
How Visa Predicts Divorce - subbu
http://www.thedailybeast.com/blogs-and-stories/2010-04-06/how-mastercard-predicts-divorce/full/
======
goodside
Slightly off-topic: if you post something with a misleading title that you can
improve, please do so. This article has no information at all on how Visa
predicts divorce, just the third-hand assertion that they do. An Amazon text
search within Supercrunchers yields nothing of value, either.

~~~
idm
Exactly. Why is the word "how" in the title? Here's a choice quote from the
article regarding that question:

"Exactly how the credit industry does it—through sophisticated data-mining
techniques—is a closely guarded secret. "

Well great! Now the title isn't simply misleading, it's factually inaccurate.

~~~
Alex3917
"Why is the word 'how' in the title?"

Because TDB raise tens of millions of dollars so they could hire dozens of
celebrities and go on Colbert the day they launched, and they're trying to
make their money back.

------
kurtosis
I've heard rumors that visa uses its purchase records as a leading indicator
to trade in stocks. Having all of these sales records gives them a leading
indicator of how a particular retailer is performing, before the company
releases any statements, or speaks with analysts. While the concept sounded
simple, I'm not sure if I believe this because I had no way of knowing how
large of an advantage it would translate into. Has anyone else here heard
these kinds of stories about visa or banks? Is there are reason why this kind
of thing would be illegal or ineffective?

~~~
byrneseyeview
I know of one financial firm that did this. They didn't trade the specific
stocks, but they used their credit card data to predict what the Fed would do.

Doing it one stock at a time might raise some eyebrows; it sounds close to
insider trading. But it's accepted that people who bet on interest rates will
gather lots of data--since every economic indicator you can imagine will have
some effect on rates, it's both impossible to be a true "insider" and
impossible not to have some degree of insider information.

~~~
anamax
> Doing it one stock at a time might raise some eyebrows; it sounds close to
> insider trading.

That's not the definition of "insider trading". Insider trading is you trading
on your company's info - the company is free to do so. For example, Google
employees can't trade Rackspace on knowledge that Google is about to make a
big deal with Rackspace. Google, on the other hand, is free to do so.

From <http://en.wikipedia.org/wiki/Insider_trading>

"In the United States and many other jurisdictions, however, "insiders" are
not just limited to corporate officials and major shareholders where illegal
insider trading is concerned, but can include any individual who trades shares
based on material non-public information in violation of some duty of trust.
This duty may be imputed; for example, in many jurisdictions, in cases of
where a corporate insider "tips" a friend about non-public information likely
to have an effect on the company's share price, the duty the corporate insider
owes the company is now imputed to the friend and the friend violates a duty
to the company if he or she trades on the basis of this information."

~~~
byrneseyeview
The definition of insider trading is alarmingly flexible; it's safer to avoid
the appearance of impropriety, since that can still get you convicted.

I wasn't aware that a corporation could trade based on insider knowledge. That
seems very unlikely; it would imply that, e.g. Boesky was busted because his
fund was organized as a limited partnership. And wouldn't a corporation with
one owner be equivalent to that owner in terms of economic interest? Could I
just form byrneseyeview Inc. to take advantage of my insider knowledge?

Do you have a source for the statement that corporations can engage in insider
trading?

~~~
Tuna-Fish
I think you misunderstood his point. Any entity is allowed to trade on
information that's legally available to them without violating any duty of
trust -- if for example, Google decides to buy rackspace, it is perfectly
legal for them to buy call options in front of the announcement to profit from
the spike in value caused by the announcement, as no duty of trust is broken.

It would be, however, illegal for employees, shareholders or indeed anyone
hearing about Google's intentions about the purchase to buy those options, as
they would be breaking their duty of trust to Google by doing so. This holds
regardless of the legal status of the entity in question -- a corporate
shareholder getting privileged information from Google before the announcement
would be just as screwed as an employee.

~~~
byrneseyeview
I assumed that a deal with Rackspace meant a purchase of Rackspace products. I
agree that you can buy a stock before trying to buy out the company--but you
can do that as an individual, too.

But in this case, the company trading on credit card data is clearly analogous
to a Google employee, not to Google. They have material information about the
prospects of another company, and they use that information to trade.

~~~
Tuna-Fish
> But you can do that as an individual, too.

If you are a secretary working for Google, and overhear talks about the buyout
and proceed to load yourself on the stock, SEC is going to want to have a word
with you.

> I assumed that a deal with Rackspace meant a purchase of Rackspace products.

I don't think this would be illegal either -- with whom would Google break
it's duty of trust if they bought half of Rackspace just before announcing a
large deal?

> They have material information about the prospects of another company, and
> they use that information to trade.

I have material information of the prospects of every company I trade -- I
wouldn't trade them without. What turns this into illegal insider trading is
receiving that information from a source that is bound by duty of trust to not
speak about it. As long as the material information about the prospects of a
company does not originate from the company in question, or anyone else bound
to not divulge it, it's not insider trading.

When visa data mines credit card transactions, the information so gained can
be freely used to whatever purpose without fear from insider trading
accusations.

That being said, I do not think it's moral or right -- the laws just were
written before large-scale data mining was feasible.

~~~
byrneseyeview
If you're an individual, and you plan on buying a company, you can accumulate
stock in it first without doing insider trading. That's what I mean when I say
you can do that as an individual, too.

 _with whom would Google break it's duty of trust if they bought half of
Rackspace just before announcing a large deal?_

This may be accurate. I was under the impression that insider trading referred
to possessing and using information that would have a material effect on the
stock price. i.e. nobody's "duty of trust" is breached if a cab driver
overhears his rider talking about a big deal, but I'd assume that the cab
driver could get in trouble for acting on the information. If it's really
about trading based on information obtained through a breach of trust, you end
up in an odd situation: either _any breach_ makes all trades insider trades
(i.e. executive tells information to his secretary, who leaks it to a
journalist) or any non-duty-bound link in the chain obviates the trust issue
(X tells it to Y who tells it to Z--who is overheard by A, who sells the tip
to B, who makes the trade.)

~~~
anamax
> If you're an individual, and you plan on buying a company, you can
> accumulate stock in it first without doing insider trading. That's what I
> mean when I say you can do that as an individual, too.

Yes, but that's because it's your information that you're buying said company.

However, there are other rules that apply to corporate take-overs. In the US,
you have to disclose when you reach a certain ownership level. (And no, you
can't avoid that by colluding with other people.)

> This may be accurate. I was under the impression that insider trading
> referred to possessing and using information that would have a material
> effect on the stock price.

That's why I posted the definition and link.

> i.e. nobody's "duty of trust" is breached if a cab driver overhears his
> rider talking about a big deal, but I'd assume that the cab driver could get
> in trouble for acting on the information.

Actually, the person who was overheard violated the breach of trust.

> If it's really about trading based on information obtained through a breach
> of trust, you end up in an odd situation: either any breach makes all trades
> insider trades (i.e. executive tells information to his secretary, who leaks
> it to a journalist)

Huh? There's at least one obvious breach of trust in that chain.

Yes, any breach makes the resulting trades insider trades. No, that doesn't
imply that all trades involve such breaches.

------
patio11
And if you think your purchases say a lot about you, just wait until somebody
gets a hold of your social network data.

(I am willing to bet that "Percentage of friends who divorced" and "Percentage
of friends who divorced recently" both whallop any naive demographic predictor
of divorce risk you care to name.)

~~~
jreposa
Rapleaf is already making progress with this.

<http://www.rapleaf.com/apidoc/person>

------
_debug_
The comments on that article are telling. The loss of privacy due to
inappropriate data mining looks like it may cause at least some people to "go
Amish" slowly (now, before I get jumped, I just mean "the avoidance of
technology" by "go Amish"; please don't get religious over that).

Personally, reading this article makes me glad I never opened a FaceBook
account. I wish gmail was not so all-knowing either; I hate seeing very
personally directed ads (anti-depressants when I am sad after reading a break-
up mail, for example). Just too creepy.

~~~
jacquesm
Anybody that breaks up using email in stead of a face-to-face is probably not
worth being sad over.

How people part ways says lots about them.

------
rythie
Does Visa actually know what you've bought?

"Cardholders who purchased carbon-monoxide detectors, premium birdseed, and
felt pads for the bottoms of their chair legs rarely missed a payment."

My bank statements only state where something was bought, not what was bought.
I'm not aware of a store that only sells felt pads for bottoms of chairs and
premium birdseed.

~~~
The_Fox
That statement was referring just to Canadian Tire, a retail store that also
offers credit cards. I assume the card company can only get that kind of
detailed information if you make your Canadian Tire purchase with your
Canadian Tire MasterCard.

I once purchased a CO detector at Canadian Tire... maybe I'll bring that up
when I apply for my next credit card?

------
Estragon
The article is badly titled. It explicitly states after the lede that the
author was unable to determine how Visa predicts divorce.

------
euroclydon
The Underground History of American Education posits that the main factor at
work in the school system is the homogenization of people for the benefit of
big business. From a tech perspective, it's easy to understand this
motivation; wouldn't it be easier to develop that killer mobile coupon app if
everyone had a device with the same capabilities?

Now I'm beginning to wonder if data mining is making the homogenization of
people obsolete, if hundreds of profiles can be created, and it suffices
business interests to simply be able to categorize you?

~~~
pmichaud
They don't only want to homogenize the consumer, they want to also homogenize
the workers. A fungible workforce is a boon.

------
jasonlotito
Off-topic, but related to stuff mentioned in the article.

How do we relate the idea that we own the data a company like Visa collects
about us? For example, our buying habits should be "our data." While I
understand the need for privacy, people go on to worry about how Visa will use
this information, and it's impact on privacy.

Does Visa have the right to use this data to target users?

On one hand, we'd be highly upset if Visa didn't use the data it collects in
certain cases, like anti-fraud and tracking odd behavior and warning us of it.
But then you have an article like this asking for consumer protection.

I guess the issue here is one of balance: who owns the data? If it's the user,
does the company really have the right to use that data to provide a service
with it? Even if it's anti-fraud or simple customer service? This isn't
something new, either. It's only become easier and easier to do more
accurately as technology grows.

On one hand, privacy is important for obvious reasons. On the other hand,
generated data is useful and can be used for improving our lives. Just as
privacy protects the criminals as well as the innocent, generated data can be
used for ill or for good.

I don't think I'm asking anything new. I've always been a person that wants to
track everything users do. On sites I create, I want to track everything, know
everything. Yes, I want to do this so that I can increase profit. But it's
only because I believe that a user who attempts to make a purchase and fails
really wanted the product, and it's my job to do everything in my power to get
that product to him. I have no desire to steal his data, sell his information,
or anything else. But I can see how something like this could be
misrepresented or misused.

Just some thoughts I had on this. I'd like to hear other points of view on
both sides of the spectrum. I admit I don't know enough, and while my motives
are honest, they are in a way profit driven. Customer services is profit
driven (Apple doesn't provide the CS it does because it loses money on it!)!
And if anyone has any good links on the topic, please share.

~~~
lotharbot
_"does the company really have the right to use that data to provide a service
with it?"_

Whenever I've signed up for a card, it's had a checkbox for whether or not the
company is allowed to send you "great offers from our affiliates". Presumably,
they'll only use your data if you allow them to. (Whether they hold to that in
practice is another matter.)

~~~
jasonlotito
But that has more to do with affiliates. Can Visa do what they want within
Visa with your data?

Let's say Google for example, tracking your search habits. Now it uses that
data to modify what it displays to you, like ads. This is all internal. They
don't release it to the public, or even advertisers.

Even Visa. While it can't release your data, can it use that data to send you
information?

------
ttol
Factoid: The author, Nicholas Ciarelli, was also known as Nick de Plume --
founder of thinksecret.com.

------
binarymax
I highly recommend Super Crunchers to anyone who has not yet read it. It is
written for the layman, but nonetheless it is highly fascinating and
insightful for anyone who is remotely interested in data mining.

~~~
jgrahamc
I found the book very disappointing because it glossed over any real detail.

~~~
binarymax
Like I said, its "written for the layman". If you want to get into high detail
for one of the many examples in his book...you will eventually find yourself
at places like this: <http://www.retrosheet.org/game.htm> :)

Also if you want some more technical detail about the overall process there
are plenty of books out there: <http://news.ycombinator.com/item?id=1055042>.

------
og1
According to the article UPS predicts when you are high risk of leaving their
service and will offer a sales call. I assume the salesman is allowed to offer
perk/discounts to get a customer to try to stay. I'm wondering if these models
can be figured out so you can intentionally trigger something like this to get
deals from companies that do data mining.

------
rmorrison
_The mobile social network Loopt or its competitors could conceivably predict
with 90 percent accuracy where an individual will be tomorrow._

I would think that Visa would be better positioned to do this than Loopt,
because people are more compelled to use their credit cards when they go
somewhere. You can't go to a store and forget to pay, although you can forget
to checkin.

------
shrikant
_Correction: The headline of this article originally referenced MasterCard,
not Visa._

As is evident from the post URL. But why the change?

~~~
easyfrag
Another headline correction that is needed is that the article doesn't tell us
_how_ Visa predicts divorce, just that they can.

~~~
xtho
Since they don't seem to tell what their success rate & the accuracy of the
predicted date are, I wouldn't say they "can" do it, which would imply that
they are 100% successful at predicting the day of a divorce.

------
jsm386
Political parties have been doing this for some time. Check out
[http://www.voterlistsonline.com/version2/site/page.asp?page_...](http://www.voterlistsonline.com/version2/site/page.asp?page_id=home)

You can learn a lot about a potential voter (ie is he worth making a stop when
canvasing?)

 _Purchase Premium Fields, including:

    
    
        - Home purchase/mortgage/refinance information
        - Presence/ages of children per household
        - Magazine subscriptions
        - Hunting/fishing licenses
        - Charity contributions
        - Additional polling options - including Targeted Random Sampling and Normalized Sampling*

------
MichaelGG
I wonder how expensive it is to purchase things that decrease your risk
rating, while also using cash for things considered particularly risky.

~~~
jfoutz
You have to be more careful than that.

You need to write some script to follow random links on HN while you're away
from your computer, so when you're off doing risky things you won't change
your profile.

You need to occasionally forget your cell phone, so when you're doing risky
things, forgetting your cell phone won't change your profile.

If you have a car, you need to pass through the intersections with red light
cameras at the normal times, but no extra times, so you don't change your
profile.

Does visa buy dns lookup histories? or cellphone active tower histories? or
car intersection histories? probably not. yet. better to build the habits now
though.

~~~
4ensic
Stepwise linear regression is how they do it. All statistical packages
marketed since the late 1970's include the procedures. It's what the AI craze
of the early 1990's used in their black box apps.

Basically you associate a narrow set of outcomes (Filing for divorce, filing
for bankruptcy, reporting a stolen credit card) and a mountain of possible
predictors (store type, store name, store location, number of purchases from
store in the billing cycle, ranges of purchases from a given store within the
cycle). The stat program builds a regression equation out of the raw data by
literally predicting trying to predict the past from data in the further past.

The cool thing is that you can't put in too many variables (as in you don't
have to know if something may be related or not) since the uncorrelated
variables will simply vanish in the final equation.

------
asimjalis
Given that the article does not actually talk about how Visa predicts divorce,
maybe we can speculate. Here are some ideas:

* Meals at two restaurants on same night.

* Separate vacations.

* Ages approach mid-life.

* Card used on personals websites.

~~~
crocowhile
I doubt there is a rationale trend. It's just statistics, really. My guess is
that it has more to do with the amount of money spent by each spouse rather
than what.

------
pw0ncakes
It's probably pretty easy, because in addition to _what_ is being bought, Visa
knows where the purchases occur. Most people have two clusters for their
purchases: work and home. A person who develops a third cluster may be having
an affair. If you know what's being bought, you can figure it out with even
higher probability.

