It was cold and windy when I boarded Metro-North at Fordham Saturday morning. My destination was a conference at Yale’s law school: “Unlocking the Black Box: The Promise and Limits of Algorithmic Accountability in the Professions.”
Anything about black box systems grabs my attention. This particular conference was organized by Frank Pasquale, a law professor who has researched the subject deeply. His book on it came out last year. This event caught my eye because a session was devoted to finance including a presentation on recent innovations in credit scoring.
It was an impressive report, jointly presented by the co-authors, a lawyer (Mikelia Hurley) and a data scientist (Julius Adebayo). But, like so much research and advocacy, the focus was consumer credit. I’m not faulting this at all. It’s an enormous topic and affects, well, everyone. As the authors noted, current regulations exist to protect consumers but have not kept up with technical capacity to capture much broader data about consumers than any drafter of such regulations could have imagined.
I was delighted that the team went beyond analyzing the problem to suggesting possible legislation to fill the gaps. We chatted afterward. I brought up, and they were aware of, the fact that consumer credit information about business owners, historical as well as the more recent novel uses of consumer social behavior, is used to evaluate small business credit. Because the decisions fall outside consumer credit, the regs technically do not apply.
They had considered broadening their proposal to encompass this use of data but ultimately decided against it.
I understand that decision. I would have done the same thing. More important to get something on the books than muddy it by introducing a whole new basis for governing the use of big data. Plus, I much prefer to see innovations launch that solve a real problem rather than default to adding laws to make it happen. Even though I’m a former lawyer!
Still . . . .
I’m rethinking my position on this. Maybe a more full-court press is needed on behalf of small business owners everywhere. Especially in this campaign season where I just don’t see any meaningful coverage of plans to invest more in small business growth.
Until then I see small business credit as being the ultimate double-whammy. You get judged for how you leveraged consumer credit to make up gaps in your ability to finance your small business and when you do get capital and credit, its a messy and disjointed effort in which you respond to multiple requests for information that are more or less the same but just different enough to force a complete rework.
We (consumers and small business owners alike) do work hard for our money!