Fung - Numbersense : how to use big data to your advantage

Copyright 2013 by Kaiser Fung. All rights reserved. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a database or retrieval system, without the prior written permission of the publisher.

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Iowe a great debt to readers of Numbers Rule Your World and my two blogs, and followers on Twitter. Your support keeps me going. Your enthusiasm has carried over to the McGraw-Hill team, led by Knox Huston. Knox shepherded this project while meeting the demands of being a new father. Many thanks to the production crew for putting up with the tight schedule. Grace Freedson, my agent, saw the potential of the book.

Jay Hu, Augustine Fou, and Adam Murphy contributed materials that made their way into the text. They also reviewed early drafts. The following people assisted me by discussing ideas, making connections or reading parts of the manuscript: Larry Cahoon, Steven Paben, Darrell Phillipson, Maggie Jordan, Kate Johnson, Steven Tuntono, Amanda Lee, Barbara Schoetzau, Andrew Tilton, Chiang-ling Ng, Dr. Cesare Russo, Bill McBride, Annette Fung, Kelvin Neu, Andrew Lefevre, Patty Wu, Valerie Thomas, Hillary Wool, Tara Tarpey, Celine Fung, Cathie Mahoney, Sam Kumar, Hui Soo Chae, Mike Kruger, John Lien, Scott Turner, Micah Burch, and Andrew Gelman. Laurent Lheritier is a friend whom I inadvertently left out last time. The odds are good that the above list is not complete, so please accept my sincere apology for any omission.

on non-sports fans.

This book is dedicated to my grandmother, who sadly will not see it come to print. A brave woman who grew up in tumultuous times, she taught herself to read and cook. Her cooking honed my appreciation for food, and since the field of statistics borrows quite a few culinary words, her influence is felt within these pages.

New York, April 2013

If you were responsible for marketing at America West Airlines, you faced a strong headwind as 1990 winded down. The airline industry was going into a tailspin, as business travel plummeted in response to Operation Desert Storm. Fuel prices spiked as the economy slipped into recession. The success of the recent past, your success growing the business, now felt like a heavy chain around your neck. Indeed, 1990 was a banner year for America West, the upstart airline founded by industry veteran Ed Beauvais in 1983. It reached a milestone of $1 billion in revenues. It also became the official airline of the Phoenix Suns basketball team. When the U.S. Department of Transportation recognized America West as a major airline, Beauvaiss Phoenix project had definitively arrived.

Rival airlines began to drop dead. Eastern, Midway, Pan Am, and TWA were all early victims. America West retrenched to serving only core West Coast routes; chopped fares in half, raising $125 million and holding a lease on life. But since everyone else was bleeding, the price war took no time to reach your home market of Phoenix. You were seeking a new angle to persuade travelers to choose America West when your analyst came up with some sharp analysis about on-time performance. Since 1987, airlines have been required by ).

FIGURE P-1 America West Had a Lower Flight Delay Rate, Aggregate of Five West Coast Airports

Possible story lines for new television ads like the following flashed in your head:

Guy in an expensive suit walks out of a limousine, gets tagged with the America West sticker curbside, which then transports him as if on a magic broom to his destination, while wide-eyed passengers looked on with mouths agape as they argued with each other in the airport security line. Meanwhile, your guy is seen shaking hands with his client, holding a signed contract and a huge smile, pointing to the sticker on his chest.

As it turned out, there would be no time to do anything. By the summer of 1991, America West declared bankruptcy, from which it emerged three years later after restructuring.