Experts are always a problem. David Teece, writing on experts and the professional services firm, essentially starts with the following proposition: experts are impossible to manage and will never work for a traditional company. They’re tough to monitor, difficult to pay and they require special attention. But he started LECG.

Teece answers the implicit contradiction by suggesting an answer – something so simple, so elegant, we could consider it the fundamental theorem of compensation. It seems like it works. The stock hits $24 dollars a share. The market cap’s $800mm. And then poof – they’re trading at $3.40.

It begs the question: why did he stop with the equation? Why didn’t he keep the experts outside of the firm – create a virtual firm?

The problem of experts doesn’t seem stop with compensation. It may also be the nature of the firm.

Indeed, if the elegance of the equation obtains, should it not also set in motion the ability to scale expertise outside of the firm – as in a network of experts? And if it is an expert network, should it be defined by his fundamental theorem of compensation?

The problem of experts doesn’t seem stop with compensation. It may also be the nature of the firm. From Coase, whose organizing principle of the firm derives is based on price. It’s cheaper to organize as a firm, and as an employee, it’s better to listen to your boss because they know better. To Schumpeter, who considers the firm in terms of routines.