Blog > September 2008

One piece of work we did for the latest release of Brandwatch was to add a ‘normalise’ option to our graphs. It was at times difficult to know, by looking at a graph, which variations in a brand’s number of mentions (or in its sentiment) where really meaningful. Quite often variations may be unrelated to the brand: it may be that more posts in general were produced on that day, or that our spider crawled better, etc. So when graphing several brands, it made sense to correlate the brands’ statistics in order to infer which variations were really important – which is roughly what normalisation does.

One other way to look at this is: given some data, how do you turn it into useful information. And this is really, really subjective. What I consider as noise, you may consider as insightful – and vice versa.

Even assuming we agree on what we try to measure, and on what would make an interesting measurement, the interpretation of the information is by definition subjective. A good example of this is … the housing market. My specialist subject again.

Let’s summarise what seems to be the common understanding of the UK housing market – according to the press, tv, estate agents and other ‘experts’:

• the UK housing market has seen strong growth in the last 10 years
• this growth is supported by ‘sound fundamentals’ (high employment, housing shortage, low inflation and interest rates)
• if any slowdown had to happen, it should have been just that: a slowdown, a ‘soft landing’
• the US housing market ran into problems, caused by (and only by) subprime lending
• the subprime issue has forced UK banks to restrict lending, which is stopping people from buying houses
• there is no subprime in the UK

Bottom line: as soon as banks go back to normal lending practices, the market will boom again.

I’m not a financial advisor, nor am I an economics expert, but the above sometimes sounds like wishful thinking to me. It is an interpretation of some information, and it does sound plausible in some respect. But it is possible to come up with a contradictory interpretation which will sound just as plausible, if not more:

• the UK housing market has formed a bubble, with exponential growth, over the last 10 years
• sound fundamentals (assuming they are sound) can only go one way – they become unsound. It’s difficult, for example, to slash already-low interest rates. Some other fundamentals are just myths: how many empty houses can you have in a housing shortage?
• bubbles are not followed by soft landings
• lending practices were lax for all types of loans in the US, not just subprime
• UK banks now ‘restrict’ loans by requiring 10% deposits and only lending 4x salary. THIS is normal practice. If we have seen a fall of 70% in lending over the last year, it just means that 70% of all loans made a year ago were not viable. Here is the ‘UK subprime’
• people don’t want to buy houses anymore. Who would buy when the market is crashing by more than 10% annually?

Bottom line: the UK market is in for a serious crash, from which it won’t recover soon. The higher you go, the bigger the fall.

Endless blog posts could be written about the merits of either interpretation (and this is already quite long). But my point is: how do you get Brandwatch to build a sound, logical (irrefutable?) narrative from the data? That is one of the challenge we currently face.