Redman: How to Battle 'Good-Enough' Data

Some weeks ago I wrote an "Open Book" on TheStreet.com in which I pointed out the contributions of poor data quality to the credit crisis and advised investors, regulators and company leaders to demand far better data.

As a reminder, poor quality data is one of the top two or three underlying causes of the credit crisis. Excessive greed is right up there as well and, unfortunately greed and poor data quality have uncanny ways of exacerbating one another. Lack of transparency and incorrect (sometimes falsified) data make it easier for the excessively greedy to proceed unchecked. And the greedy are strongly motivated to be opaque and to "manage the facts."

That article stimulated many discussions. While most people agree with my analysis, they also think I was too harsh. They point out that, in many cases, the data were "good enough." Income data on mortgages were "good enough" to make the loans, descriptions of complex products were "good enough" to sell them, and, until recently, balance sheets were "good enough" for banks to loan to one another.

These discussions have convinced me that I was not direct enough.

No one would argue, for example, that a brake disc that failed, killing a driver and her passengers, was "good enough" because it fit into wheel assembly. Nor would anyone argue that a surgery in which the patient died was "good enough" because it was a technical success.

Since the beginning of the Industrial Revolution (at least) quality has proven itself a winning long-term strategy. Anyone who doubts this point should compare the annual reports of Toyota (TM Quote), Sony (SNE Quote) and GE (GE Quote) with their respective competitors. Companies like these, that embrace strategies of high-quality, enjoy lower costs and more satisfied customers. In contrast, of course, over the long-term, inattention to quality is a big loser. However, large and growing markets can cover up mediocre quality. Cell phone service is a good example.