learned to read a racing form and handicap horses. I did the math.

Dad’s friend Stan, who invented the system, was completely data-driven. Once he ran the calculations, he might place only a single bet per day. He placed what was a large bet for him since he was retired. Stan won with great frequency. If you knew which horse he had picked, you could easily make money.

My father wasn’t as strict. He bet more than one horse per day. Dad also had some other math-based metrics he used to identify a long-shot horse that he believed could win. So, I ran the numbers on the first system, and my father combined this data with his own data. Dad won more often than all his friends, but never at the rate Stan achieved. However, using our data analysis, Dad once picked the winner of all 14 races in a single day. When my father won, I got a tip for my math contributions.

This is how I learned data could be used to make better informed decisions, and even win some money. Later, learning about probabilities in statistics was a breeze. I never questioned the Deming approach or the idea that using data and tracking outcomes could result in better public policy and business operations. I had been taught that “only a sucker invests his time and money without looking at the numbers.”

Data-Driven in a World of Big Data

Photo courtesy of Pixabay via CC2.0

The world is producing data at incredible rates, with 90 percent created in the last two years alone. This is Big Data, and it is growing. While I would gladly run calculations in my head, this volume of data requires more powerful tools like SAS software. SAS uses artificial intelligence and machine learning to analyze billions of records quickly, providing users with insights to make better decisions. This includes fighting fraud, defeating cyber criminals, and helping society through Data for Good projects like fighting opioid addiction.

Whether in government or business, you’ll need to decide which approach will help you reach your goals. For me, I learned at an early age that being data-driven is best if you want to win.

How can being data-driven help you improve healthcare, government, or even a private business?

The Cleveland Clinic shared how data analytics was transforming their healthcare business at the most recent SAS Global Forum. You can also learn how a data-driven culture at the University of North Texas has increased student retention and reduced costs by more than $1 million, or how Illinois uncovers Medicaid fraud using data.


About Author

John Maynard

Principal Industry Consultant

John is a Principal Industry Consultant at SAS, and former State Medicaid Program Integrity Director, with nearly 25 years in state government. As part of the SAS Global Fraud practice, he supports private and federal/state public healthcare and other government social benefit programs worldwide. John has a BA in Business and holds CPA, CFE, and AHFI designations.

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