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Seeking Wisdom from a machine

Thursday, July 19, 2001

By Eve Modzelewski, Post-Gazette Staff Writer

It may not be as flashy as the human-replicating artificial intelligence of Steven Spielberg's hit summer movie, but a local start-up is using the technology for a more practical purpose -- to help big companies manage their money.

	Angela Kennedy, left, and Jaime Carbonell helped found Wisdom Technologies, which develops artificial intelligence software for managing corporate finances. Their flagship product, CFO Strategist, was launched last year. (Annie O'Neill/Post-Gazette)

Wisdom Technologies, spawned five years ago from Carnegie Mellon University, has decade-old roots in the realm of artificial intelligence. In 1990, two of its three founders -- Jaime Carbonell and Peter Shell, both CMU researchers -- developed software for Spanish utilities company Union Fenosa that used artificial intelligence to make quick, efficient decisions on cash allocation.

Much faster than a human could, it sifted through loads of financial data, then made a recommendation on what investment or debt-management strategy would maximize returns and minimize costs for the company.

"It worked better than we expected," said Carbonell, now Wisdom's chairman. So, the team decided to turn this customized product into a more general tool that could be applied to any firm. While team members were at it, they launched a company of their own and recruited a third founder and chief executive officer, Angela Kennedy, who also was a CMU researcher.

Because there were so many combinations of maneuvers that had to be programmed into Wisdom's software, it took years to develop the artificial-intelligence product. It needed to know about fixed-income investments such as Treasury securities, debt, cash management and how to account for foreign exchange.

But "teaching" a software program those things was a tedious, labor-intensive process that involved refining algorithms, writing and rewriting software code, and testing the system over and over again, Carbonell said.

It helped that Wisdom incubated until 1998 on the campus of CMU, which has one of the country's most recognized artificial intelligence programs in its School of Computer Science.

In November, after Wisdom had opened separate offices Downtown, the company launched its flagship financial product, CFO Strategist.

The software is designed to calculate the costs and benefits of thousands of financial moves, then decide which will produce the best returns. Call it a "What if?" simulator.

"These things usually work, but when they fail, they fail spectacularly," Carbonell said. If the software encounters an economic situation it doesn't recognize, for example, it won't know how to make a recommendation. That's one way machines are dumber than humans -- they don't know how to take their base of knowledge and use it creatively, Carbonell said.

Instead, programs such as CFO Strategist have to be preprogrammed to recognize as many financial scenarios as its designers can think of. Otherwise, such programs fall short.

Wisdom's technology isn't entirely unlike IBM's Deep Blue, a chess simulator initially developed at CMU that in 1997 defeated world chess champion Garry Kasparov.

Deep Blue's upset of Kasparov brought artificial intelligence to the world's attention -- after all, a machine had dethroned the world champion of a game invented by humans. And people became even more fascinated by the notion of reproducing human behavior and intellect.

"People are interested in AI because of the myth that we're trying to replicate humans," Carbonell said. And people are captivated also because they can't comprehend it -- the technology is so complex, it's hard to understand how a machine can continually determine the right answers to problems.

Deep Blue played chess skillfully because it generated multiple scenarios, then evaluated them to determine which move would be most likely to generate a win.

"The technology that Wisdom implements for finance is based on the same philosophy," Carbonell said. "It involves telling whether certain futures are better than others."

In minutes, CFO Strategist is designed to make quick decisions that maximize returns and minimize costs for a company.

"In order for humans to evaluate the same things that machines can evaluate, you would need a small army," Carbonell said. And while machines can compute data exponentially faster than humans, they can't completely replace manpower. "Machines are becoming power tools for people. We have chain saws, but they have not taken over carpentry."

Companies equipped with these power tools can make much more informed decisions, he said, but that doesn't mean they replace the human corporate treasurer. Those types of personnel are still needed to set goals for a company.

So far, Wisdom has six customers who have incorporated CFO Strategist into their operations. Pittsburgh-based Allegheny Technologies, CMS Energy Corp. and Pacific Coast Feather are among them. Plus, Citibank partnered with Wisdom last year to help market the product on a national scale.

The company now has about 30 employees, about a third of whom were hired in the past year, said CEO Kennedy. Peter Shell, formerly chief technology officer, left Wisdom last year, but he continues to serve on the board.

"There are types of problems that people can attack, and there are types of problems that computers can do. Then there's the area of overlap between the two," Kennedy said. Wisdom targets the overlapping area, and its products are designed to speed computations and optimize results under the guidance of human-set company goals.

Wisdom expects to launch a second product, a cash flow forecasting tool, sometime next year.