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The pad met as many of the important requirements as any apartment ever would, so I bought it. I used my judgment, relying on a gut feel that I bring into play on major financial occasions.

It was the perfect way to buy a pad, but in the business world, it would be one hell of a way to run an ant farm. You simply couldn't run a company on that basis, because what board of directors or shareholders would regularly accept "Well, it felt right" as justification?

Stewart, whom I just met, studied with followers of the mathematician Benoit Mandelbrot and the 1977 Nobel Chemistry Prize winner Ilya Prigogine. She and her colleague, Dr. Daams, wrapped their new math into a new program. The immediate implications are in insurance, banking, compliance and asset management, but DWENA works everywhere that judgment is required.

To understand fuzzy logic, you'd need to be a cybernetician or, at the very least, a giant brainbox, but try this: binary logic produces yes/no answers. Say you were driving along at 50 mph, and a Stop sign appeared on the horizon. Driving binarily, you'd roar right up to the sign doing 50 and have to go from 50 to zero in a split second when the sign took precedence. Binary is either/or. Fuzzy logic takes account of circumstances and experience to allow you to slow down gradually.

DWENA has applications in all kinds of worlds. Investment managers and banks currently use her. The Geneva-based World Health Organization uses her to help develop a universal set of health standards, much as the Basel concordats have done for the banking world.

DWENA won't make decisions for you, you'll be pleased to hear. Your presence will still be required. Like property catastrophe and other models in use in the insurance arena, DWENA is simply a tool that formalizes and enhances the judgment process by dialing out human irrationalities: moods, biases, and biorhythms.

The mind reels. Can Hollywood be far off producing a "Judge DWENA" TV series? This whole encounter produced vague feelings of an "I, Robot" or "Judge Dredd" future world in which machines endowed with fuzzy logic decide who's guilty. Isn't judgment what makes us who we are?

It's part of it. Common sense shapes who many of us are as well. DWENA leaves the common sense in the equation, but removes all the real-world variables, such as emotion, office politics or chemical imbalances. Given the limits of our cognitive-bounded rationality, the ability to deal with only so much at one time, bringing mathematical rigor to the business decision-making processes can't possibly be a bad thing.

If DWENA turns out to be the ur-program that begets a "Matrix" future or worse, well, there we are. At least you can tell the robots that you heard about DWENA first, and they might stitch you into a better pouch before they suck the precious life out of you.

ROGER CROMBIE is a Bermuda-based columnist for Risk & Insurance®.

January 1, 2008

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