THE ISSUES Business
M
itchel Harad has never been so happy to have a family holiday ruined. In May 2016, the US-born
marketing executive was driving his family three hours south of their home in Sydney, Australia for a beach weekend when his phone went wild with urgent calls, texts and emails. LendingClub, the San Francisco- based fi ntech where Harad had run consumer marketing before moving to Australia, had plunged into crisis. Suddenly, dozens of hedge fund managers and other investors were so desperate for his insights into his former employer that they were willing to pay an average of $500 an hour to get him on the phone. The family hit the beach, but Harad stayed holed up in their little rental cabin taking call after call, cramming in 20 one-hour conversations. He ate on the phone and one of his inquisitors even kept the clock ticking on his ‘paid by the minute’ fees while he dashed off for a toilet break. ‘My throat was so sore that I had no voice by the end of it and I never got to the beach, but I had no choice,’ he recalls. ‘So many people suddenly wanted my opinion that I earned enough to pay for a few weeks in Fiji for the whole family.’ All those paying customers desperate to know what Harad thought was going on inside his former company were hedge fund managers and other investors who had found him through so-called ‘expert networks’ – fi rms that make their money by putting clients in touch with people whose insights they want in a hurry. He was on their lists because in 2007 he had received an ‘out of the blue’ email from a fi rm called Gerson Lehrman Group (GLG) asking if he was willing to fi eld such calls. Since then he has joined a half-dozen similar networks and taken 200-plus calls at fees of between $300 and $800, earning up to $10,000 a year for having brief conversations that he quite enjoys. Expert networks are one of the more
infl uential industries that most people have never heard of. At GLG alone, Harad is among an army of a million on-demand experts in 160 countries, according to the company. They range from Boston academics working on nanotechnology to retired chief executives, former politicians and the sales executives
who know more than anyone else about niche topics ranging from shoe sales in Scotland to Coca-Cola’s operations in Germany. In an age of robots and artifi cial intelligence, the world’s 100-plus expert networks or ‘insights’ fi rms are fulfi lling one of the oldest and most low-tech of human desires: the urge to talk directly to someone who knows something that you don’t. The companies are somewhere between talent agencies and micro-consultancies, and many of them are expanding rapidly. Having averaged an estimated annual growth of almost 20 per cent in recent years, the industry is showing no signs of slowing down. Covid leaves both experts and businesses open to more fl exible ways of working, while clients crave advice on how to cope with a disrupted and rapidly changing global economy. GLG is the best known fi rm, but there are a growing number of players in the space. Some have carved out a niche by specialising in certain industries or geographical regions. This combination of growth and competition has helped to set off a wave of fundraising and M&A activity. In October GLG fi led for the industry’s fi rst IPO in the US. The company plans to list on the Nasdaq Global Select Market under the ‘GLGX’ stock symbol, in a move that has shone new light on what has always been a deliberately secretive industry. The fi rm has still not announced how many shares it will offer or at what price, but
its prospectus revealed that in the year to 31 December 2020 it booked $589 million in revenue from 2,700 clients, with its $322 million takings in the fi rst half of 2021 representing growth of 14 per cent over the same period a year earlier. GLG reported a striking gross profi t margin of 72 per cent, which is not unusual in an industry where clients often pay $1,300 or more for a one-hour phone call, with as little as $300 of that – or in some cases less – being passed on to the ‘expert’. Neither GLG nor its competitors make their rates public, but clients and experts tell Spear’s that a typical mid-ranking expert receives $250–$500 an hour, with a smaller cadre of medical specialists or ex-CEOs able to demand $1,000. One industry player recalls a client being charged $30,000 for a phone chat with a former top Google engineer, and ex-prime minister David Cameron received uncomfortable news coverage in 2016 after a 90-minute breakfast with a small group of GLG’s hedge fund clients earned him tens of thousands of pounds.
T
he insights industry began with the founding of GLG in 1998, after changes to Wall Street’s rules on investment
research had left investors desperate for new sources of information. Two Yale Law School graduates from New York, Mark Gerson and Thomas Lehrman, launched the firm in their twenties. It was initially a publishing house, producing industry guides for fund managers, but the founders quickly realised their customers were much more interested in talking directly to the experts GLG’s researchers were interviewing. Alexander Saint-Amand, who joined the young fi rm while he was still at college and would be its chief executive for 12 years from 2006, is credited with realising the potential value of mediating direct conversations after he tried to research his mother’s Alzheimer’s condition at a medical conference and found that he learned most by talking to experts on the fringes of the event. Gerson and Lehrman remain directors and shareholders but for more than a decade they have spent much of their time pursuing other start-ups and business activities. Lehrman worked full-time from 2004 for President George W Bush’s Commission on
CLARE MALLISON
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