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Nothing to hide, everything to fear

Written by Clay Dillow, Fortune Staff Writer

Digital Reasoning is using military-grade tech to help banks sense trouble before it happens.

When Tim Estes founded Digital Reasoning in 2000, he couldn’t have imagined that he would spend the next decade using software to help the U.S. Department of Defense track suspected terrorists across the globe. It’s exactly what happened.

Estes started the company, which is headquartered in Franklin, Tenn., to make what is called cognitive computing a commercial reality. If you watched the star turn of IBM’s Watson on Jeopardy! in 2011, you’re already familiar with the concept of a computer that can learn by experience and respond to queries that don’t neatly fit its programming. With this kind of artificial intelligence, a computer can begin to understand intent, so that when a terrorist sends a message to another that says, “The baby is in the carriage,” a computer can mark the seemingly benign exchange as suspicious. Estes started his company at the turn of the millennium because he thought that all software would eventually teach itself. Three years later the Pentagon came knocking on his door with several small projects in hand and the Sept. 11, 2001, terrorist attacks freshly seared into its institutional memory.

“September 11 showed us the consequences of not being able to act on information,” says Estes, who serves as the company’s chief executive. “The desire to make software that could learn was the impetus for the company, but after 9/11 it became a national impetus.”

Digital Reasoning moved quickly to seize the opportunity. In 2004 it landed a prime contract with the U.S. Army’s National Ground Intelligence Center. In 2010 it received an injection of cash from In-Q-Tel, the Central Intelligence Agency’s venture capital fund. Working for the U.S. national security apparatus—its sole customer—allowed the company to turn its increasingly deep understanding of cognitive computing into high-powered analytics tools for the intelligence community. The Department of Defense deeply desired prescience—a way to hint at the course of global events before they actually happen. Digital Reasoning delivered that with software that could, in an instant, process large volumes of disparate, disorganized, and seemingly unrelated information and discern from it intangible connections between people, places, and events.

In 2012 the FinTech Innovation Lab, a mentorship program in New York City, invited the company to meet and exchange ideas with people in the financial services industry. After talking with representatives from Goldman Sachs, Credit Suisse, and J.P. Morgan, Estes decided it was time to bring his company’s technology to the private sector. Digital Reasoning had spent a decade behind the veil of government secrecy, he thought; now it was time to expand into an industry with an appetite for intelligence as voracious as any military’s: Wall Street.

Read the full article on the Fortune website here.