Complementarity between computers and humans isn’t just a macro-scale fact. It’s also the path to building a great business. We came to understand this from deeply looking into Pay Pal. In mid-2000, they had survived the dot.com crash and they were growing fast, but they faced one huge problem.

They were losing upwards of $10 million to credit card fraud every month. Since they were processing hundreds or even thousands of transactions per minute, they couldn’t possibly review each one—no human quality control team could work that fast.

So they did what any group of engineers would do: they tried to automate a solution. First, Max Levchin assembled an elite team of mathematicians to study the fraudulent transfers.

Then they took what they 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. They were dealing with an adaptive enemy, and their software couldn’t adapt in response.

The fraudsters’ adaptive evasions fooled their automatic detection algorithms, but they found they didn’t fool their human analysts as easily. So Max and his engineers rewrote the software to take a hybrid approach.

The computer would flag the most suspicious transactions on a well-designed user interface, and human operators would make the final judgment as to their legitimacy. Thanks to this hybrid system—they named it “Igor,” after the Russian fraudster who bragged that they would never be able to stop him—they turned their first quarterly profit in the first quarter of 2002 (as opposed to a quarterly loss of $29.3 million one year before).

The FBI asked them if they had 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 kind of man-machine symbiosis enabled PayPal to stay in business, which in turn enabled hundreds of thousands of small businesses 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. 

We have always emphasized the importance of having a good website for your company because it can act as your best tool for marketing and sales. A poorly designed website can repulse people from your business and can cause you to lose customers before you even have them. Get in touch with HyperEffects to work on creating, enhancing, and making the website of your company more user-friendly.