FutureWatch: Understanding the Implications of Big Data

As a futurist, I have been watching the trend of big data for some time. In fact, it has become so commonplace that it is not technically a trend anymore. However, while the practice of big data is becoming unremarkable, a common understanding of what it really means is not. Somewhat like the idea of ‘the cloud’ ten years ago, big data is just beginning to form its definition in mainstream culture. Furthermore, the effects of this shift are becoming apparent.

Today’s blog provides insights about the implications of big data. The examples below find their origin in a recent LA Time article which provides fascinating insights about how big data is changing the banking lending industry. Let’s begin with a quick overview of how we have traditionally awarded consumer credit before we look at how big data is changing things.

We all have credit scores. In fact, how much credit we are granted is based on your score. These numbers are created from a combination of several factors and include things such as how much you owe, how well you pay back what you owe and the length of your credit history. Together, these factors are used to provide creditors with an indication about how safe or how risky your loan request is.

So what happens when big data impacts the lending industry and the traditional credit request process? In short, the industry begins to innovate!

As a reminder, big data refers to using the vast amounts of information that is available as a result of living in an information age. This includes data about which web sites you visit (and when), your social media profiles and your on-line purchasing habits. While you knew that Amazon uses this type of information to customize your buying experience, you should also be aware that this data is now being analyzed by credit companies.

In his LA Times article, Koren pointed out big data ingredients are now being used by some lending companies to assess credit applications. Your credit application may not include reviews of things such as;

  • Your college major,
  • The reviews on Yelp about your business (your good business balance sheet can be negated by negative customer reviews!), and,
  • Whether you type your application in ALL CAPS (people who do are a much higher credit risk).

If these things surprise you, listen to the most shocking one! Facebook recently secured a patent that “would assess a borrower’s creditworthiness based on the credit scores of Facebook friends” (Koren).

So is the application of big data to credit a good thing or a bad thing?

Yes (meaning it’s both)!

At its worst, big data can be invasive and based on algorithms that don’t fully reflect the way real-life works (e.g. – A degree in Russian Language may not seem highly employable until you understand that this person works as a translator for the Russian Embassy). At its best, big data can move us beyond credit assumptions that are antiquated and inadequate. For example, Mr. Brigham was recently given a loan for a $700,000 condo by a lender who uses big data. After being turned down by many banks, Brigham was granted a loan because non-traditional assessments deemed him loan-worthy. In fact, he was even assessed with low enough risk to also waive the costly mortgage insurance (Koren).

Welcome to the era of big data banking. Whether you acknowledge it or not, big data is impacting your life. In and of itself, it is a neutral issue. However, how we use it will create our future Jekyll and Hyde’s! In fact, look for the ethics of big data to become a dominant issue in the next decade.

So how should you respond to big data? The company ZestFinance’s slogan summarizes perfectly – just remember that, “All data is credit data”.


 

Head ShotDr. Jeff Suderman an educator, futurist, consultant and pracademic who works in the field of organizational development. He can’t wait to ask his banker how they assessed his line of credit! He partners with clients to improve culture, leadership, teamwork, organizational alignment, strategy and organizational future-readiness. He resides in Palm Desert, California. Twitter: @jlsuderman

Fear This, Not That! You May be Afraid of the Wrong Things

Misdirected fear.

When our minds focus on the wrong issues, our misdirected fear can keep us from working on the things that matter. For example, in the weekend LA Times Parade magazine, Maura Rhodes provided a short list of what we tend to focus on versus what we should really be fearing (see graphic).Fear This Not That 2

Organizations also encounter this same problem. When we focus on the wrong thing we attempt to fix the wrong problems with misguided efforts. Here are three ‘Fear This, Not That’ scenarios that I bump into as I work with organizations.

1. Fear a faulty hiring process, not problem employees! No one enjoys a bad employee. However, if we aren’t careful with who we let in the front door, we can expect a busy back-door! I have inherited more than my share of bad employees. I’ve also hired a few myself. A consistent pattern with problem staff is that they provided early warning signals about poor performance (usually in the interview or during their probation period). If your HR office is not a strong collaborator during the hiring, probation and evaluation process, you can expect problem employees. When you are supported by a robust interview (which must include the three C’s – character, competency and chemistry), you will generally make good decisions. When we don’t, low performer employees cause leaders to develop a defensive leadership style. We create better leaders by hiring better employees.

2. Fear your strategic planning process, not the future! As a futurist, I consistently speak with people who hear what I do and say, “Oh, we need to understand the future better”. Then they go on to tell me about the many challenges that an uncertain future brings. Usually their focus is on what they don’t know. Very few speak about what they do know or how they can know more. If your strategic plan is not using the tools of strategic foresight as a means to proactively engage with the future, you have reason to fear it. As we equip ourselves with future knowledge we enable ourselves to build and activate better strategy. When we don’t, we fear the future.

3. Fear organizations who focus on leadership development rather than the development of good leadership. While this phrase may seem like I am splitting hairs, the difference between leadership and good leadership is immense. Leadership development focuses on what leaders do. While what a leader accomplishes is important, it is insufficient. Bin Laden, Hitler and President Mugabe (Zimbabwe) were effective leaders who left a path of destruction in their wake. Instead, when we focus on good leadership we discuss the hard issues – why are we leading, what is good and how do we improve our collective well-being. While that statement contains a throwback hippy sentimentality, the current rise of ethics, morality and ends-focus (not just the means) is also increasing in our business literature.

As we examine our fears, we need to ensure we are afraid of the right things. This requires us to challenge our assumptions. Learning to question our fears and identify the important ones can mobilize us from inaction to action.

I’d love to hear your own versions of misdirected fear in the workplace. ‘Fear This, Not That!’.


 

Jeff SuHead Shotderman is a futurist, professor and consultant who works in the field of organizational development. He works with clients to improve leadership, teamwork, organizational alignment, strategy and organizational FutureReadiness. He resides in Palm Desert, California. Twitter: @jlsuderman

Rhodes, M. (2015). Fears 2015. Parade Magazine via the LA Times. Sunday, January 18, 2015.