On Data Science, Causal Models, & AI

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You must be Platinum, Diamond, or Elite Plus somewhere. Maybe Premier Plus?

Since LLM developers discovered the idea of using multiple models (or agents?) that interact with each other to produce richer output, we have seen another round of semantic reduction by overusing “deep” and “research” (as we did with “intelligence”, “thinking”, and “reasoning”).

In this post “The Differences between Deep Research, Deep Research, and Deep Research”, Han Lee tries to make sense of the deep research mania and offers a quadrant to classify different models.

Is the “depth” of research just the number of iterations in the search for information? That’s another story.

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I just received this email from Google. If you have a Google Workspace account, you may have received it as well. As soon as I saw the email, I remembered a Reddit thread from yesterday (where the meme is from).

I can’t turn off “Gemini Apps Activity” in my account (the account admin can’t turn it off either). Why is this? Why would I use a tool that is forced upon me while it is also giving me little to no control over my data?

See the Reddit thread here for more frustration with the haphazard rollout of “AI” tools (not limited to Google or privacy issues).

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Sentence completion is a predictive task for the language model, not a causal one. It works as just another data model – it doesn’t need a world model, that is, unless a revolution is at stake.

World models are causal representations of the environment to the extent required by the tasks to be performed (as discussed here and there).

World models guide actions by making predictions based on this causal representation. So while not all data models need to be causal, all world models do.

LLM agents as world modelers?

LLMs are data models, so they are useful simplifications of the world. How well LLM agents can move from one useful simplification to another will determine the business use cases for which the agents will be useful. We’re about to find out.

* Image courtesy of xkcd.com.

Just came across this new, free book on the basics of enterprise data management. The book does a great job of covering the most important aspects of data management from a data science perspective.

I have a hard time fitting all of these tool-focused topics like using Git, CI/CD, Docker, SSH, OAuth into my course syllabi. These are things to know vs. understand and we focus on the latter. But these are absolute must-knows for data workers. This is how models are deployed and optimized for production, which is the only way to make a real impact. So this will be a great quick reference to list.

The book is a very practical introduction to (almost) everything that comes after modeling in data science. Here’s the intro to data connectors (no offense to data engineers):

Your job as a data scientist is to sift through a massive pile of data to extract nuggets of real information – and then use that information. Working at the end of an external process, you must meet the data where it lives.

CI/CD and Git:

The role of Git is to make your code promotion process happen. Git allows you to configure requirements for whatever approvals and testing you need. Your CI/CD tool sits on top of that so that all this merging and branching does something.

with the footnote:

Strictly speaking, this is not true. There are a lot of different ways to kick off CI/CD jobs. But, the right way to do it is to base it on Git operations.

I like the tone here (and the drawings). You can check out the book here.

In my earlier work, I applied systems modeling to business problems using agent-based and system dynamics models. My background in systems thinking prompts me to question every time we make claims we make about causal relationships in data that has many moving and interacting parts, as in most business analytics problems.

In business, when we look for cause-and-effect relationships, we typically measure the impact of a single action. The stakes are measured in financial terms, not human lives. Even if we get it wrong and attribute the increase in sales to a new ad rather than a competitor’s price hike, we can only lose money. But if we fail to identify the causes of one accident, we may fail to prevent another one, and the cost is human life.

So with accidents, we need a different framework to answer causal modeling questions, a deadly one of which is: why did the plane crash? We can no longer downplay interactions, interference, interdependencies, and feedback loops, as we tend to do when measuring the causal effect of a new ad or coupon. Systems thinking should be part of the modeling process.

Causal Analysis based on System Theory (CAST) is an accident analysis framework that aims to maximize causal learning from accidents and incidents. This is clearly a difficult and vital task. Here’s a nice summary of CAST (credit to Joel Parker):

• Causal: Don’t assume accidents are due to one “root cause” or a few “probable causes”, because it turns out that most accidents are actually due to many interacting causes.

• Analysis: Don’t blame people, because it turns out you learn more by doing a blame-free examinations of why a loss occurred, and how it occurred i.e. “ask why and how, not who”.

• System: Don’t fix just the one thing that broke, because it turns out it’s smarter to discover multiple causes, then consider multiple ways to improve the whole system.

• Theory: Don’t wait until something breaks, because it turns out it’s wiser to plan ahead by using scientific control theory and process model theory.

One of the basic tenets of CAST is that human error is a symptom of a system that needs to be fixed: redesigned or reengineered. Indeed, this is often the case. It’s easier to blame a person for pushing or not pushing a button, but why was that button needed in the first place? Well, that’s a systems question.

Root cause analysis and other approaches that are motivated by finding a single cause (e.g., average treatment effect of X) tend to miss the bigger picture by oversimplifying, and lead to a false sense of accomplishment in “solving the problem”. Here’s an example from the CAST handbook by Nancy G. Leveson:

In the crash of an American Airlines DC-10 at Chicago O’Hare Airport in 1979, the U.S. National Transportation Safety Board (NTSB) blamed only a “maintenance-induced crack” and not also a design error that allowed the slats to retract if the wing was punctured. Because of this omission, McDonnell Douglas was not required to change the design, leading to future accidents related to the same design error.

Takeaway?

Every time we think we’ve identified and estimated a causal effect, we may be better off pausing for a moment and taking a systems view. A systems mindset will lead to more questions than answers, but asking those questions is better than jumping to conclusions. This is a way to increase our chances of actually “solving” the problem.

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What if we could rank order causal effects without having to estimate them? A creative question, but would it work?

Why would we want to rank rather than estimate at the first place? First, estimating causal effects is difficult and expensive. Also, in a case like the following, we may not need to estimate the effect: The decision to intervene has already been made (say, there will be a promotion). We want to maximize the return on the promotion.

A missing piece, as I also discussed with one of the authors is the estimation of the financial impact, which usually precedes the decision to intervene (and how). Let’s skip this part for now and assume that an intervention (a specific promotion) has already been decided. So the conditional question we are answering is: Which of the customers should we target given the promotion? Can we decide this without estimating the causal effect for each customer?

The paper explores two cases where causal effect ordering may be a viable solution:

• Intervention data is not available. In other words, we only have predictions of the treatment effect, not a direct estimate as we would have in an experiment. Let’s say we only have predicted propensity scores for conversion.
• Data on the actual outcome are not available, and we have to rely on a surrogate. Let’s say we can observe a customer’s short-term revenue, but that’s only a surrogate for the actual outcome we’re interested in: customer lifetime value.

The authors use discrete choice modeling to show that in such cases where causal effect estimation is not feasible, causal effect ordering is possible if there exists a latent variable that satisfies the following two conditions:

1. Latent monotonicity: The latent variable is monotonically (positively or negatively) related to both the treatment effect and the outcome.
2. Full moderation: All (customer) features are informative only through the moderator.*

That is, following the example in the opening slide, customer features (demographics, historical and behavioral purchase patterns…) are only relevant to the effect of the promotion and the customer’s decision to leave the company through, let’s say, the customer’s price sensitivity (a perfect mediation).

Even with such strong assumptions, this looks like a useful and promising method. I came across this paper while attending a conference in December and finally found the time to take a look. Of course, there is more to the story. For example, what happens when you have multiple latent variables? If those latent variables are positively correlated, it shouldn’t be a problem, but what if they’re not? Also, the potentially different relationship between the latent variable and the outcome versus its surrogate is a concern. The authors address these boundary conditions and provide two decision trees in the paper that show when it is a good time to use causal effect ordering. Check it out here.

* The latent variable is actually a moderator of the relationship between the treatment and the outcome. The authors show how it can also be defined as a mediator between the features and the outcome (and its surrogate) when the treatment is removed from the DAG. See Figure 10 in the paper.