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This tutorial discusses two approaches to creating new variables in data analysis - using either the replace or the recode command. The process involves summarizing the old source variable, generating the new variable, and comparing the two for errors. Data preparation involves using commands like histogram, list, and tabulate to summarize and spot-check data before and after generating new variables. The replace command is more versatile but requires more coding steps, involving generating a new variable and setting it to missing initially. This lecture demonstrates the steps and commands involved in the process.