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You’re a JD candidate. You expect it will provide for a predictable and lucrative career despite the massive price tag. However, law school hardly looks like the ticket it once was. With law firms shrinking around the country, clients insisting on flat rates, and a new wave of highly sophisticated outsourcers, both domestic and international, not only are there fewer jobs, those that do emerge are less stable and less remunerative. Whoops!
Then the news cycle begins. Expert networks, once an obscure service to a niche industry, find themselves in the middle of a string of insider trading investigations. Read the rest of this entry »
We, as investors, do not feel we are at the point yet where it is necessary to ban managers from using experts. Furthermore, we will still invest in managers that do utilise the services of experts. However, it is essential for us to hold managers to a higher standard and demand that they implement specific practices.
—Joshua Barlow, associate director at PAAMCO, underscoring the importance of sharing and enacting robust firm-level compliance policies in the absence of regulator-derived policies: via COO Connect
Why did Gerson Lehrman Group outsource payment and contract management to metratech?
Strip away all the fancy experts, managers, and front-line service-professionals from an expert network, and you see, at the bedrock of the business, payment and contract management.
Why would you outsource that? Why would you give up square one of the organization?
True. Payment platforms are commodities. Click-through contracts are procedural, annoying, and available. It’s tempting to let someone else take care of it. After all, a good cook doesn’t necessarily have a farm. In fact, they rely on others to produce the highest-quality ingredients for their recipes.
But it’s a bad idea.
Gerson Lehrman Group isn’t outsourcing individual ingredients. They’re outsourcing the recipe.
[NB: I’m surprised Integrity Research didn’t cover this.]
The reality is that LinkedIn has been used as a proxy expert network by many for some time now
—Ross Dawson, a self-described globally recognized leading futurist, entrepreneur, keynote speaker, strategy advisor, and bestselling author, opining on the state of expert networks.
Not really. It turns out that LinkedIn went down the expert network road some time back, but to no avail. It hired management consultants. It built out a research-staff. It held preliminary discussions with hedge-funds, investment banks, and others, but in the end, it shut it down. So no, it’s not an expert network, and it hasn’t been one for some time now.
Ross is a smart guy. Why the mistake?
The mistake lies in a simple confusion of concepts. LinkedIn is a professional network. It’s organized like a directory. It has experts. You can use it to find experts, but calling LinkedIn an expert network is a lot like calling the membership-directory of the IEEE an expert network. Sure, there are a lot of talented engineers in there. You can even sort them by employer, location, and with the IEEE profile-data, very specific expertise, but at the end of the day, it’s just a more detailed phone-book. It’s a directory, and a directory does not an expert network make.
Expert networks not only allow you to find an expert. That’s the easy part — the part you can do with a directory like LinkedIn, an IEEE directory or the phone book. Expert networks provide tools to facilitate the full life-cycle of an interaction between an expert and a client. These entail the stages over which Ross glosses when he says, “It is a little more effort to negotiate terms and make payments than it is on an existing platform, but it isn’t hard to do.” That’s a lot like saying, “all you really need for a restaurant is some food and a kitchen, right?” Neither statement is all you have to worry about to get started, and neither venture is that easy.
An expert network solves three problems. First, discovery. It surfaces those experts, niche or otherwise, whom you need to know. Second, it manages the engagement from qualification to contracts and compliance to connections to compensation. Third, it builds a repository of all past connections for both experts and clients. It’s the combination of everything – the systems, policies, compliance – that makes it work. Otherwise, it’s just a directory.
LinkedIn has provided a boon to expert networks. They’ve made it immeasurably easier to discover experts and arrange to reach them. Firms like Gerson Lehrman Group, Guidepoint, Coleman Research, Cognolink and others are probably very large clients of LinkedIn’s premium features. LinkedIn has even signed a little discussed, though exclusive and expensive, marketing partnership with DeMatteo Moness, a minor expert network. Notwithstanding the exclusivity of the arrangement, DeMatteo remains a marginal player.
The evolution of expert networks is just beginning. Ross is right to expect changes, but he’s missing some of the detail that will illuminate where the model is actually headed.
He’s not alone, though. The many smokescreens, from the insider trading scandal emanating from so many connections fostered through Primary Global, to the fabulously successful IPO of LinkedIn, have either written expert networks off or suggested that they’re nothing more than a directory with a little more effort. From a competitive standpoint, it’s taken everyone’s eye off the inner-workings of what really makes them tick and scared them from even experimenting with the model. It couldn’t be a better opportunity for companies like Gerson Lehrman Group to consolidate their position in an industry defined by unrelenting growth.
Retail cannot be algorithmically driven. Great retail is all about that sense of adventure and discovery. The next wave on this space is really rich social interaction, using video, using media, to achieve that.
—Jules Pieri, founder of Daily Grommet, remarking on the implicit tension between algorithmic and human curation. Eli Pariser frames a similar tension with his notion of the filter bubble: via Bloomberg
DealBook’s discussion of the upcoming Wini Jiau case left off with the ratio of pending cases to convictions and guilty-pleas in their on-going insider-trading investigation. It’s 80%.
Some 80% of those ensnared in the insider-trading investigation that shook up the street in the fall of 2010 have either plead guilty or been convicted of crimes related to insider trading. Among those pending, Wini Jiau. According to her court-designated lawyer, former federal prosecutor Joanna Hendon, Wini can’t wait to go “home to California and her beloved dog, Hunter.”
For Judge Jed Rakoff, who will preside over the case, however, the process is just getting started: “I am so impressed with the level of lawyering in this case on both sides. “I saw somewhere in press reports that the parties were talking settlement, and I personally hope that is not true because I am really looking forward to this trial.”
A former financial analyst at NVIDIA pleaded guilty today of criminal conspiracy and insider trading charges. Sonny Nguyen, 39, agreed to provide material nonpublic information he gathered in his role at NVIDIA to peers in an insider trading ring that allegedly spanned, among others, Winifred Jiau, a commonly used expert Primary Global Research LLC network of consultants.
Though “Wini” has not yet plead guilty, she has come under allegations of participating in and promoting insider trading through her engagement with Primary Global. It seems that Nguyen was perhaps one of whom she meant when she was quoted as saying, “As soon as I get it, I give you guys a buzz.”
It would almost seem that the probe is widening, but it’s not. If anything, it appears to be narrowing.
Today’s news began with open speculation by the WSJ that investigators shifted their focus to the principals of Primary Global: Unni Narayanan and Phani Saripella. The shift would appear to match the circumstances. Nguyen claims to have provided Wini inside information. Sam Barai, best known for his colorful instructions to his analyst who had been cooperating with investigators, pleaded guilty today and, according to the WSJ, “the probe of Messrs. Narayanan and Saripella, both former employees of Intel Corp., is being aided by one of their former clients, former hedge-fund founder Sam Barai.”
Investigators have illuminated what looks like a rich vein of corruption, circumscribed by a series of bad actors, both admitted and alleged. If no more convictions come of this, at least it will serve as a lesson describing the importance of compliance policies, procedures, and systems organized by industry-leaders, such as Gerson Lehrman Group, when speaking with outside experts, and at most, it may provide the contours of a gripping movie.
As the Rajaratnam prosecution revealed, the “expert network” firms that produced high-level insights — allegedly by paying technology industry workers for inside information — hardly were engaging in legitimate research.
—Jim Pavia, Editor, Investment News.
It’s surprising and disappointing to see Jim Pavia commit a gross failure of analysis in his review of insider trading. The Raj case wasn’t about expert networks. It was about insider trading.
Jim boldly misstates the circumstances, figuring a relationship that he thought must exist, and failing to recognize the fact that Raj was accused of insider trading based on information obtained through personal relationships with insiders, not through expert networks.
The crimes Raj has been convicted of weren’t conducted in the open. They were committed in the shadows, outside of any formal process. His information came from personal relationships and personal sources. If anything the formal compliance systems, controls, and policies of an effectively managed expert network would have scared him off and made him think twice about pressing for inside information. Knowing that an auditable record of his interactions would be on file at the network would have reminded him of his obligations to the law and society.
Yes. Insider trading is a problem. It poisons the market in a way that suggests the “game is rigged.” But one must also learn to recognize it for what it is – bad people doing bad things. Raj was convicted for gathering inside information through personal relationships with insiders, not through expert networks.
The investment industry is resilient and will continue conducting diligent company research and analysis while the investigations play out. As part of that process, companies and individuals will need to individually judge the potential reputational impact of using expert consultants. But given the need for quality information, the expert network industry — or its next incarnation — undoubtedly will remain a part of many analysts’ toolboxes.
—Glenn Doggett, Director of Standards of Practice, CFA Institute: via CFA Institute. Doggett reminds us that there have been bad actors outside of expert networks and bad actors inside of expert networks, but expert networks or their next incarnation will continue to provide an important research service.
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