Heard Off the Street: Watson's next smart move is helping investors

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Since its triumphant appearance on the popular television game show "Jeopardy" three years ago, IBM's Watson technology has gotten smaller yet more powerful.

Now Watson is wired to take on its next challenge: helping investment advisers identify appropriate options for their clients.

Singapore's DBS Bank announced Thursday that it will use IBM's Watson technology to provide what it promises will be "a next generation customer experience."

DBS plans to roll out the Watson Engagement Advisor in the second half of this year. The bank said Watson will help its relationship advisers -- presumably actual human beings who at some point in the not-so-distant future will be replaced by higher intelligence -- do their jobs.

Watson will analyze large volumes of data, including customer demographics, research reports and product information. That will enable advisers to develop appropriate investment options for their clients.

"This collaboration with IBM enables us to explore ways to better harness data, providing more precise, customized and quality solutions that correspond to our customers' needs," said CEO Piyush Gupta.

IBM says the current iteration of Watson takes up as much space as about three stacked pizza boxes, compared to the master bedroom that it took to contain the "Jeopardy" champion. The new one is also 24 times faster.

Watson already is helping doctors diagnose patients. Last week, Big Blue announced several new Watson initiatives, including hiring out Watson to pharmaceutical researchers who will use it to accelerate their work by reading millions of articles, journals and studies.

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Here's another job for Watson: helping the IRS provide better customer service to the millions of taxpayers mystified by the vagaries of the inscrutable federal tax code.

Nina E. Olson, the national taxpayer advocate, reported to Congress last week that the complexity of tax laws is the most serious problem facing taxpayers. Congress has made nearly 5,000 changes to the tax code since 2001, an average of more than one a day, she said, adding that there are now nearly 4 million words in the code.

Sounds like something Watson could digest in a minute or so.

The complexity of the code, as well as declining funding from Congress, means taxpayers are experiencing the IRS's version of "a next generation customer experience."

According to Ms. Olson's report, in the fiscal year that ended Sept. 30, 2012, the IRS answered just 68 percent of the calls it received and those who got through spent an average of 17 minutes on hold. Eight years earlier, the IRS answered 87 percent of the calls and the average wait time was just over 2.5 minutes.

Service also declined for letter writers. Of the more than 10 million letters the agency received in fiscal 2012 over proposed tax law changes, 48 percent were not processed within IRS time targets versus 12 percent eight years earlier.

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Customer service isn't the only thing going up in smoke. Given the reception that legalized marijuana received in the Mile High City and other parts of Colorado, even potheads could have envisioned that capitalists would venture one toke over the line.

CNBC, Marijuana Business Daily, and other major media outlets are heralding the launch of the High Times Growth Fund, a private equity vehicle for investors seeking to capitalize on marijuana-related ventures. The opportunity comes as Colorado legalized marijuana sales and Alaskan supporters of recreational marijuana use moved closer to putting the issue on the ballot vote this year.

Reports indicate the New York-based fund wants to raise $100 million. One investor will be Trans-High Corp., the publisher of High Times magazine. The publisher has licensed the fund to use "high times" in its name in exchange for a yet-to-be determined stake in the fund.

According to its website, the fund will invest "in compelling businesses across all areas of the rapidly growing domestic cannabis market." The fund will act like the typical private equity operator, taking about two years to stoke its portfolio. It will make an average investment of $2 million and will sell its positions in an average of five years.

Legalization in Colorado and Washington add to the investment potential of the marijuana industry. The national legal marijuana industry is a $1.4 billion industry, according to ArcView Market Research. The San Francisco firm forecasts the market will grow to $2.3 billion by next year and could exceed $10 billion five years from now.

Financing has been a critical issue for marijuana entrepreneurs. Traditional lenders and investors are reluctant to run afoul of federal drug laws, which consider the substance illegal. The U.S. Justice Department has indicated that, in general, it will take a hands-off approach in states that have legalized marijuana as long as state regulators make sure things don't get out of hand.

FINRA also wants to keep things on the up-and-up. Last week, the Wall Street-funded industry watch dog reissued its previous warning about marijuana stock scams.


Len Boselovic: lboselovic@post-gazette.com or 412-263-1941.

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