Watson, come here, we need you


MAY 2, 2012 09:57 AM EDT  
I spent some time with Watson over the past week or so at various conferences and I came away
impressed. This is IBM’s Jeopardy-solving computer. At the St. Louis Gateway to Innovation conference,
IBM had a kiosk showing off its prowess. You had your chance to try to come up with the correct
question (remember, the game gives you the answers) before the computer did. Now, I consider myself
a fairly decent Jeopardy player: when I watch the show on TV, I can usually get the right question more
than half the time. But that is sitting in the comfort of my own living room.
When it came to standing in front of the Watson kiosk, I choked. Big time. It was interesting, because
you get to see how Watson “thinks” and formulates its replies. I could barely start typing before it had
finished figuring out its (correct) question. The kiosk doesn’t contain the actual Watson computer: it is
just a remote interface. You can see a picture of part of the kiosk here, and how it judges among three
different possible responses, along with assigning confidence values to each.
Then, at the IBM Impact conference in Vegas, I got to attend one of the sessions where Bob Madey, one
of Watson’s developers, was talking about their next steps. Watson isn’t a product: with all the
processors and storage it isn’t exactly portable. And you can’t really buy it anyway. It isn’t quite a service
yet, although IBM is working on commercial versions for healthcare and financial services, and
eventually for other industries such as sales contact management. But what is interesting is how IBM is
going to make money from their efforts with this research project.
Anyone who signs up for Watson (and you better believe there is a waiting list) has to agree to a unique
arrangement: IBM will take 40% of the calculated savings from its use. So if Watson is helping to
diagnose diseases (as was being shown in the session that I attended), the hospital and IBM will come to
some agreement as to what the cost savings will be from this activity. It is an intriguing way to sell
computer services. The client only pays if Watson delivers.
This differs from usual computer services types of deals where you pay by the CPU minute or the
amount of storage or other resources consumed. But that wouldn’t do for Watson, because there are a
lot of resources involved in processing its natural language queries and storing all the data it needs to
figure out the context of the query and possible answers to your questions. And one other thing: IBM will
own all the data that is fed into Watson. You just get the results, and that’s it.
There are 220 people involved in the Watson project and this large staff is needed. It took them more
than a week to load in a new database for each Jeopardy build. For the medical apps they are currently
working on, it still takes them several days to retrain Watson. Part of the problem here is in
understanding how to retire old data, or to assign lesser confidence intervals as you learn new things
about the particular subjects you are covering. One of the audience members at Impact raised that
issue, and it was an important one. Another asked how long it would take IBM to develop the Watson
equivalent of a WebMD.com that anyone could query its medical data online. While Madey was cagey
about answering this, if Watson would be allowed to reply the machine would probably agree that was a
reasonable goal. I started thinking of the HAL9000 computer that powers the spaceship in 2001. “Dave,
that’s a really good idea.”
It was fun to watch Watson on TV last year, although none of the human contestants stood a chance
and eventually it was a total silicon rout. I know a bit how those fellow carbon-based life forms all felt: it
was humbling just to try my hand at a couple of questions. But it is exciting to see where IBM is taking
the project, and I suspect we will be hearing more about this curious machine sometime soon.

This business model should be very profitable.

On Fri, May 4, 2012 at 7:38 AM, Bob Russell <bobqrussell@yahoo.com> wrote:
Thank you, Donbot, for the provided article and for your assertions
to buy IBM stock for the reason of its Watson system's new client
service contract type.
Q.: Is it the case that IBM will not sell Watson system and software
on a turnkey basis?
A1: That alternative wasn't discussed in the article. The service fee
is a contract rewarding both participants with recognized client savings.
A2: It may be that IBM groups will need to acquire new technological
systems to support responsiveness to access memory and provide
an increased number of client needs. This will be an internal capital
And IBM will retain the rights to all data gathered and all learned techniques which will be
able to be applied to future projects. IBM is big on patents and they will obtain new patents on the
nascent industry of Artificial Intelligence.  This will put them way ahead of every other player in the field
and lock their position in with Worldwide Intellectual Property Rights.
Q. Is it the case that IBM is a multinational firm with hundreds of
thousands (433K) of employees and $107B in 2011 sales?
A: Yes
Q.: What is the expectation for major sales or profitability changes
to this extremely large corporation if only 230 employees are in its
Watson practice at this time?
A1: Stay tuned for demonstrated client awareness and performance
for initial and more general problems later.
A2: Trust me!
A3: Since Watson beats the smartest humans it is hard to emphasize how much it adds in terms of
human-equivalent workforce participants.
Please note that the concept that human ability lies along a "bell curve" has been disproven.  It has
been shown that a small minority of superstar performers contribute a disproportionate amount of the
output.  Successful companies would do well to identify superstars and place emphasis on them.  There
are few Einsteins, but their impact is enormous.  In the case of IBM, the biggest superstar is clearly
Watson and forthcoming Watson offspring.  In terms of human superstars at IBM, it is clearly evident that
that group of 230 employees contain more than their "fair" share.  As time goes on, this discontinuity will
be even greater and Watson's Sons and their human caretakers will be the most important IBM
employees by far.  At some point in time, one of the Watsons will be used to advise IBM administration to
"trim the fat" which means eliminating many of those 433,000 human workers at IBM.
We looked at researchers, we looked at entertainers, we looked at politicians, and we looked at
collegiate as well as professional athletes.  In each of these kinds of industries, we found that a small
minority of superstar performers contribute a disproportionate amount of the output.  Successful
companies and nations would do well to identify superstars, because such performers are
disproportionately likely to register new discoveries and achievements. http://www.npr.
Note that I am a member of a group called R4P which stands for "Robot for President of the US  
(POTUS)".  A robot may well become president of IBM first.

Q.: When shall the contractual gains from the Watson sector become
a matter of annual meeting discussion?
A1: At each meeting, such as ...
Q.: When will Watson results drive the price higher?
A2: Expect a three year delay from startup to recognizable gains from
learning organizations before significant improvements occur and are
recognized and paid.
A3: Traditionally it might take three years for significant improvements to be recognized and reflected in
the stock price.  What you are currently seeing is constant upward pressure on IBM stock due to their
various presentations of Watson's unique capabilities and "superstar" nature to customers which then
decide to increase their IBM stockholdings.  Perhaps you should join them in their correctly directed