Predictive Models Can Lose the Plot. Here’s How to Keep Them on Track.

Algorithmic inertia can result in guidance that leads businesses astray.

Vern L. Glaser, Omid Omidvar, and Mehdi Safavi

June 13, 2023

The Research

• The authors took a historical case study approach to explore the causes and consequences of algorithmic inertia, centering on the use of algorithms by Moody’s to rate mortgage-backed securities before the 2008 financial crisis.
• They drew on government reports on official investigations into the financial crisis, which included extensive witness testimony that enabled them to effectively reconstruct changes to the Moody’s credit rating routine during the years prior.
• They gained useful information about the Moody’s credit rating ...