Sion Balass believes he is about to create a revolution in the world of science and industry. No more, no less. Somehow, he manages to remain quite calm about it. Perhaps his family tempestuous story taught him that it’s better to keep your feet on the ground, even when a very big dream is about to come true. Balass, just 29, is presently revealing an “artificial creativity” technology, which he says frightens physicists and scientists greatly because it succeeds in emulating aspects of the functioning of the human mind. No more, no less. In more scientific terms: Balass’s software can extract new mathematical and physical laws from a sequence of data.
The person who developed the software is Dr. Marcel Thuerk, chief scientist of Matrix Advanced Solutions, the company which the two jointly founded. “He is the mastermind behind everything we build”, says Balass. “He built a system that draws conclusions independently, and extracts the model from the data”. The applications of a software of this kind, Balass explains, are endless: it can develop new drugs at a fraction of the traditional cost, analyze physical phenomena, and even recommend shares on the stock exchange. “It is a software with applications in every field”.
You make the discovery of a mathematical model sound as easy as baking a cake.
“In the beginning, people really didn’t believe us. Everywhere we went people said to us, ‘It’s amazing, but it’s science fiction, voodoo, no way it can work’. The problem is that you can’t explain how you do it, because it’s your trade secret. To us, it was important from the marketing aspect to build the technology’s credibility, to have it known, for people to realize that it works. So we took it to the highest authority in the world of technology the Institute of Advanced Technology (IAT), which is a research center employed by the US army.
“They gave us a sequence of data, without telling us what it was or in which field, and said, ‘We want the model behind this sequence’. Two months later, we came back with the model. They were stunned, because they had removed 60% of the data from the information they gave us, and added 20% noise and errors to the rest. But we came back with a model with very high prediction capabilities again, without knowing why. And then they asked for the differential equation, which was about the physics supporting the data. We said that we'd give it a try. We came back with the equation with a five-meter margin of error. In retrospect, we know that it was the trajectory of a ballistic missile. They didn’t believe it could be done”.
In its Web site, Matrix boasts a letter from the IAT: "The IAT is highly impressed with the IAAC’s (referring to the team of Matrix and US defense contractor Sparta Inc.) technical capabilities as well as the solution they provided for what, at times, appeared to be a nearly impossible PoC (point of contact) problem to solve. Without hesitation, the IAT strongly recommends the IAAC to potential US government sponsors and is ready to work with the IAAC to pursue funding for future collaborative projects within the US security guidelines".
And are you involved in any such projects?
“We are working with the US Armed Forces on several projects”.
“We started over again with $4,000”
Sion Balass’s Matrix is the latest and most unusual venture by the Balass family, one of the wealthiest families operating in Israel, and yet one of the most modest. The Balass’s have never revealed the scope of their assets, but a clue is provided by their brokering a $200 million deal for laying optic cables in Russia, signed in 1991. The accepted brokerage fee in deals of this kind is 5%-15% of the value, and sometimes reaches double-digit percentage points. The Balass family brokers several such deals each year.
The family’s chronicles are so fantastic that they could easily be taken from "1001 Arabian Nights". The pictures gracing the buffet in the spacious mansion in Kfar Shmaryahu, which has become the “Balass Bros” office in Israel, say something about the family’s connections. For example, a picture of the mother, Ferial, descendant of the wealthy Musaffi family, shaking hands with King Hussein during one of his visits to England. For decades the family succeeded in keeping out of the public eye, both in Israel and elsewhere. Sammy Balass, father of the family, preferred to run his business modestly and quietly, and did not flaunt his connections and fortune. He also refused to be interviewed for this article.
Ferial and Sammy Balass, who were married in 1965, lived in the El-Hindiya quarter in Baghdad, considered one of the most fashionable and upper-class in the city. Balass was at the time a dealer in Japanese automobiles, including Nissan, and represented a series of companies in Iraq, such as Sony, Sanyo, Philips and Panasonic. Until 1967 their life was tranquil, consisting of social get-togethers, parties, a membership at the Club Mansur sports club. They raised their two older children, daughter Vania and son Benny, in prosperity and comfort.
When pushed, Sion Balass says with embarrassment that, “My father became one of the most successful businessmen in Iraq. His businesses ranged from electronic appliances, such as Sanyo and Philips TV and radio, through commodities such as iron, sugar and cotton, to heavy infrastructure equipment. He was the representative of a Japanese shosha (general trade conglomerate, K.Z.) and was involved in infrastructure projects power stations and communications”.
Ferial’s parents were also connected to the Iraqi Muslim elite. Her father imported tea and sugar and exported cotton, owned a fleet of ferries and a distribution company. He had two chauffer-driven cars one an elegant Buick (there was only another one like it in Iraq). “Our standard of living was extremely high”, Ferial wrote in her testimony, which was posted on the WOJAC (World Organization of Jews from Arab Countries) website, called “The Forgotten Million”.
The idyllic fabric of their life unraveled slowly, a process which began in 1963, with the assassination of President Abed El Karim Kassam and the Baath party’s rise to power. Israel’s victory in the Six Day War in 1967 marked a further escalation in the persecution of the country’s Jewish population. In 1969 Saddam Hussein, cousin of the Baath party president and the man considered the true power in the party, began persecuting the Jews directly. Among other things, he claimed that a Zionist plot woven by 14 conspirators had been exposed. Nine Iraqi Jews were publicly executed, their corpses left to hang for over 24 hours.
“In late 1969 my father was sent to Saddam’s prison”, says Sion Balass. “His Iraqi partner said that he was sending all his money to the Zionist state. His brothers, and my mother’s brothers and my grandfather, were all put in jail”.
Balass was in prison for five months; Ferial’s father and her uncle were there for one year and three months all of them, without having been charged or tried. “We paid a lot of bribes and used many connections so that they would not be physically harmed while they were incarcerated”, wrote Ferial.
“My father had good connections with the Baath party, so they let him out, and in 1970 the family fled to Iran”, Balass continues. “My parents took my big brother and sister, told the maid they were going on holiday to the north, and went to the Kurds, who at the time helped the Jews get away. One of Father’s good friends was the Spanish Ambassador to Iraq, and he gave our whole family Spanish passports to get out. They fled in jeeps, in the middle of the night, their headlights off, to the mountains. It took them eleven days to get out of there, with all kinds of bribes they were forced to pay. My little sister and I were born in Iran”.
Why did they flee to Iran, and not to Israel?
“It’s true that most of our family was in Israel, and we visited here a lot in the years we lived in Iran, but from the business aspect what Iran had to offer my father was too good to leave. He took a $4,000 loan, and in eight years he made his fortune again, after starting with nothing.
“In Iran, his main business was in optic cables. In that period the Shah had a plan that every person in Iran would have a telephone line, and there were deals in the country totaling billions. My father is always proud that he was the first to introduce optic cables to Iran, to Israel and to Russia. At the time he was working with Nortel, with STC which in time became Pirelli Cables, with Hitachi, and with Japanese firms. In Iran his business was mainly in cables, iron, and in representing Nissan.
“There was already a very large Israeli community in Iran. To this very day, when you look at Teheran and see the tall buildings, it’s all Solel Boneh. Those were the days when it was better to be a Jew in Iran that a Muslim. The Jews and Israelis had a very good life there. There was a very large Israeli community, my brother and sister went to an Israeli school. It was also a very good time for my family. And then, in 1978, with the revolution, we had to leave everything again”.
And again, you left everything behind?
“Most of it. My father was a little wiser”, he says with a smile. “After he had already been cut off and had to start from scratch, he learned to keep things liquid”.
“We brought Nissan to Carasso”
Immigration by relatives six years earlier, frequent visits to Israel and the house they had bought in advance in Kfar Shmaryahu made the Balass family’s immigration easy. “My brother and sister went to an Israeli school in Iran, so they fitted in immediately. For my father, it was important to build a profitable, high-yield business. He had a lot of connections in Israel and was asked to help, for example in breaking the Arab boycott”.
How?
“In the early eighties there were many companies that still didn’t do business in Israel, Nissan was part of the process of telling them, ‘The boycott’s over, come in”.
The Nissan agency belongs to Carasso, doesn’t it?
“My father was Nissan’s agent in Iran. When Nissan decided to penetrate the Israeli market they came to him, but we didn’t have the infrastructure of garages, etc., so we talked to all kinds of people here with whom they could do it. My father thought that Carasso was the strongest option, with Renault, and together with them we submitted a bid for the agency. We don’t deal in management, we are not partners in the equity but in royalties. Haim (Carasso) is a good friend of Father’s, they live here, next door.
“My father started his business in Israel with a company he called ‘Balass Bros’, and here too, he succeeded in building a flourishing business in infrastructures, communications and energy. This is primarily equipment in the communications field, and infrastructure equipment for cables and switching. In energy it’s water pumps, oil pumps. Mainly overseas companies. We import, and sell their equipment to large government firms, such as Bezeq and the Israel Electric Corporation”.
Give me some examples.
“We sell Bezeq all the copper cables they install today. We represent LEC in Israel; this is a highly unique company that deals in protecting entire compounds against lightning, such as Pi-Glilot or airports. And a lot of gray water equipment, pumps and valves, for companies like Pi-Glilot and Israel Oil Refineries. We and an English company we work with did the evacuation, cleaning and restructuring of Oil Refineries after the explosion there.
“In 1981 we opened an office in London that deals purely in trade. Less of an agency that represents companies. We buy and sell equipment manufactured by companies such as Siemens, Marconi, Pirelli, and represent a large number of Japanese firms, such as Hitachi, for projects in Europe, England, and particularly in Eastern Europe. And now, together with partners, we have an office in Baghdad”.
Surely it’s frightening to open an office in Baghdad, after what you went through?
“My father hasn’t been there yet. His friends keep telling him to come and he wants to, but he’s afraid. My parents’ memories of Iraq are far from easy. It’s funny, they never really talked about it. We heard the stories, but always nostalgically, how tasty the food was, and that Father was in jail and Mother spent six months alone with two babies. But we never heard about real pain. Only now, with the war in Iraq, the painful stories of their maltreatment there are coming out. When the famous press conference was held, ‘Ladies and gentlemen, we’ve got him’, and they showed pictures of Saddam, my mother had tears of joy in her eyes. Still, they’re very attached to Iraq, and what Saddam did there is an atrocity. My brother, sister and I tell Father that he has to close a circle; he started his career there, and maybe he should close it there”.
Does he live in Israel now?
“He divides his time between London and Israel, and some of his best friends in England are from the Arab countries. He used to play cards with the whole exiled leadership of Iraq in London. Before the Americans invaded Iraq, Father told an American friend, ‘You're betting on Chalabi (Ahmad Chalbi, leader of the Iraqi National Congress, for years supported by the US as opposition to Saddam K.Z), and I tell you he’s not the person to bet on. He’s a liar, and I know because I play cards with him every night’”.
Today, the Balass family’s business is spread among dozens of European and Asian countries, and run by only eight people (most of them family members), “Because we don’t get involved in management”, Balass explains. “We broker. Most of our business is on a brokerage basis we build the deal and get out. We are not directors and not shareholders. In fact, Matrix is our first time being directors with a share in the equity of the company”.
“Our software trades the stock exchange”
Twenty-nine year-old Sion is the third of the Balass’s four children. He spent his childhood and youth in Israel, including high school and military service in the Intelligence Corps. After his discharge he went to study engineering and business administration at London University. “When I finished my studies, five years ago, my Father called me. His first question was, ‘Are you sure you want to work with me? Because if you don’t, this is the time to say so’. I told him I couldn’t think of a better place to work. The second thing he said was, ‘You know what we do here, you know the business, you grew up with the business, and I won’t have you doing what we do. You have to do new things’”.
Weren’t you angry?
“There were times when I was angry at that decision. It could have been very easy to go into the regular business and immediately be productive. On the other hand, it forced me to sit down and think about what I wanted to do with my life. It was five years ago, at the height of the economic boom, when there were a large number of veteran companies and startups in Israel, which had failed in sales, in executing sales. And that’s something we know how to do. So we set up a company, a sort of boutique, which builds marketing and sales operations for each company abroad, according to its specific requirements”.
This plan went awry when he met Dr. Marcel Thuerk, then a scientist who had developed a technology and was looking to commercialize it. Ten years ago, Thuerk did his doctorate in the laboratories of Professor Manfred Eigen, Nobel Prize laureate in biophysical chemistry at the University of Guttingen in Germany. The goal of Thuerk’s doctorate was to imitate the evolutionary process.
“He built a system which simulates evolution, without introducing predetermined models to it. Scientist usually have theories, according to which they build models. We say that these models are a preconceived idea based on the theories, rather than on the actual data.
“He created a metaphor for what happens in nature. If you want to imitate nature, you take molecules, put them in a reactor chamber, add oxygen, heat, and wait two billion years to get a frog. He imitated this process using computer software. Each software is a molecule that is able to create a similar interaction to what occurs between molecules in nature: each reads the source code of the other and acts accordingly bonding, replicating, cutting, all the basic functions that take place in nature. This is in fact the self-structuring of molecules, and very quickly one is able to see how, from simple organisms, a complex structure is created”.
What can be derived from all of this?
“This is actually a system that helps scientists in all fields to find their way out of a deadlock. We have created an artificial system that is able to use the world of mathematics and offer a new insight into your data. The software extracts new models exclusively from the data. I’ll give you an example: suppose you are presented with the numbers 0, 2, 4, 6, 8 and asked, what comes after 8. You’ll say 10. How did you know? Because the model itself is in the data. Incidentally, it could also be 11, if the model is, ‘add 2.1, and round it off’. The software actually extracts the model from the data”.
Give me an example of an application.
“One of the first applications was in the pharmaceutical discovery category. When you look at what’s being done today it’s almost crazy. There are robotic systems that take hundreds of thousands of compounds and conduct experiments with them until they discover something active. Millions of components are examined to achieve a single drug. It takes years, and the moment something is discovered it is immediately introduced to preclinical and clinical trials, because it has cost a great deal of money to reach that point.
“Our system comprises one thousand compounds in total, which are synthesized in the lab, and the real data from the lab are fed into the system. The technology is completely blind to the goal of the medical application, but it finds the model that explains the connection between the structure and the activity, in a cyclic process, and in relation to a very large number of parameters simultaneously, such as toxicity and metabolic toleration. Today we have a drug for treating thrombosis, which we developed together with the University of Guttingen, and is now in the preclinical trial phase”.
How long did it take you to develop it?
“It takes us ten to twelve months, five people, and a cost of about six hundred thousand euro, to reach the pre-clinical phase, which does not depend on us. We use one thousand compounds, and in the conventional method it takes two to five million compounds to achieve a drug. There it’s done with thirty to forty people, and sometimes even two hundred people, and costs five to ten million dollars to reach the pre-clinical trial phase. And then too, their product has been optimized against 2-3 parameters, as opposed to ours, which is measured against 6-8 parameters.
“I’ll give you an example from the world of finance: We developed a system that predicts stock prices. The system builds models that explain certain correlations between share prices only, without at all considering what the company does, management, etc. We claim that on the basis of these correlations, the rise and fall of specific shares can be predicted. In September we began trading with the system, using real money”.
What were your returns?
“In the beginning we traded on paper, and the system yielded a return of three to five percent per month. In September, when we really started to trade, we made 8%. In the first two weeks of December we made one-and-a-half percent, but that was a problematic month because of the holidays and the small number of workdays. This is in fact a system that does day trading. One hour after trading opens in the US, the system tells us which three shares to buy, and at what price, and it usually gets out within half-an-hour to an hour, after it achieves 1.5% profit. In any case, at the end of the day you sell what you bought that morning”.
So your technology will replace Newton’s brain when an apple falls on it? “An artificial system that creates principles of physics is something that human beings do, not artificial systems. It deters many experts. We met with people from an electricity company somewhere in the world, and they got scared. One of them said, ‘So what do we need physics for?’ We are creating new expert knowledge, and the experts are afraid it will replace them. But this knowledge can’t replace them, because a computer is a stupid thing it only creates what you put into it. I need someone to give me the data, tell me what questions to ask, and understand the computer’s conclusion”.
The software that takes thought further
Matrix Advanced Solutions, which operates under the slogan “Extracting knowledge from data”, is developing a system of “artificial creativity”, a member of the extensive artificial intelligence family. The idea is to create computerized processes which expand human thought patterns.
Sion Balass explains that the software doesn’t care which data it is fed or for which industry. To the software numbers are numbers, and through its ability to overlook errors and complete missing information, it succeeds, he claims, in extracting the model behind the data from the data, and in its light, to predict the subsequent data.
This abstract concept can be applied in every field. In fact, every developer or scientist that is deadlocked and unable to continue can achieve a breakthrough with a computer that finds the law and takes it several steps further.
Until now Matrix has applied its technology to several primary markets: in pharmaceuticals, it has developed several drugs, including a drug that halts thrombosis, now nearing the end of the preclinical trial phase and entering the clinical phase; antibacterial compounds and anti-fungal compounds. Matrix also conducts simulations for the American Cancer Institute, for the optimization and rapid identification of compounds.
In the medical equipment field Matrix has analyzed and processed chips; in signal processing, it has developed a tool for the identification and numerological elimination of systemic screen error. In defense, as mentioned earlier, it has derived a model for a missile from information on its trajectory. In engineering, the company has optimized engine management, and is currently involved in several projects for the optimization of materials and sensors.
About a month ago, the company’s investors and shareholders met in the office/home in Kfar Shmaryahu to decide the fate of its name. The reason for the deliberations is that there is another large and well-known Matrix company in the market. They ultimately decided to retain the present name.
The Friends: Carasso, Allalouf and Tery
Whoever knows the Balass family says they do business differently, in a way that is more family-like and warm, that trust and friendship are the most basic things about it. The living room in the house in Kfar Shmaryahu frequently hosts friends and business partners, who in any case quickly become one and the same. For example, there are three members on Matrix’s advisory board: Isaac Appelbaum, a partner in US fund Lightspeed Venture Partners; Yoram Romem, remembered as president and CEO of ESI - Expert Solutions International; and Maj.-Gen. (res.) Yaakov Amidror, formerly commander-in-chief of the military colleges and military secretary to the Minister of Defense.
How did Sion Balass get to Amidror? He served in the army with his daughter, visited their home on many occasions, and became friendly enough with Amidror senior to call on him to join the brain trust steering Matrix’s future.
Among the group of Israeli investors, the biggest investor is Allalouf, of one of the country’s largest shipping groups. Allalouf family member Yoram is a childhood friend of Sion’s, “And when we saw his company it seemed an attractive investment opportunity. A company with a finished product and no marketing capabilities, which, if we invested in it, would have high potential”.
Haim Carasso, who knows how to put up a fight when it comes to protecting the family’s car agency, is full of warmth and sympathy for young Balass. “What do you say he’s doing today? Good, good. I remember when I gave him a nice gift for his bar mitzvah. I’m happy he’s getting heavily involved in high-tech. He’s an excellent fellow. We’re neighbors in Kfar Shmaryahu, I know them for over ten years. We do business with his father, he brought me the Nissan agency and we remained friends. He’s an extraordinary person”.
Moshe Tery, chairman of the Securities Authority, knows Balass senior from the days he served as CEO of the Central Securities Company (now Migdal Capital Markets). “When I was CEO there, he introduced me to them. He has a crowd of friends, the elite of the business community, and at a function I met the father and saw an aristocratic family, with values, true Zionists, and the kind of people who are close to my heart. And so a very close bond was formed with the whole family, it’s been fifteen years now. Every time I’m in London I see them. The most important thing is that family’s humanity and warmth. It’s a pleasure to be with them”.
Published by Globes [online], Israel business news - www.globes.co.il - on Tuesday, March 08, 2005