The Ash Twins Blog

Computer Scientist Panos Ipeirotis writes that

An interesting example of a company deriving policy based on their predictive model is American Express. They realized that the feature “customer buys in a 99c store” is correlated with higher delinquency rates. So, AmEx decided to decrease the credit limit for such customers. Of course, the result will be that potentially affected customers will stop visiting such stores, decreasing the value of this policy for AmEx. Furthermore, this action may cause even more economic stress to these customers that are now “forced” to buy from more expensive stores, and this may result in a much higher default rate for AmEx. This “unexpected” outcome is the effect of devising policy based on non-causal variables.

The New York Times reports today that

the Walt Disney Company is now offering refunds for all those “Baby Einstein” videos that did not make children into geniuses. . .

Baby Einstein, founded in 1997, was one of the earliest players in what became a huge electronic media market for babies and toddlers. Acquired by Disney in 2001, the company expanded to a full line of books, toys, flashcards and apparel, along with DVDs including “Baby Mozart,” “Baby Shakespeare” and “Baby Galileo.”

The videos — simple productions featuring music, puppets, bright colors, and not many words — became a staple of baby life: According to a 2003 study, a third of all American babies from 6 months to 2 years old had at least one “Baby Einstein” video.

Despite their ubiquity, and the fact that many babies are transfixed by the videos, the American Academy of Pediatrics recommends no screen time at all for children under 2.

In 2006, Ms. Linn’s group went to the Federal Trade Commission to complain about the educational claims made by Disney and another company, Brainy Baby. As a result, the companies dropped the word “educational” from their marketing. . .

Last year, lawyers threatened a class-action lawsuit for unfair and deceptive practices unless Disney agreed to refund the full purchase price to all who bought the videos since 2004. “The Walt Disney Company’s entire Baby Einstein marketing regime is based on express and implied claims that their videos are educational and beneficial for early childhood development,” a letter from the lawyers said, calling those claims “false because research shows that television viewing is potentially harmful for very young children.”

The letter cited estimates from The Washington Post and Business Week that Baby Einstein controlled 90 percent of the baby media market, and sold $200 million worth of products annually.

The letter also described studies showing that television exposure at ages 1 through 3 is associated with attention problems at age 7.