then eventually became the manager of the whole center. When the fraud
group operations moved to Omaha, that made it a lot cheaper for us to run. She
was working on the human management part—all the investigators—and I
would be supplying her with software. Between those things, we got fraud
pretty well under control in about a year.
Livingston: So the fraud solution was a combination of humans and software?
Levchin: Depending on who you ask. I think Sarah feels that it’s probably more
humans and the coders think it’s more technology. It’s one of those things
where, in the end, fraud is so nondeterministic that you need a human or a
quantum computer to look at it and sort of make a final decision, because, in
the end, it’s people’s money. You don’t really want some computer saying,
“$2.00 for you, nothing for you.” You need a human with a brain to say, “Hmm.
This looks like fraud, but I really don’t think it is.”
Then there are various processes and exception handling where you say,
“Even though it’s fraud, you don’t handle it because . . .” We got really good at
it later on. Initially, we sorted things by loss, but then we started sorting things
by expected loss. We’d estimate the probability of losses programmatically, and
then we’d get the amount of money in question calculated, figure out the
expected loss, and then sort the cases for the investigators by expected loss.
The investigators would only have to deal with the top 5 percent. You’d
never go through the entire queue of things for them to judge, but, because
they judge things pretty quickly, they would go through half the queue, and
they would inevitably start with the ones we thought were the highest possible
loss. So, the highest probable, the highest possible. That was one of the techniques
that we used to guide development.
Max Levchin 9
Livingston: Were any of your competitors doing anything similar?
Levchin: We kept the stuff under wraps for a very long time. We never really
showed IGOR to anyone. We never talked about it in the press. I was definitely
very paranoid. Initially, when we built it, we had a conference room where there
was the IGOR terminal, and people would go in there, use it, and leave. There
were no other copies available.
Eventually, various federal and state authorities wanted to use it too,
because they started to see that we were getting pretty good at this stuff. We
would invite them in, and they would have to go into the room and use it and
leave. They couldn’t take it with them, couldn’t print.

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