- 1 Welcome to A Business Analyst’s Introduction to Business Analytics
**I Introductory Material**- 2 Becoming a Data-Driven Business Analyst
- 3 The Computing Environment
- 4 R: Basic Usage
- 5 R Packages: causact,tidyverse, etc.
**II DATA: Manipulation & Visualization**- 6 dplyr: Manipulating Data Frames
- 7 dplyr: Data Manipulation For Insight
- 8 ggplot2: Data Visualization Using The Grammar of Graphics
- 9 ggplot2: The Four Stages of Visualization
**III DATA STORIES: Modelling The Real World**- 10 Representing Uncertainty
- 11 Joint Distributions Tell You Everything
- 12 Graphical Models Tell Joint Distribution Stories
- 13 Bayesian Inference On Graphical Models
- 14 Generative DAGs As Prior Joint Distributions
- 15 Install Tensorflow, greta, and causact
- 16 greta: Bayesian Updating And Probabilistic Statements About Posteriors
- 17 causact: Quick Inference With Generative DAGs
- 18 The beta Distribution
- 19 Parameter Estimation
- 20 Posterior Predictive Checks
- 21 Decision Making
- 22 A Simple Linear Model
- 23 Linear Predictors and Inverse Link Functions
- 24 Multi-Level Modelling
- 25 Compelling Decisions and Actions Under Uncertainty

This chapter illustrates how to use the `causact`

package which reduces the friction experienced while going from business issues to computational models. It provides an easy-to-use, intuitive, and visual interface to `greta`

and TensorFlow. In fact, it automates the creation of `greta`

code based on a user creating a generative DAG. `causact`

advocates and enables generative DAGs to serve as a business analytics workflow (BAW) platform upon which to launch business discussions, create statistical models, and run computational inference.

Recall from the *Representing Uncertainty* chapter that `foo`

is a placeholder name in computer programming. The word `foo`

itself is meaningless; we substitute more meaningful words in its place.

If you run the below code,

```
library(greta)
library(causact)
library(tidyverse)
dag_create() ## returns a list of data frames to store DAG info
dag_create() %>% dag_node("BernoulliRV") ## adds a node with the given description
```

you will discover that the two lines beginning with `dag_`

output R list objects consisting of six data frames. Let’s not worry too much about the details, but notice that one of the data frames is for storing node information (i.e. `nodesDF`

) and one for edge information (i.e. `edgesDF`

). Recall, we learned about these nodes and edges in the *Graphical Models* chapter.

The function dag_create() is used to create an empty list object that we will refer to as a *causact_graph*. Subsequently functions like `dag_node()`

and `dag_edge()`

will take a *causact_graph* object as input, modify them, and provide a *causact_graph* object as output. This feature allows for the chaining (i.e. using `%>%`

) of these functions to build up your observational model. Once done building with `dag_create()`

, `dag_node()`

, and `dag_edge()`

, a call to the `dag_render()`

function outputs a visual depiction of your *causact graph*. Here is small example of what that code might look like:

Let’s use the `dag_foo()`

functions to make a generative DAG with Bernoulli data (\(X\)), a uniform prior, and some observed data:

\[ \begin{aligned} X &\sim \textrm{Bernoulli}(\theta) \\ \theta &\sim \textrm{uniform}(0,1) \end{aligned} \]

Assume two successes and one failure such that:

\[ x_1 = 1, x_2 = 1, x_3 = 0 \]

The following code uses the `descr`

and `label`

arguments of the `dag_node()`

function to, respectively, provide a long label for your random variable that is easily understood by business stakeholders and a short label that is more for notational/mathematical convenience:

```
dag_create() %>% # just get one node to show
dag_node(descr = "Store Data", label = "x") %>%
dag_render()
```

Since, we actually observe this node as data, we use the `data`

argument of the `dag_node()`

function to specify the observed values The observed values will more often be in a column of a data frame, but giving a vector of actual values also works.:

```
dag_create() %>% # make it an observed node
dag_node(descr = "Store Data", label = "x",
data = c(1,1,0)) %>% ##add data
dag_render()
```

The node’s darker fill is automated because of the supplied observed data and the `[3]`

means there are three observed realizations in the supplied data vector. You could also use a plate to represent the multiple realizations, but I recommend plate creation to be the last step in creating generative DAGs via the `causact`

package.

One goal we often have is to take a sample of data and find plausible parameters within a distribution family (e.g. normal, gamma, etc.) governing how that data might have been generated - at its core, Bayesian inference is a search for plausible parameters of a specified generative DAG. To specify the distribution family governing the observed data, use the `rhs`

argument of the `dag_node()`

function rhs stands for right-hand side. The rhs of a node is reserved for indicating how the node is generated as a function of its parent nodes’ values. Alternatively, when not used as a distribution specification, the rhs is an algebraic expression or other function of data converting parent node values into a realization of the node’s value. There is an implicit assumption that all unknown variables will eventually be defined by parent nodes - the `causact`

package will not check for this. In the case below, we are specifying a parameter `theta`

that will need to eventually be added as a parent node.

*Hint: Use CTRL+SPACE or CMD+SPACE to access the auto-complete functionality when looking to add the rhs and data arguments.*

```
dag_create() %>% # specify data generating distribution
dag_node(descr = "Store Data", label = "x",
rhs = bernoulli(theta), ##add distribution
data = c(1,1,0)) %>%
dag_render()
```

Note, a random variable’s distribution must be part of `greta`

. The full list of `greta`

distributions can be found by running the following line:

For each unknown argument remaining on the `rhs`

of any nodes in your causact graph, one must eventually All unknown rhs arguments for nodes must be defined prior to running any Bayesain computations. define how the unknown argument can be generated. In our data node above, the only unknown argument on the `rhs`

is `theta`

. We define the generative model for `theta`

by making an additional node representing its value:

```
dag_create() %>% # add parent nodes for all rhs arguments
dag_node(descr = "Store Data", label = "x",
rhs = bernoulli(theta), ## rhs does not use quotes
data = c(1,1,0)) %>%
dag_node(descr = "Success Probability", label = "theta", # label needs quotes
rhs = uniform(0,1)) %>%
dag_render()
```

Notice, the parameters of the `rhs`

distribution for `theta`

are not unknown - they are actually constants (i.e. 0 and 1) and hence, no additional parent nodes are required to be created. Take note that `theta`

on the `rhs`

for the *Store Data* node does not require quotes as it refers to an R object; specifically, this refers to the R object created by:

where the `theta`

object is given its name by the `label = "theta"`

argument; The only case for when the label argument is not within quotes will be when the label name itself is stored in a pre-existing R-object. when creating node labels via this argument, quotes are typically required.

Without a link betwen `theta`

and `x`

, one is not creating a properly factorizable directed acyclic graph as is required for specifying a joint distribution (see the *Graphical Models* chapter). When using the child argument, please ensure the child was previously defined as a node. Generative DAGs are designed to be built from bottom-to-top reflecting the way a business analyst would create these DAGs. Note that computer code for Bayesian inference, like greta code, requires the exact opposite order - parent nodes get defined prior to their children. One way the causact package accelerates the BAW is by facilitating a bottom-up workflow that can be automatically transalated to top-down computer code. Using the `child`

argument of `dag_node`

, one can now create the required link between `theta`

as a parent node and `theta`

as an argument to the distribution of its child node `x`

:

```
dag_create() %>% # connect parent to child
dag_node(descr = "Store Data", label = "x",
rhs = bernoulli(theta),
data = c(1,1,0)) %>%
dag_node(descr = "Success Probability", label = "theta",
rhs = uniform(0,1),
child = "x") %>% ## ADDED LINE TO CREATE EDGE
dag_render()
```

For more complicated modelling, repeat this process of adding parent nodes until there are no uncertain parameters on the right hand side of the top nodes.

A call to the `dag_greta()`

function automates the creation of `greta`

code for you. This function expects a `causact_graph`

as the first argument, so make sure you are not passing the output of the `dag_render`

function by mistake. Use `dag_render`

to get a picture and `dag_greta()`

for Bayesian inference - just do not mix them in the same chain of functions. The second argument of `dag_greta()`

is the `mcmc`

argument and its default value is `TRUE`

. When `mcmc = FALSE`

, `dag_greta(mcmc = FALSE)`

gives a print-out of the `greta`

code without running it. You can cut and paste this code into a new R-script if you wish and run it there (ESPECIALLY USEFUL FOR DEBUGGING WHEN YOU GET AN ERROR AT THIS STAGE). Alternatively, you can have the `greta`

code run automatically by setting `mcmc = TRUE`

or simply omitting the argument because it is the default value. Usage is shown below:

```
# running Bayesian inference - remove dag_render() and save graph object
graph = dag_create() %>% # same as previous
dag_node(descr = "Store Data", label = "x",
rhs = bernoulli(theta),
data = c(1,1,0)) %>%
dag_node(descr = "Success Probability", label = "theta",
rhs = uniform(0,1),
child = "x")
# then, pass graph to dag_greta function with mcmc = TRUE or omitted
drawsDF = graph %>% dag_greta(mcmc=TRUE)
```

After some time, during which `greta`

calls `TensorFlow`

to do our Bayesian number-crunching. The output is assigned to an object I named `drawsDF`

- a data frame of posterior draws that is now useful for computation and plotting. For plotting, we can pass the data frame to the `dagp_plot()`

function to get a quick look at the data as shown here:

This is a `ggplot`

graph that can be extended or modified with `ggplot`

layers. The lighter fill indicates a \(90\%\) percentile interval where \(5\%\) of plausible values are excluded from the left- and right-sides of the colored interval. The darker fill within the colored interval indicates a \(10\%\) percentile interval. For more customized graphs, please use `ggplot2`

with `drawsDF`

as the input data.

To answer questions based on the posterior distribution, it is often easier to manipulate `drawsDF`

using `dplyr`

functions. See section 7.2 for a refresher on the type of computations that can help you count the percentage of values in a data frame column that match a certain criteria. For example, one way of computing \(P(\theta > 65\%)\) is shown below using a trick we have seen before (Chapter 16.3 Making Probabilistic Statements):

```
drawsDF %>%
mutate(indicatorFlag = ifelse(theta > 0.65, TRUE, FALSE)) %>%
summarize(pctOfThetaVals = mean(indicatorFlag))
```

```
## # A tibble: 1 x 1
## pctOfThetaVals
## <dbl>
## 1 0.46
```

A more descriptive output, possibly used for plotting purposes, is shown here:

```
# get P(theta>0.65) using dplyr recipe
drawsDF %>%
mutate(indicatorFlag = ifelse(theta > 0.65,"theta > 0.65","theta <= 0.65")) %>%
group_by(indicatorFlag) %>%
summarize(countInstances = n()) %>%
mutate(percentageOfInstances = countInstances / sum(countInstances))
```

```
## # A tibble: 2 x 3
## indicatorFlag countInstances percentageOfInstances
## <chr> <int> <dbl>
## 1 theta <= 0.65 2160 0.54
## 2 theta > 0.65 1840 0.46
```

Figure 17.2: The credit card example from the Graphical Models chapter will be analyzed in this chapter using the causact package.

In the *Graphical Models* chapter, we presented the case where prospective credit card applicants were being segmented based on the car they drove. A dataset to accompany this story is built-in to the `causact`

package:

```
# ----------------------------------------------------------
### Revisiting the Get Credit Card Model Based On Car Driven
# ----------------------------------------------------------
# data included in the causact package
# 1,000 potential customers, the car they drvie
?carModelDF ## see help file
carModelDF #show data
```

```
## # A tibble: 1,000 x 3
## # Rowwise:
## customerID carModel getCard
## <int> <chr> <int>
## 1 1 Toyota Corolla 0
## 2 2 Subaru Outback 1
## 3 3 Toyota Corolla 0
## 4 4 Subaru Outback 0
## 5 5 Kia Forte 1
## 6 6 Toyota Corolla 0
## 7 7 Toyota Corolla 0
## 8 8 Subaru Outback 1
## 9 9 Toyota Corolla 0
## 10 10 Toyota Corolla 0
## # ... with 990 more rows
```

Figure 17.3 revisits the inital graphical model using functionality from the `causact`

package:

```
graph = dag_create() %>%
dag_node("Get Card","x",) %>%
dag_node("Car Model","y",
child = "x")
graph %>% dag_render(shortLabel = TRUE)
```

Notice the `shortLabel = TRUE`

argument. This presents a useful graph to share with business stakeholders (see Figure 17.3). It avoids all math notation and statistical jargon, yet still conveys the essence of your modelling choices/approach.

To make this a generative DAG, we take a bottom-up approach starting with our target measurement *Get Card* and add in the mathematical and data details:

```
graph = dag_create() %>%
dag_node("Get Card","x",
rhs = bernoulli(theta),
data = carModelDF$getCard)
graph %>% dag_render()
```

To model subsequent nodes, we consider any parameters on the right-hand side of the statistical model that remain undefined. Hence, for \(x \sim \textrm{Bernoulli}(\theta)\), \(\theta\) should be a parent node in the graphical model and will also require definition in the statistical model. And at this point, we say *ay caramba!*. There is a mismatch between *Car Model*, the parent of *Get Card* in the graphical model of Figure 17.3, and \(\theta\), the implied parent of *Get Card* in the statistical model which would represent *Signup Probability*.

In this case, we realize that *Signup Probability* is truly the variable of interest - we are interested in the probability of someone signing up for the card, not what car they drive. Ultimately, we want *Signup Probability* as a function of the car they drive, but let’s move incrmentally. Figure 14.1 graphically models the *probability of sign-up* (\(\theta\)) as the parent, and not the actual car model.

```
graph = dag_create() %>%
dag_node("Get Card","x",
rhs = bernoulli(theta),
data = carModelDF$getCard) %>%
dag_node("Signup Probability","theta",
rhs = uniform(0,1),
child = "x")
graph %>% dag_render()
```

Using Figure 17.4, the generative recipe implies there is only one *true* \(\theta\) value and all 1,000 Bernoulli observations are outcomes of Bernoulli trials using that one \(\theta\) value. We can get the posterior distribution under this assumption:

```
drawsDF = graph %>% dag_greta(mcmc = TRUE, warmup = 400) ## get representative sample
drawsDF %>% dagp_plot()
```

Based on Figure 17.5, a reasonable conclusion might be that plausible values for *Signup Probability* lie (roughly) between 37% and 42%.

Our business narrative calls for the probability to change based on car model. The `dag_plate()`

function can then be called upon to create a generative DAG where `theta`

will vary based on car model. A major difference in the use of `greta`

and `causact`

is that the `causact`

package shifts the burden of index creation to the computer. A *plate* signifies that the random variables inside of it should be repeated; thus, any oval inside a plate is indexed behind the scenes and effectively, a repeat instance is created for each member of the plate. The system automatically adds the index to the model using the plate `label`

for indexing notation. When using `dag_plate()`

the following arguments prove most useful:

Remember, you can use `?dag_foo`

, e.g. `?dag_plate`

, to get descriptions for all available function arguments from the help system.

`descr`

- a character string representing a longer more descriptive label for the cluster/plate.`label`

- a short character string to use as an index label when generating code.`data`

- a vector representing the categorical data whose unique values become the plate index. When using with`addDataNode = TRUE`

, ensure this vector represents observations of a variable whose unique values can be coerced to a factor. Omit this argument and`causact`

assumes that node replication is based on observations of any observed nodes within the plate.`nodeLabels`

- a character vector of node labels or descriptions to include in the list of nodes that get repeated one time per index value. Labels must be defined already within the specification of the`causact_graph_`

.`addDataNode`

- a logical value. When`addDataNode = TRUE`

, the code adds a node of observed data, in addition to the plate, based on the supplied`data`

argument value. This node is used to extract the proper index when any of the nodes in the plate are fed to children nodes. Verify the graphical model using`dag_render()`

to ensure correct behavior.

Figure 17.6 shows how we can change the generative DAG to accomodate the story of *Signup Probability* being different for drivers of different cars.

```
### Now vary your modelling of theta by car model
### we use the plate notation to say
### "create a copy of theta for each unique car model
graph = dag_create() %>%
dag_node("Get Card","x",
rhs = bernoulli(theta),
data = carModelDF$getCard) %>%
dag_node(descr = "Signup Probability",label = "theta",
rhs = uniform(0,1),
child = "x") %>%
dag_plate(descr = "Car Model", label = "y", #plate labels
data = carModelDF$carModel, #where index variable is stored
nodeLabels = "theta", #nodes duplicated for each unique data value
addDataNode = TRUE) #automate creation of index observations
graph %>% dag_render()
```

The generative DAG in Figure 17.6 added one additional function call, `dag_plate()`

. That addition resulted in both the creation of the plate, and also the additional node representing *Car Model* observations. Each of the 1,000 observed customers of the *Car Model* **node** were driving one of 4 unique car models of the *Car Model* **plate**. The indexing of `theta`

by `y`

, i.e. the `theta[y]`

on the `rhs`

of the *Get Card* node extracts one of the 4 \(\theta\)-values to create the generative model governing each observation of \(x\). Take time to digest this powerful line of code before moving on. Expert tip: Observed-discrete random variables, like car model, are best modelled via plates. Do not rush to add nodes or indexes for these random variables. Let dag_plate() do the work for you.

Now, when we get the posterior distribution from our `greta`

code, we will get a representative sample of four \(\theta\) values instead of one.

Visualizing the posterior we get:

Notice, the index names for the four `theta`

values are automatically generated as abbreviated versions of the unique labels found in `carModelDF$carModel`

.

Digesting Figure 17.7, there are a couple of things to draw attention to. First, interval widths are different for the different `theta`

values. For example, the probability interval for the Toyota Corolla is more narrow than the interval for the other cars. This is simply because there is more data regarding Toyota Corolla drivers than the other vehicles. With more data, we get more confident in our estimate. Here is a quick way to see the distribution of car models across our observations:

```
## # A tibble: 4 x 2
## carModel numOfObservations
## <chr> <int>
## 1 Jeep Wrangler 193
## 2 Kia Forte 86
## 3 Subaru Outback 145
## 4 Toyota Corolla 576
```

Second, notice the overlapping beliefs regarding the *true* sign-up probability for drivers of the Toyota Corolla and Kia Forte. Based on this, a reasonable query might be what is the probability that `theta_KiaForte`

> `theta_ToytCrll`

? As usual, we use an indicator function on the posterior draws to answer the question. This time though, we look at the representative sample of two random variables and recognize each row of the posterior is a realization of the joint probability distribution. So, to answer “what is the probability that `theta_KiaForte`

> `theta_ToytCrll`

?” Note: this type of query can only be answered by relying on Bayesian inference, we compute:

```
drawsDF %>%
mutate(indicatorFunction = ifelse(theta_KiaForte > theta_ToytCrll,1,0)) %>%
summarize(pctOfDraws = mean(indicatorFunction))
```

```
## # A tibble: 1 x 1
## pctOfDraws
## <dbl>
## 1 0.764
```

And using this ability to make probabalistic statements, one might say "there is an approximately 76% chance that Kia Forte drivers are more likely than Toyota Corolla drivers to sign up for the credit card.

In Figure 17.6, the bracketed `[1000]`

next to the node descriptions tells us that the observed data has 1,000 elements. Often, for visual clarity, I like to make a plate of observations and have the observed nodes revert back to representing single realizations. This is done by creating a second plate, but now excluding the `data`

argument in the additional call to `dag_plate`

:

```
graph = dag_create() %>%
dag_node("Get Card","x",
rhs = bernoulli(theta),
data = carModelDF$getCard) %>%
dag_node("Signup Probability","theta",
rhs = uniform(0,1),
child = "x") %>%
dag_plate("Car Model", "y",
data = carModelDF$carModel,
nodeLabels = "theta",
addDataNode = TRUE) %>%
dag_plate("Observations", "i",
nodeLabels = c("x","y"))
```

`dag_plate()`

now infers the number of repetitions from the observed values within the plate. The generative DAG in Figure 17.8 reflects this change, yet remains computationally equivalent to the previous DAG of Figure 17.6.

The code change to produce Figure 17.6 is completely optional, but I use the extra plate in my daily work to add clarity for both myself and my collaborators in a data analysis.

The `causact`

package is actively being developed. Please post any questions or bugs as a github issue at: https://github.com/flyaflya/causact/issues.