what is complementary business?

Complementary business:


Complementary between computer and humans is not just a macro-scale fact. It's also the path to building a great business. I came to understand this form  experience at Pay pal . In mid-2000, we had survived the dot-come crash and we are growing fast, but we faced one huge problem:
we were upwards of $10 million to credit card fraud every month

Since we were processing hundreds or even thousand of transactions per minute, we couldn't possible review each one-no human quality control team could work that fast.

So we did what any group of engineer would do: we tried to automate a solution. First, Max Levchin assembled and elite team of mathematicians to study the fraudulent transfers in detail.

Then we took what we learned and wrote software to automatically identify and cancel bogus transactions in real time.

But it quickly became clear that this approach wouldn't work either: after an hour or two, the thieves would catch on and change their tactics.

We were dealing with an adaptive enemy, and our software couldn't adapt in response.

The fraudsters' adaptive evasions fooled our automatic detection algorithms, but we found that they didn't fool our human analysts as easily.

So Max and his engineer rewrote the software to take a hybrid approach:the computer would flag the most suspicious transaction on a well-designed user interface, and human operators would make the final judgment as to their legitimacy.

Thanks to his hybrid system we named it "Igor," after the Russian fraudster who bragged that we'd never be able to stop him- we turned our first quarterly profit in the first quarter of 2002 (as opposed to quarterly loss of 29.3 million one year before).

THE FBI asked us if we'd let them use Igor to help detect financial crime. And Max was able to boast, grandiosely but truthfully, that he was "the Sherlock Holmes of the Internet Underground.

This kinds of man-machine symbiosis enabled PayPal to stay in business, which in turn enabled hundreds of thousands of small business to accept the payments they needed to thrive on the internet.

None of it would have been possible without the man-machine solution- even though most people would never see it or even hear about it.

I continued to think about this after we sold PayPal in 2002: if humans and computer together could achieve dramatically better result than either could attain alone, what other valuable business could be built on this core principle? 

The next year, I pitched Alex Karp, an old Stanford classmate, and Stephen Cohen, a software engineer, on a new startup idea: we would use the human- computer hybrid approach from PayPal's security system to identify terrorist network and financial fraud.

We already knew the FBI was interested, and in 2004 we founded Palantir, a  software company that helps people extract insight from divergent sources of information. 

The company is on track to book sales of $1 billion in 2004 and forbes has called Palantir's software the "killer app" for its rumored role in helping the government locate Osama bin Laden.

We have no details to share from that operation, but we can say that neither human intelligence by itself nor computers alone will be able to make us safe.

America's two biggest spy agencies take opposite approach: The Central intelligence Agency is run by spies who prioritize computers.

CIA analytics have to wade through so much noise that it's very difficult to identify the most serious threats.

start of LinkedIn:

LinkedIn has done exactly this for recruiters. When LinkedIn was founded in 2003, they didn't poll recruiters to find discrete pain point in need of relief. And they didn't try to write software that would replace recruiters outright.

Recruiting is part detective work and part sales: you have to scrutinize applicants' history, assess their motives an compatibility, and persuade the most promising ones to join you.

Effectively replacing all those function with a computer would be impossible.
Instead, LinkedIn set out to transfer how recruiters did their job. Today, more than 97% of recruiters use LinkedIn and its powerful search and filtering functionality to source job candidates, and the network also crate value for the hundreds of millions of professionals who use it to manage their personal brands. 

If LinkedIn had tried to simple replace recruiter with technology, they wouldn't have a business today.

1 comment: