Chapter 1. Making Better Decisions Based on Data

The primary purpose of data analysis is to make better decisions. There is rarely any need for us to spend time analyzing data if we aren’t under pressure to make a decision based on the results of that analysis. When you are purchasing a car, you might ask the seller what year the car was manufactured and the odometer reading. Knowing the age of the car allows you to estimate the potential value of the car. Dividing the odometer reading by the age of the car allows you to discern how hard the car has been driven, and whether it is likely to last the five years you plan to keep it. Had you not cared about purchasing the car, there would have been no need for you to do this data analysis.

In fact, we can go further—the purpose of collecting data is, in many cases, only so that you can later perform data analysis and make decisions based on that analysis. When you asked the seller the age of the car and its mileage, you were collecting data to carry out your data analysis. But it goes beyond your data collection. The car has an odometer in the first place because many people, not just potential buyers, will need to make decisions based on the mileage of the car. The odometer reading needs to support many decisions—should the manufacturer pay for a failed transmission? Is it time for an oil change? The analysis for each of these decisions is different, but they all rely on the fact that the mileage data has been collected.

Collecting data in a form that enables decisions to be made often places requirements on the collecting infrastructure and the security of such infrastructure. How does the insurance company that receives an accident claim and needs to pay its customer the car’s value know that the odometer reading is accurate? How are odometers calibrated? What kinds of safeguards are in place to ensure that the odometer has not been tampered with? What happens if the tampering is inadvertent, such as installing tires whose size is different from what was used to calibrate the odometer? The auditability of data is important whenever there are multiple parties involved, and ownership and use of the data are separate. When data is unverifiable, markets fail, optimal decisions cannot be made, and the parties involved need to resort to signaling and screening.1

Not all data is as expensive to collect and secure as the odometer reading of a car.2 The cost of sensors has dropped dramatically in recent decades, and many of our daily processes throw off so much data that we find ourselves in possession of data that we had no intention of explicitly collecting. As the hardware to collect, ingest, and store the data has become cheaper, we default to retaining the data indefinitely, keeping it around for no discernable reason. However, we still need a purpose to perform analysis on all of this data that we somehow managed to collect and store. Labor remains expensive.

The purpose that triggers data analysis is a decision that needs to be made. To move into a market or not? To pay a commission or not? How high to bid up the price? How many bags to purchase? Whether to buy now or wait a week? The decisions keep multiplying, and because data is so ubiquitous now, we no longer need to make those decisions based on heuristic rules of thumb. We can now make those decisions in a data-driven manner.

Of course, we don’t need to make every data-driven decision ourselves. The use case of estimating the value of a car that has been driven a certain distance is common enough that there are several companies that provide this as a service—they will verify that an odometer is accurate, confirm that the car hasn’t been in an accident, and compare the asking price against the typical selling price of cars in your market. The real value, therefore, comes not in making a data-driven decision once, but in being able to do it systematically and provide it as a service. This also allows companies to specialize, and continuously improve the accuracy of the decisions that can be made.

Many Similar Decisions

Because of the lower costs associated with sensors and storage, there are many more industries and use cases that now have the potential to support data-driven decision making. If you are working in such an industry, or you want to start a company that will address such a use case, the possibilities for supporting data-driven decision making have just become wider. In some cases, you will need to collect the data. In others, you will have access to data that was already collected, and, in many cases, you will need to supplement the data you have with other datasets that you will need to hunt down for which you’ll need to create proxies. In all these cases, being able to carry out data analysis to support decision making systematically on behalf of users is a good skill to possess.

In this book, I will take a decision that needs to be made and apply different statistical and machine learning methods to gain insight into making that decision. However, we don’t want to make that decision just once, even though we might occasionally pose it that way. Instead, we will look at how to make the decision in a systematic manner. Our ultimate goal will be to provide this decision-making capability as a service to our customers—they will tell us the things they reasonably can be expected to know, and we will either know or infer the rest (because we have been systematically collecting data).

When we are collecting the data, we will need to look at how to make the data secure. This will include how to ensure not only that the data has not been tampered with, but also that users’ private information is not compromised—for example, if we are systematically collecting odometer mileage and know the precise mileage of the car at any point in time, this knowledge becomes extremely sensitive information. Given enough other information about the customer (such as the home address and traffic patterns in the city in which the customer lives), the mileage is enough to be able to infer that person’s location at all times. So, the privacy implications of hosting something as seemingly innocuous as the mileage of a car can become enormous. Security implies that we need to control access to the data, and we need to maintain immutable audit logs on who has viewed or changed the data.

It is not enough to simply collect the data or use it as is. We must understand the data. Just as we needed to know the kinds of problems associated with odometer tampering to understand the factors that go into estimating a vehicle’s value based on mileage, our analysis methods will need to consider how the data was collected in real time, and the kinds of errors that could be associated with that data. Intimate knowledge of the data and its quirks is invaluable when it comes to doing data science—often the difference between a data-science startup idea that works and one that doesn’t is whether the appropriate nuances have all been thoroughly evaluated and taken into account.

When it comes to providing the decision-support capability as a service, it is not enough to simply have a way to do it in some offline system somewhere. Enabling it as a service implies a whole host of other concerns. The first set of concerns is about the quality of the decision itself—how accurate is it typically? What are the typical sources of errors? In what situations should this system not be used? The next set of concerns, however, is about the quality of service. How reliable is it? How many queries per second can it support? What is the latency between some piece of data being available, and it being incorporated into the model that is used to provide systematic decision making? In short, we will use this single use case as a way to explore many different facets of practical data science.

The Role of Data Engineers

“Wait a second,” I imagine you saying, “I never signed up for queries-per-second of a web service. We have people who do that kind of stuff. My job is to write SQL queries and create reports. I don’t recognize this thing you are talking about. It’s not what I do at all.” Or perhaps the first part of the discussion was what has you puzzled. “Decision making? That’s for the business people. Me? What I do is to design data processing systems. I can provision infrastructure, tell you what our systems are doing right now, and keep it all secure. Data science sure sounds fancy, but I do engineering. When you said Data Science on the Google Cloud Platform, I was thinking that you were going to talk about how to keep the systems humming and how to offload bursts of activity to the cloud.” A third set of people are wondering, “How is any of this data science? Where’s the discussion of different types of models and of how to make statistical inferences and evaluate them? Where’s the math? Why are you talking to data analysts and engineers? Talk to me, I’ve got a PhD.” This is a fair point—I seem to be mixing up the jobs done by different sets of people in your organization.

In other words, you might agree with the following:

  • Data analysis is there to support decision making

  • Decision making in a data-driven manner can be superior to heuristics

  • The accuracy of the decision models depends on your choice of the right statistical or machine learning approach

  • Nuances in the data can completely invalidate your modeling, so understanding the data and its quirks is crucial

  • There are large market opportunities in supporting decision making systematically and providing it as a service

  • Such services require ongoing data collection and model updates

  • Ongoing data collection implies robust security and auditing

  • Customers of the service require reliability, accuracy, and latency assurances

What you might not agree with is whether these aspects are all things that you, personally and professionally, need to be concerned about.

At Google,3 we look on the role a little more expansively. Just as we refer to all our technical staff as engineers, we look at data engineers as an inclusive term for anyone who can “shape business outcomes by performing data analysis”. To perform data analysis, you begin by building statistical models that support smart (not heuristic) decision making in a data-driven way. It is not enough to simply count and sum and graph the results using SQL queries and charting software—you must understand the statistical framework within which you are interpreting the results, and go beyond simple graphs to deriving the insight toward answering the original problem. Thus, we are talking about two domains: (a) the statistical setting in which a particular aggregate you are computing makes sense, and (b) understanding how the analysis can lead to the business outcome we are shooting for. This ability to carry out statistically valid data analysis to solve specific business problems is of paramount importance—the queries, the reports, the graphs are not the end goal. A verifiably accurate decision is.

Of course, it is not enough to do one-off data analysis. That data analysis needs to scale. In other words, the accurate decision-making process must be repeatable and be capable of being carried out by many users, not just you. The way to scale up one-off data analysis is to make it automated. After a data engineer has devised the algorithm, she should be able to make it systematic and repeatable. Just as it is a lot easier when the folks in charge of systems reliability can make code changes themselves, it is considerably easier when people who understand statistics and machine learning can code those models themselves. A data engineer, Google believes, should be able to go from building statistical and machine learning models to automating them. They can do this only if they are capable of designing, building, and troubleshooting data processing systems that are secure, reliable, fault-tolerant, scalable, and efficient.

This desire to have engineers who know data science and data scientists who can code is not Google’s alone—it’s across the industry. Jake Stein, founder of startup Stitch, concludes after looking at job ads that data engineers are the most in-demand skill in the world of big data. Carrying out analysis similar to Stein’s on Indeed job data in San Francisco and accounting for jobs that listed multiple roles, I found that the number of data engineer listings was higher than those for data analysts and data scientists combined, as illustrated in Figure 1-1.

Analysis of Indeed job data in San Francisco shows that data engineers are the most in-demand skill in the world of big data.
Figure 1-1. Analysis of Indeed job data in San Francisco shows that data engineers are the most in-demand skill in the world of big data

Even if you don’t live in San Francisco and do not work in high-tech, this is the direction that all data-focused industries in other cities are headed. The trend is accentuated by the increasing need to make repeatable, scalable decisions on the basis of data. When companies look for data engineers, what they are looking for is a person who can combine all three roles.

How realistic is it for companies to expect a Renaissance man, a virtuoso in different fields? Can they reasonably expect to hire data engineers? How likely is it that they will find someone who can design a database schema, write SQL queries, train machine learning models, code up a data processing pipeline, and figure out how to scale it all up? Surprisingly, this is a very reasonable expectation, because the amount of knowledge you need in order to do these jobs has become a lot less than what you needed a few years ago.

The Cloud Makes Data Engineers Possible

Because of the ongoing movement to the cloud, data engineers can do the job that used to be done by four people with four different sets of skills. With the advent of autoscaling, serverless, managed infrastructure that is easy to program, there are more and more people who can build scalable systems. Therefore, it is now reasonable to expect to be able to hire data engineers who are capable of creating holistic data-driven solutions to your thorniest problems. You don’t need to be a polymath to be a data engineer—you simply need to learn how to do data science on the cloud.

Saying that the cloud is what makes data engineers possible seems like a very tall claim. This hinges on what I mean by “cloud”—I don’t mean simply migrating workloads that run on-premises to infrastructure that is owned by a public cloud vendor. I’m talking, instead, about truly autoscaling, managed services that automate a lot of the infrastructure provisioning, monitoring, and management—services such as Google BigQuery, Cloud AI Platform, Cloud Dataflow, and Cloud Run on Google Cloud Platform. When you consider that the scaling and fault-tolerance of many data analysis and processing workloads can be effectively automated, provided the right set of tools is being used, it is clear that the amount of IT support that a data scientist needs dramatically reduces with a migration to the cloud.

At the same time, data science tools are becoming simpler and simpler to use. The wide availability of frameworks like Spark, scikit-learn, and Pandas has made data science and data science tools extremely accessible to the average developer—no longer do you need to be a specialist in data science to create a statistical model or train a random forest. This has opened up the field of data science to people in more traditional IT roles.

Similarly, data analysts and database administrators today can have completely different backgrounds and skillsets because data analysis has usually involved serious SQL wizardry, and database administration has typically involved deep knowledge of database indices and tuning. With the introduction of tools like BigQuery, in which tables are denormalized and the administration overhead is minimal, the role of a database administrator is considerably diminished. The growing availability of turnkey visualization tools like Tableau that connect to all the data stores within an enterprise makes it possible for a wider range of people to directly interact with enterprise warehouses and pull together compelling reports and insights.

The reason that all these data-related roles are merging together, then, is because the infrastructure problem is becoming less intense and the data analysis and modeling domain is becoming more democratized.

If you think of yourself today as a data scientist, or a data analyst, or a database administrator, or a systems programmer, this is either totally exhilarating or totally unrealistic. It is exhilarating if you can’t wait to do all the other tasks that you’ve considered beyond your ken if the barriers to entry have fallen as low as I claim they have. If you are excited and raring to learn the things you will need to know in this new world of data, welcome! This book is for you.

If my vision of a blend of roles strikes you as an unlikely dystopian future, hear me out. The vision of autoscaling services that require very little in the form of infrastructure management might be completely alien to your experience if you are in an enterprise environment that is notoriously slow moving—there is no way, you might think, that data roles are going to change as dramatically as all that by the time you retire.

Well, maybe. I don’t know where you work, and how open to change your organization is. What I believe, though, is that more and more organizations and more and more industries are going be like the tech industry in San Francisco. There will be increasingly more data engineer openings than openings for data analysts and data scientists, and data engineers will be as sought after as data scientists are today. This is because data engineers will be people who can do data science and know enough about infrastructure so as to be able to run their data science workloads on the public cloud. It will be worthwhile for you to learn data science terminology and data science frameworks, and make yourself more valuable for the next decade.

Growing automation and ease-of-use leading to widespread use is well trodden in technology. It used to be the case that if you wanted vehicular transport, you needed a horse-drawn carriage. This required people to drive you around and people to tend to your horses because driving carriages and tending to horses were such difficult things to do. But then automobiles came along, and feeding automobiles got to be as simple as pumping gas into a tank. Just as stable boys were no longer needed to take care of horses, the role of carriage drivers also became obsolete. The kind of person who didn’t have a stablehand would also not be willing to employ a dedicated driver. So, democratizing the use of cars required cars to be simple enough to operate that you could do it yourself. You might look at this and bemoan the loss of all those chauffeur jobs. The better way to look at it is that there are a lot more cars on the road because you don’t need to be able to afford a driver in order to own a car, and so all the would-be chauffeurs now drive their own cars. Even the exceptions prove the rule—this growing democratization of car ownership is only true if driving is easy and not a time sink. In developing countries where traffic is notoriously congested and labor is cheap, even the middle class might have chauffeurs. In developed countries, the time sink associated with driving and the high cost of labor has prompted a lot of research into self-driving cars.

The trend from chauffeured horse-driven carriages to self-driving cars is essentially the trend that we see in data science—as infrastructure becomes easier and easier, and involves less and less manual management, more and more data science workloads become feasible because they require a lot less scaffolding work. This means that more people can now do data science. At Google, for example, nearly 80% of employees use Dremel (Dremel is the internal counterpart to Google Cloud’s BigQuery) every month.4 Some use data in more sophisticated ways than others, but everyone touches data on a regular basis to inform their decisions. Ask someone a question, and you are likely to receive a link to a BigQuery view or query rather than to the actual answer: “Run this query every time you want to know the most up-to-date answer,” goes the thinking. BigQuery in the latter scenario has gone from being the no-ops database replacement to being the self-serve data analytics solution.

As another example of change in the workplace, think back to how correspondence used to be created. Companies had rows and rows of low-wage workers whose job was to take down dictation and then type it up. The reason that companies employed typists is that typing documents was quite time-consuming and had low value (and by this, I mean that the direct impact of the role of a typist to a company’s core mission was low). It became easier to move the responsibility for typing correspondences to low-paid workers so that higher-paid employees had the time to make sales calls, invent products, and drink martinis at lunch. But this was an inefficient way for those high-wage workers to communicate. Computerization took hold, and word processing made document creation easier and typing documents became self-serve. These days, all but the senior-most executives at a firm type their own correspondence. At the same time, the volume of correspondence has greatly exploded. That is essentially the trend you will see with data science workloads—they are going to become easier to test and deploy. So, many of the IT jobs involved with these will morph into that of writing those data science workloads because the writing of data science workloads is also becoming simplified. And as a result, data science and the ability to work with data will spread throughout an enterprise rather than being restricted to a small set of roles.

The target audience for this book is people who do computing with data. If you are a data analyst, database administrator, data engineer, data scientist, or systems programmer today, this book is for you. I foresee that your role will soon require both creating data science models and implementing them at scale in a production-ready system that has reliability and security considerations.

The current separation of responsibility between data analysts, database administrators, data scientists, and systems programmers came about in an era when each of these roles required a lot more specialized knowledge than they will in the near future. A practicing data engineer will no longer need to delegate that job to someone else. Complexity was the key reason that there came to be this separation of responsibility between the people who wrote models and the people who productionized those models. As that complexity is reduced by the advent of autoscaled, fully managed services, and simpler and simpler data science packages, it has become extremely easy for an engineer to write a data science workload, submit it to the cloud, and have that workload be executed automatically in an autoscaled manner. That’s one end of the equation—as a data scientist, you do not need a specialized army of IT specialists to make your code ready for production.

On the other side, data science itself has become a lot less complex and esoteric. With well-designed packages and easy-to-consume APIs, you do not need to implement all of the data science algorithms yourself—you need to know only what each algorithm does and be able to connect them together to solve realistic problems. Because designing a data science workload has become easier to do, it has come to be a lot more democratized. So, if you are an IT person whose job role so far has been to manage processes but you know some programming—particularly Python—and you understand your business domain well, it is quite possible for you to begin designing data processing pipelines and to begin addressing business problems with those programming skills.

In this book, therefore, we’ll talk about all these aspects of data-based services because data engineers will be involved from the designing of those services, to the development of the statistical and machine learning models, to the scalable production of those services in real time.

The Cloud Turbocharges Data Science

Before I joined Google, I was a research scientist working on machine learning algorithms for weather diagnosis and prediction. The machine learning models involved multiple weather sensors, but were highly dependent on weather radar data. A few years ago, when we undertook a project to reanalyze historical weather radar data using the latest algorithms, it took us four years to do. However, more recently, my team was able to build rainfall estimates off the same dataset, but were able to traverse the dataset in about two weeks. You can imagine the pace of innovation that results when you take something that used to take four years and make it doable in two weeks.

Four years to two weeks. The reason was that much of the work as recently as five years ago involved moving data around. We’d retrieve data from tape drives, stage it to disk, process it, and move it off to make way for the next set of data. Finding out what jobs had failed was time consuming, and retrying failed jobs involved multiple steps including a human in the loop. We were running it on a cluster of machines that had a fixed size. The combination of all these things meant that it took incredibly long periods of time to process the historical archive. After we began doing everything on the public cloud, we found that we could store all of the radar data on cloud storage, and as long as we were accessing it from virtual machines (VMs) in the same region, data transfer speeds were fast enough. We still had to stage the data to disks, carry out the computation, and bring down the VMs, but this was a lot more manageable. Simply lowering the amount of data migration and running the processes on many more machines enabled us to carry out processing much faster.

Was it more expensive to run the jobs on 10 times more machines than we did when we did the processing on-premises? No, because the economics are in favor of renting rather than buying processing power. Whether you run 10 machines for 10 hours or 100 machines for 1 hour, the cost remains the same. Why not, then, get your answers in an hour rather than 10 hours?

As it turns out, though, we were still not taking full advantage of what the cloud has to offer. We could have completely foregone the process of spinning up VMs, installing software on them, and looking for failed jobs—what we should have done was to use an autoscaling data processing pipeline such as Cloud Dataflow. Had we done that, we could have run our jobs on thousands of machines and brought our processing time from two weeks to a few hours. Not having to manage any infrastructure is itself a huge benefit when it comes to trawling through terabytes of data. Having the data processing, analysis, and machine learning autoscale to thousands of machines is a bonus.

The key benefit of performing data engineering in the cloud is the amount of time that it saves you. You shouldn’t need to wait days or months—instead, because many jobs are embarrassingly parallel, you can get your results in minutes to hours by having them run on thousands of machines. You might not be able to afford permanently owning so many machines, but it is definitely possible to rent them for minutes at a time. These time savings make autoscaled services on a public cloud the logical choice to carry out data processing.

Running data jobs on thousands of machines for minutes at a time requires fully managed services. Storing the data locally on the compute nodes or persistent disks as with the Hadoop Distributed File System (HDFS) doesn’t scale unless you know precisely what jobs are going to be run, when, and where. You will not be able to downsize the cluster of machines if you don’t have automatic retries for failed jobs. The uptime of the machines will be subject to the time taken by the most overloaded worker unless you have dynamic task shifting among the nodes in the cluster. All of these point to the need for autoscaling services that dynamically resize the cluster, move jobs between compute nodes, and can rely on highly efficient networks to move data to the nodes that are doing the processing.

On Google Cloud Platform, the key autoscaling, fully managed, “serverless” services are BigQuery (for SQL analytics), Cloud Dataflow (for data processing pipelines), Google Cloud Pub/Sub (for message-driven systems), Google Cloud Bigtable (for high-throughput ingest), Cloud Run (for applications), and Cloud AI Platform (for machine learning). Using autoscaled services like these makes it possible for a data engineer to begin tackling more complex business problems because they have been freed up from the world of managing their own machines and software installations whether in the form of bare hardware, virtual machines, or containers. Given the choice between a product that requires you to first configure a container, server, or cluster, and another product that frees you from those considerations, choose the serverless one. You will have more time to solve the problems that actually matter to your business.

Case Studies Get at the Stubborn Facts

This entire book consists of an extended case study. Why write a book about data science, not as a reference text, but as a case study? There is a reason why case studies are so popular in fields like medicine and law—case studies can help keep discussion, in the words of Paul Lawrence, “grounded in upon some of the stubborn facts that must be faced in real-life situations.”5 A case study, Lawrence continued, is “the record of complex situations that must be literally pulled apart and pulled together again for the expression of attitudes or ways of thinking brought into the classroom.”

Solving a real-world, practical problem will help cut through all the hype that surrounds big data, machine learning, cloud computing, and so on. Pulling a case study apart and putting it together in multiple ways can help illuminate the capabilities and shortcomings of the various big data and machine learning tools that are available to you. A case study can help you identify the kinds of data-driven decisions that you can make in your business and illuminate the considerations behind the data you need to collect and curate, and the kinds of statistical and machine learning models you can use.

Case studies are unfortunately too rare in the field of data analysis and machine learning—books and tutorials are full of toy problems with neat, pat solutions that fall apart in the real world. Witten and Frank, in the preface to their (excellent) book on data mining,6 captured the academic’s disdain of the practical, saying that their book aimed to “gulf [the gap] between the intensely practical approach taken by trade books that provide case studies on data mining and the more theoretical, principle-driven exposition found in current textbooks on machine learning.”7 In this book, I try to change that: it is possible to be both practical and principled. I do not, however, concern myself too much with theory. Instead, my aim will be to provide broad strokes that explain the intuition that underlies a particular approach and then dive into addressing the case study question using that approach.

You’ll get to see data science done, warts and all, on a real-world problem. One of the ways that this book will mirror practice is that I will use a real-world dataset to solve a realistic problem and address problems as they come up. So, I will begin with a decision that needs to be made and apply different statistical and machine learning methods to gain insight into making that decision in a data-driven manner. This will give you the ability to explore other problems and the confidence to solve them from first principles. As with most things, I will begin with simple solutions and work my way to more complex ones. Starting with a complex solution will only obscure details about the problem that are better understood when solving it in simpler ways. Of course, the simpler solutions will have drawbacks, and these will help to motivate the need for additional complexity.

One thing that I do not do, however, is to go back and retrofit earlier solutions based on knowledge that I gain in the process of carrying out more sophisticated approaches. In your practical work, however, I strongly recommend that you maintain the software associated with early attempts at a problem, and that you go back and continuously enhance those early attempts with what you learn along the way. Parallel experimentation is the name of the game. Due to the linear nature of a book, I don’t do it, but I heartily recommend that you continue to actively maintain several models. Given the choice of two models with similar accuracy measures, you can then choose the simpler one—it makes no sense to use more complex models if a simpler approach can work with some modifications. This is an important enough difference between what I would recommend in a real-world project and what I do in this book that I will make a note of situations in which I would normally circle back and make changes to a prior approach.

A Probabilistic Decision

Imagine that you are about to take a flight and just before the flight takes off from the runway (and you are asked to switch off your phone), you have the opportunity to send one last text message. It is past the published departure time and you are a bit anxious. Figure 1-2 presents a graphic view of the scenario.

A graphic illustration of the case study: if the flight departs late, should the road warrior cancel the meeting?
Figure 1-2. A graphic illustration of the case study: if the flight departs late, should the road warrior cancel the meeting?

The reason for your anxiety is that you have scheduled an important meeting with a client at its offices. As befits a rational data scientist,8 you scheduled things rather precisely. You have taken the airline at its word with respect to when the flight would arrive, accounted for the time to hail a taxi, and used an online mapping tool to estimate the time to the client’s office. Then, you added some leeway (say 30 minutes) and told the client what time you’d meet her. And now, it turns out that the flight is departing late. So, should you send a text informing your client that you will not be able to make the meeting because your flight will be late or should you not?

This decision could be made in many ways, including by gut instinct and using heuristics. Being very rational people, we (you and I) will make this decision informed by data. Also, we see that this is a decision made by many of the road warriors in our company day in and day out. It would be a good thing if we could do it in a systematic way and have a corporate server send out an alert to travelers about anticipated delays if we see events on their calendar that they are likely to miss. Let’s build a data framework to solve this problem.

Even if we decide to make the decision in a data-driven way, there are several approaches we could take. Should we cancel the meeting if there is greater than a 30% chance that you will miss it? Or should we assign a cost to postponing the meeting (the client might go with our competition before we get a chance to demonstrate our great product) versus not making it to a scheduled meeting (the client might never take our calls again) and minimize our expected loss in revenue? The probabilistic approach translates to risk, and many practical decisions hinge on risk. In addition, the probabilistic approach is more general because if we know the probability and the monetary loss associated with missing the meeting, it is possible to compute the expected value of any decision that we make. For example, suppose the chance of missing the meeting is 20% and we decide to not cancel the meeting (because 20% is less than our decision threshold of 30%). But there is only a 25% chance that the client will sign the big deal (worth a cool million bucks) for which you are meeting her. Because there is an 80% chance that we will make the meeting, the expected upside value of not canceling the meeting is 0.8 * 0.25 * 1 million, or $200,000. The downside value is that we do miss the meeting. Assuming that the client is 90% likely to blow us off if we miss a meeting with her, the downside value is 0.2 * 0.9 * 0.25 * 1 million, or $45,000. This yields an expected value of $155,000 in favor of not canceling the meeting. We can adjust these numbers to come up with an appropriate probabilistic decision threshold.

Another advantage of a probabilistic approach is that we can directly take into account human psychology. You might feel frazzled if you arrive at a meeting only two minutes before it starts and, as a result, might not be able to perform at your best. It could be that arriving only two minutes early to a very important meeting doesn’t feel like being on time. This obviously varies from person to person, but let’s say that this time interval that you need to settle down is 15 minutes. You want to cancel a meeting for which you cannot arrive 15 minutes early. You could also treat this time interval as your personal risk aversion threshold, a final bit of headroom if you will. Thus, you want to arrive at the client’s site 15 minutes before the meeting and you want to cancel the meeting if there is a less than 70% of chance of doing that. This, then, is our decision criterion:

Cancel the client meeting if the likelihood of arriving 15 minutes early is 70% or less.

I’ve explained the 15 minutes, but I haven’t explained the 70%. Surely, you can use the aforementioned model diagram (in which we modeled our journey from the airport to the client’s office), plug in the actual departure delay, and figure out what time you will arrive at the client’s offices. If that is less than 15 minutes before the meeting starts, you should cancel! Where does the 70% come from?

It is important to realize that the model diagram of times is not exact. The probabilistic decision framework gives you a way to treat this in a principled way. For example, although the airline company says that the flight is 127 minutes long and publishes an arrival time, not all flights are exactly 127 minutes long. If the plane happens to take off with the wind, catch a tail wind, and land against the wind, the flight might take only 90 minutes. Flights for which the winds are all precisely wrong might take 127 minutes (i.e., the airline might be publishing worst-case scenarios for the route). Google Maps is publishing predicted journey times based on historical data, and the actual journeys by taxi might be centered around those times. Your estimate of how long it takes to walk from the airport gate to the taxi stand might be predicated on landing at a specific gate, and actual times may vary. So, even though the model depicts a certain time between airline departure and your arrival at the client site, this is not an exact number. The actual time between departure and arrival might have a distribution that looks that shown in Figure 1-3.

There are many possible time differences between aircraft departure and your arrival at a client site, and the distribution of those differences is called the probability distribution function.
Figure 1-3. There are many possible time differences between aircraft departure and your arrival at a client site, and the distribution of those differences is called the probability distribution function

Intuitively, you might think that the way to read this graph is that given a time on the x-axis, you can look up the probability of that time difference on the y-axis. Given a large enough dataset (i.e., provided we made enough journeys to this client site on this airline), we can estimate the probability of a specific time difference (e.g., 227 minutes) by computing the fraction of flights for which the time difference is 227. Because the time is a continuous variable, though, the probability of any exact time is exactly zero—the probability of the entire journey taking exactly 227 minutes (and not a nanosecond more) is zero—there are infinitely many possible times, so the probability of any specific time is exactly zero.

What we would need to calculate is the probability that the time lies between 227 – ɛ and 227 + ɛ, where the epsilon is suitably small. Figure 1-4 depicts this graphically.

In real-world datasets, you won’t have continuous variables—floating-point values tend to be rounded off to perhaps six digits. Therefore, the probability of exactly 227 minutes will not be zero, given that we might have some 227-minute data in our dataset. In spite of this, it is important to realize the general principle that the probability of a time difference of 227.000000 minutes is meaningless.

Instead, you should compute the probability that the value lies between two values (such as 226.9 and 227.1, with the lefthand limit being inclusive of 226.9 and the righthand limit exclusive of 227.1). You can calculate this by adding up the number of times that 226.90, 226.91, 226.92, and so on appear in the dataset. You can calculate the desired probability by adding up the occurrences. Addition of the counts of the discrete occurrences is equivalent to integrating the continuous values. Incidentally, this is what you are doing when you use a histogram to approximate a probability—a histogram implies that you will have discretized the x-axis values into a specific number of bins.

The probability of any exact time difference (such as 227 minutes) is zero. Therefore, we usually think of the probability that the time difference is within, say 30 seconds of 227 minutes.
Figure 1-4. The probability of any exact time difference (such as 227 minutes) is zero. Therefore, we usually think of the probability that the time difference is within, say 30 seconds of 227 minutes.

The fact that you need to integrate the curve to get a probability implies that the y-axis value is not really the probability. Rather, it is the density of the probability and referred to as the probability density function (abbreviated as the PDF). It is a density because if you multiply it by the x-axis value, you get the area of the blue box, and that area is the probability. In other words, the y-axis is the probability divided by the x-axis value. In fact, the PDF can be (and often is) greater than one.

Integrating probability density functions to obtain probabilities is needed often enough and PDFs are unintuitive enough (it took me four paragraphs to explain the probability distribution function, and even that involved a fair amount of hand-waving) that it is helpful to look around for an alternative. The cumulative probability distribution function of a value x is the probability that the observed value X is less than the threshold x. For example, you can get the Cumulative Distribution Function (CDF) for 227 minutes by finding the fraction of flights for which the time difference is less than 227 minutes, as demonstrated in Figure 1-5.

The CDF is easier to understand and keep track of than the PDF. In particular, it is bounded between 0 and 1, whereas the PDF could be greater than 1.
Figure 1-5. The CDF is easier to understand and keep track of than the PDF. In particular, it is bounded between 0 and 1, whereas the PDF could be greater than 1.

Let’s interpret the graph in Figure 1-5. What does a CDF(227 minutes) = 0.8 mean? It means that 80% of flights will arrive such that we will make it to the client’s site in less than 227 minutes—this includes both the situation in which we can make it in 100 minutes and the situation in which it takes us 226 minutes. The CDF, unlike the PDF, is bounded between 0 and 1. The y-axis value is a probability, just not the probability of an exact value. It is, instead, the probability of observing all values less than that value.

Because the time to get from the arrival airport to the client’s office is unaffected by the flight’s departure delay,9 we can ignore it in our modeling. We can similarly ignore the time to walk through the airport, hail the taxi, and get ready for the meeting. So, we need only to find the likelihood of the arrival delay being more than 15 minutes. If that likelihood is 0.3 or more, we will need to cancel the meeting. In terms of the CDF, that means that the probability of arrival delays of less than 15 minutes has to be at least 0.7, as presented in Figure 1-6.

Thus, our decision criteria translate to the following:

Cancel the client meeting if the CDF of an arrival delay of 15 minutes is less than 70%.

Our decision criterion is to cancel the meeting if the CDF of an arrival delay of 15 minutes is less than 70%. Loosely speaking, we want to be 70% sure of the aircraft arriving no more than 15 minutes late.
Figure 1-6. Our decision criterion is to cancel the meeting if the CDF of an arrival delay of 15 minutes is less than 70%. Loosely speaking, we want to be 70% sure of the aircraft arriving no more than 15 minutes late.

The rest of this book is going to be about building data pipelines that enable us to compute the CDF of arrival delays using statistical and machine learning models. From the computed CDF of arrival delays, we can look up the CDF of a 15-minute arrival delay and check whether it is less than 70%.

Data and Tools

What data do we need to predict the likelihood of a specific flight delay? What tools shall we use? Should we use Hadoop? BigQuery? Should we do it on my laptop or should we do it in the public cloud? The question about data is easily answered—we will use historical flight arrival data published by the US Bureau of Transportation Statistics, analyze it, and use it to inform our decision. Often, a data scientist would choose the best tool based on his experience and just use that one tool to help make the decision, but here, I will take you on a tour of several ways that we could carry out the analysis. This will also allow us to model best practice in the sense of picking the simplest tool and analysis that suffices.

On a cursory examination of the data, we discover that there were more than 5.8 million flights in 2015 alone. We can easily envision going back and making our dataset more robust by using data from previous years also. My laptop, nice as it is, is not going to cut it. We will do the data analysis on the public cloud. Which cloud? We will use the Google Cloud Platform (GCP). Although some of the tools we use in this book (notably MySQL, Hadoop, Spark, etc.) are available on other cloud platforms, other tools (BigQuery, Cloud Dataflow, etc.) are specific to the GCP. Even in the case of MySQL, Hadoop, and Spark, using GCP will allow me to avoid fiddling around with virtual machines and machine configuration and focus solely on the data analysis. Also, I do work at Google, so this is the platform I know best.

This book is not an exhaustive look at data science—there are other books (often based on university courses) that do that. Instead, the information it contains allows you to look over my shoulder as I solve one particular data science problem using a variety of methods and tools. I promise to be quite chatty and tell you what I am thinking and why I am doing what I am doing. Instead of presenting you with fully formed solutions and code, I will show you intermediate steps as I build up to a solution.

This learning material is presented to you in three forms:

Rather than simply read this book cover to cover, I strongly encourage you to follow along with me by also taking advantage of the code. After reading each chapter, try to repeat what I did, referring to the code if something’s not clear.

Getting Started with the Code

To begin working with the code, create a project and single-region10 bucket on https://cloud.google.com/ if necessary, open up a CloudShell window, git clone the repository and follow along with me through the rest of this book. Here are more detailed steps:

  1. If you do not already have an account, create one by going to https://cloud.google.com/.

  2. Click the Go To Console button and you will be taken to your existing GCP project.

  3. Create a regional bucket to store data and intermediate outputs. On the Google Cloud Platform Console, navigate to Google Cloud Storage and create a bucket. Bucket names must be globally unique, and one way to create a memorable and potentially unique string is to use your Project ID (which is also globally unique; you can find it by going to Home on the Cloud Platform Console).

  4. Open CloudShell, your terminal access to GCP. Even though the Cloud Platform Console is very nice, I typically prefer to script things rather than go through a graphical user interface (GUI). To me, web GUIs are great for occasional and/or first-time use, but for repeatable tasks, nothing beats the terminal. To open CloudShell, on the menu bar, click the Activate CloudShell icon, as shown here:

    Image

    This actually starts a micro-VM that is alive for the duration of the browser window and gives you terminal access to the micro-VM. Close the browser window, and the micro-VM goes away. The CloudShell VM is free and comes loaded with many of the tools that developers on Google Cloud Platform will need. For example, it has Python, Git, the Google Cloud SDK and Orion (a web-based code editor) installed on it.

  5. In the CloudShell window, git clone my repository by typing the following:

    git clone \
      https://github.com/GoogleCloudPlatform/data-science-on-gcp
    cd data-science-on-gcp

    Although the CloudShell VM is ephemeral, it is attached to a persistent disk that is tied to your user account. Files that you store in that filesystem are saved across different CloudShell sessions. Hence, this Git repository and the code in it will be present in any CloudShell VM that you launch.

If you prefer to do development on your local machine (rather than in CloudShell), install the Cloud SDK and git clone the repository locally:

  1. Install gcloud on your local machine using the directions in https://cloud.google.com/sdk/downloads (gcloud is already installed in CloudShell and other Google Compute Engine VMs—so this step and the next are needed only if you want to do development on your own machine).

  2. If necessary, install Git for your platform11 by following the instructions at https://git-scm.com/book/en/v2/Getting-Started-Installing-Git. Then, open up a terminal window and git clone my repository by typing the following:

    git clone \
      https://github.com/GoogleCloudPlatform/data-science-on-gcp
    cd data-science-on-gcp

That’s it. You are now ready to follow along with me. As you do, remember that you need to change my project ID (cloud-training-demos) to the ID of your project (you can find this on the dashboard of the Cloud Platform Console) and bucket-name (gs://cloud-training-demos-ml/) to your bucket on Cloud Storage (you create this Chapter 2). In Chapter 2, we look at ingesting the data we need into the Cloud.

Summary

A key goal of data analysis is to be able to provide data-driven guidance toward making accurate decisions systematically. Ideally, this guidance can be provided as a service, and providing as a service gives rise to questions of service quality—both in terms of the accuracy of the guidance and the reliability, latency, and security of the implementation.

A data engineer needs to be able to go from designing data-based services and building statistical and machine learning models to implementing them as reliable, high-quality services. This has become easier with the advent of cloud services that provide an autoscaling, serverless, managed infrastructure. Also, the wide availability of data science tools has made it so that you don’t need to be a specialist in data science to create a statistical or machine learning model. As a result, the ability to work with data will spread throughout an enterprise—no longer will it be a restricted skill.

Our case study involves a traveler who needs to decide whether to cancel a meeting depending on whether the flight she is on will arrive late. The decision criterion is that the meeting should be canceled if the CDF of an arrival delay of 15 minutes is less than 70%. To estimate the likelihood this arrival delay, we will use historical data from the US Bureau of Transportation Statistics.

To follow along with me, create a project on Google Cloud Platform and a clone of the GitHub repository of the source code listings in this book. Alternately, try the code of this book in a sandbox environment using Qwiklabs. The folder for each of the chapters in GitHub contains a README.md file that lists the steps to be able to replicate what I do in the chapters. So, if you get stuck, refer to those README files.

1 The classic paper on this is George Akerlof’s 1970 paper titled “The Market for Lemons.” Akerlof, Michael Spence (who explained signaling), and Joseph Stiglitz (who explained screening) jointly received the 2001 Nobel Prize in Economics for describing this problem.

2 The odometer itself might not be all that expensive, but collecting that information and ensuring that it is correct has considerable costs. The last time I sold a car, I had to sign a statement that I had not tampered with the odometer, and that statement had to be notarized by a bank employee with a financial guarantee. This was required by the company that was loaning the purchase amount on the car to the buyer. Every auto mechanic is supposed to report odometer tampering, and there is a state government agency that enforces this rule. All of these costs are significant.

3 In general, you should consider everything I say in this book as things said by someone who happens to work at Google and not as official Google policy. In this case, though, Google has announced a data engineer certification that addresses a mix of roles today performed by data analysts, IT professionals, and data scientists. In this book, when I talk about official Google statements, I’ll footnote the official Google source. But even when I talk about official Google documents, the interpretation of the documents remains mine (and could be mistaken)—you should look at the linked material for what the official position is.

4 Source: Jordan Tigani, GCP Next 2016. See http://bit.ly/2j0lEbd.

5 Paul Lawrence, 1953. “The Preparation of Case Material,” The Case Method of Teaching Human Relations and Administration. Kenneth R. Andrews, ed. Harvard University Press.

6 The field of study that broadly examines the use of computers to derive insight from data has gone through more name changes than a KGB agent—statistical inference, pattern recognition, artificial intelligence, data mining, data analytics/visualization, predictive analysis, knowledge discovery, machine learning, and learning theory are some that come to mind. My recommendation would be to forget what the fad du jour calls it, and focus on the key principles and techniques that, surprisingly, haven’t changed all that much in three decades.

7 Ian Witten and Eibe Frank, 2005. Data Mining: Practical Machine Learning Tools and Techniques. 2nd ed. Elsevier.

8 Perhaps I’m simply rationalizing my own behavior—if I’m not getting to the departure gate with less than 15 minutes to spare at least once in about five flights, I decide that I must be getting to the airport too early and adjust accordingly. Fifteen minutes and 20% tend to capture my risk aversion. Yours might be different, but it shouldn’t be two hours and 1%—the time you waste at the airport could be used a lot more productively by doing more of whatever it is that you traveled to do. If you are wondering why my risk aversion threshold is not simply 15 minutes but includes an associated probabilistic threshold, read on.

9 This is not strictly true. If the flight is late due to bad weather at the destination airport, it is likely that taxi lines will be longer and ground transportation snarled as well. However, we don’t want to become bogged down in multiple sets of probability analysis, so for the purposes of this book, we’ll use the simplifying assumption of independence.

10 Single-region is explained in Chapter 2. In short, it’s because we don’t need global access.

11 Software identified in this book are suggestions only. You are responsible for evaluating whether to use any particular software and accept its license terms.

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