Artificial Intelligence is smart (as a 7year old)

A real life case study depicting capabilities and limitations of Artificial Intelligence

Artificial Intelligence is smart (as a 7year old)

I often tell this story, both as evidence of what Artificial Intelligence is capable of, and what its limitations are.

Let's start from the year 2003, when Palantir was founded by Peter Thiel (one of the earliest investors in Facebook) and others. Palantir was made to provide technological solutions to modern organizations using data and analytics. US government was their earliest customer. They wanted their help with problems like detecting patterns in child trafficking, drugs, cross border terrorism on social media platforms. And preventing financial fraud.

This story is about an attempt to prevent financial fraud through credit cards. It is said that the smart people at Palantir build sophisticated AI models that could look at a presented transaction and predict whether it had come from a fraudster using someone else's credit card or not.

A control room with a wall full of TV panels was set to show real-time credit card fraud rates across the concerned territories. They switch on the model, and wait with their breaths held…

And voila, the rates started to go down as they watched. Their model was able to identify fraudulent transactions and prevent them in real-time.

But the next day brought a different story. Fraud rates started to go up. Their super smart model was not good anymore. Something had changed. Was it a bug?

They fine-tuned the model again. And voila, it started detecting frauds again. But only in a few hours, did the frauds start rising again.

When they analyzed, the findings were no short of incredible. As it turns out, on the other end of the fence, the bad guys were also using smart AI models. They soon figured out the rules of the system that was preventing their transactions and they modified theirs.

In other words, the jailors made a higher fence and the thieves learned to jump higher.

AI by itself was not proving useful. It is then that Palantir changed their approach radically — they combined their AI models with human beings. Now a model would flag a transaction as fraudulent, and the human being would verify it using other markers.

The model has since been running successfully.


Explore More Insights

Comprehensive Fintech Audit Unveiled: Mastering Complex Tech Stacks for Strategic Excellence

Comprehensive Fintech Audit Unveiled: Mastering Complex Tech Stacks for Strategic Excellence

Read More
Digitally Transforming Legacy and Startup Fintechs: A Journey Towards Innovation

Digitally Transforming Legacy and Startup Fintechs: A Journey Towards Innovation

Read More
Empowering Supply Chain Businesses with Advanced AI: A Look at Our Image Matching Technology

Empowering Supply Chain Businesses with Advanced AI: A Look at Our Image Matching Technology

Read More
The Future of Website Optimization for Large Language Models

The Future of Website Optimization for Large Language Models

Read More
Pioneering a New Era in Startup Investing: Streamlining Connections between Entrepreneurs and Investors

Pioneering a New Era in Startup Investing: Streamlining Connections between Entrepreneurs and Investors

Read More
Revitalizing Retail: How Strategic Tech Enhancements Supercharged a Startup's Delivery Service

Revitalizing Retail: How Strategic Tech Enhancements Supercharged a Startup's Delivery Service

Read More
Revolutionizing Logistics: How Microsoft Dynamics 365 Boosts Supply Chain Efficiency

Revolutionizing Logistics: How Microsoft Dynamics 365 Boosts Supply Chain Efficiency

Read More
Revolutionizing Business Intelligence: A Deep Dive into AI-Driven Strategic Solutions

Revolutionizing Business Intelligence: A Deep Dive into AI-Driven Strategic Solutions

Read More
Scaling Success: How We Elevated a D2C Apparel Brand's Digital Storefront and Operations

Scaling Success: How We Elevated a D2C Apparel Brand's Digital Storefront and Operations

Read More
Transforming Chemical Formulations: A Case Study of Innovation in Contract Manufacturing

Transforming Chemical Formulations: A Case Study of Innovation in Contract Manufacturing

Read More
Artificial Intelligence For Freight Carriers

Artificial Intelligence For Freight Carriers

Read More
Beyond CRM and ERP.

Beyond CRM and ERP.

Read More
CBDC and the Future of Blockchain in India

CBDC and the Future of Blockchain in India

Read More
Chiplet Manufacturing in India: Current State and Outlook

Chiplet Manufacturing in India: Current State and Outlook

Read More
Cloud Price Comparison

Cloud Price Comparison

Read More
Common Human Factors That Inform Design

Common Human Factors That Inform Design

Read More
Consumer Trends in 2025: The Era of Smart, Sustainable, and Digitally-Driven Choices

Consumer Trends in 2025: The Era of Smart, Sustainable, and Digitally-Driven Choices

Read More
3 Cybersecurity Breaches That Cost Indian Startups ₹50+ Crore in 2024

3 Cybersecurity Breaches That Cost Indian Startups ₹50+ Crore in 2024

Read More
Decentralized Oracle

Decentralized Oracle

Read More
The Digital Leap: How Business Outpaced Competitors

The Digital Leap: How Business Outpaced Competitors

Read More
Digital Solutions for Stock Brokers.

Digital Solutions for Stock Brokers.

Read More
How Artificial Intelligence Helps Automobile Dealerships.

How Artificial Intelligence Helps Automobile Dealerships.

Read More
How Digitisation Helps Formulation Companies.

How Digitisation Helps Formulation Companies.

Read More
How metaverse will impact our lives and businesses

How metaverse will impact our lives and businesses

Read More
How Web 3.0 Will Change Businesses.

How Web 3.0 Will Change Businesses.

Read More
Industrial Digital Twins

Industrial Digital Twins

Read More
The Top Technology Trends of 2025 That Are Reshaping Our World

The Top Technology Trends of 2025 That Are Reshaping Our World

Read More
New Problems (& Solutions) of Identity Verification.

New Problems (& Solutions) of Identity Verification.

Read More
Next.js 13 is here

Next.js 13 is here

Read More
Psychology in Design

Psychology in Design

Read More
Reinforcement learning for custom trading algorithms.

Reinforcement learning for custom trading algorithms.

Read More
Tech Without Tech Teams: Outsourcing vs. In-House Development

Tech Without Tech Teams: Outsourcing vs. In-House Development

Read More
Technology In Agriculture

Technology In Agriculture

Read More
The Beauty & The Beast

The Beauty & The Beast

Read More
The Cost of Inaction: Why Delaying Tech Investment Is Risky

The Cost of Inaction: Why Delaying Tech Investment Is Risky

Read More
The Future of Virtual Reality

The Future of Virtual Reality

Read More
The Power of Boring

The Power of Boring

Read More
The Search For Value

The Search For Value

Read More
Pioneering Industry Trends in India for 2025: A Tech-Driven Revolution

Pioneering Industry Trends in India for 2025: A Tech-Driven Revolution

Read More
Unleashing Agentic AI: Transforming Supply Chain, Fintech and Pharma

Unleashing Agentic AI: Transforming Supply Chain, Fintech and Pharma

Read More
When Less Is More

When Less Is More

Read More

Ready to Transform Your Business?

Join industry leaders already scaling with our custom software solutions. Let’s build the tools your business needs to grow faster and stay ahead.