12th March 2009 - Sentinels and the Formula That Killed Wall Street

If you are not yet familiar with Sentinels, let me briefly explain: Sentinels are warning agents that business users can apply in order to get an early warning if something is threatening their meeting of critical business goals. Sentinels are discovered using an easy to use data mining algorithm that everyone can use, and by allowing everyone to place Sentinels around their area of responsibility, we render the organization highly capable of dealing with the chaos and crisis that might surround it. Sentinels will be broadly available mid April 2009 in the TARGIT Business Intelligence Suite version 2K9.

A few days ago we published the first technical report about Sentinels in which we specifically describe how Sentinels are able to give warnings about incidents that would go undetected when using correlation techniques or sequential pattern mining. At the same time, when planning a speech for the Platon Information Management conference in June 2009, I could not help myself posing the question:

"Could Sentinels have given early warning about the financial crisis?"

When reading the Wired Magazine article "Recipe for Disaster: The Formula That Killed Wall Street" by Felix Salmon, my curiosity was fuelled even more! The main principle of the formula is indeed based on correlation, and since Sentinels are only about warning, not predicting specific outcome, I feel that there might be a possibility that Sentinels could actually have given warning about the financial crisis…

The idea that such warning capabilities can be broadly available, and not just in the hands of a few "quants" such as described in the New York Times article "They Tried to Outsmart Wall Street" by Dennis Overbye, means that an organization as a whole will be much better suited to cope with a crisis using Sentinels. Time will show, but for now I can’t wait to test my hypothesis using the brand new version of TARGIT BI Suite.

If you are curious, here is the Formula That Killed Wall Street:

Stay CALM in the crisis! ;-)

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Updated 2009-03-12

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