Long gone are the stigmas of working a second job, today the idea of a “side hustle” has emerged as a way to multiply revenue streams beyond a full time salary.
The sharing economy launched the side hustle from the fringes of the working world to the center of contemporary culture. If you’ve stayed in an Airbnb, ridden in an Uber, or had a brochure designed online, you have experienced first hand someone else’s side hustle.
Dozens of dollars per hour is a traditional side hustle income. In 2018, after accounting for expenses, the average Uber driver made somewhere between eight and twelve dollars per hour. That’s not a ton of money, but timing is flexible and it accounts for a modest additional income stream. Driving nine hours a week for a year nets between 3700-5600 based on the hourly rates above. At a seven percent annual return, that would grow to forty thousand dollars in thirty years.
Realizing the power of these returns, a small (but growing!) community is maximizing alternative revenue streams to accelerate savings with a goal of financial independence. Earning eight to twelve dollars and hour is great, but what if you could earn eight to twelve dollars per minute on your side hustle? Enter the expert network.
Expert networks
I first encountered expert networks in 2015 when a sales representative found me on LinkedIn. At the time, I had never heard of an expert network and was skeptical when asked for my hourly rate. As a 28 year old I didn’t exactly think of myself as an expert in anything.
I figured an expert needed a PhD in an esoteric field or, at the very least, years of experience working in industry. I was just a young professional researching regulatory and company operating challenges in the China market, what could I offer?
Turns out, I could offer quite a lot. My experience working on commercial issues in China gave me nuanced insights in one key area. The dynamics of China’s commercial environment.
What is an expert network?
An expert network is a group of individuals available for hire by outside parties seeking information on specific topics. In the parlance of expert networks, these experts are known as “advisors.”
The network is the storefront that does two things. (1) Identify and sign up new advisors (that’s what the senior associate in the picture above is doing). (2) Connect clients with advisors to share industry expertise.
The advisor decides an hourly rate and calls into the network’s conference bridge. The client calls in and pays the expert’s hourly rate and a service fee to the expert network.
What at the hourly rates?
Hourly rates are decided by the advisor, but the market determines fair value. If the rate is too high, few will choose to work with the advisor. Too low, and demands on the advisors time become onerous.
Like in surge pricing with Uber or dynamics pricing with Airbnb, an advisors rate will fluctuate. In my first call I set a rate based on the recommendation of the expert network, $400 an hour.
Years later, when a series of calls focused on China anti-trust regulator restructuring I raised my rate at $1000 per hour. Because few were so closely tracking these dynamics, demand was high and supply of knowledgeable advisors was low.
Once the government restructuring was complete, I went back to advising on macro trends and returned to the normal $400 hourly rate.
$1000 an hour seems like a lot, but if you’re an effective advisor you should be answering questions in a concise and substantive way, using much less than a full hour of time. Most calls are no longer than 20 minutes.
How does compensation work?
Because hourly rates are so high, the conference bridge provided by the expert network tracks the time the advisor and the client are on the call. The moment the client and advisor connect on the bridge, the timer begins. The timer stops when the client or advisor hangs up the phone.
The client is charged by the minute not a flat hourly rate. If an advisor speak to a client for 23 minutes at an hourly rate of a thousand dollars, the advisor will receive compensation of three hundred and eighty three dollars.
$1000/60 minutes = 16.66 per minute
16.66*23 minutes=$383
There are few side hustles in the world today that compensate you as richly as an expert network, but an effective advisor needs a narrow specialty to prove value to the networks’ clients.
Who uses expert networks?
The majority of expert network business comes from financial firms. Investment banks, hedge funds, private equity investors and venture capital firms are the most common users, both others in management consulting also leverage the platform.
In the financial sector, investment decisions are made based on huge amounts of information gathered from public sources. Financial managers describe this process as building a “mosaic” of information.
A mosaic is a picture or pattern assembled from thousands of small pieces of rock and glass. In a similar way, a hedge fund analyst assembles news, conversations with industry and regulators, and insights from expert networks to identify trends and patterns in the information.
The best financial analysts take in the most information from increasingly esoteric sources to gain an edge over the competition. In this industry, developing an original insight brings enormous market advantages that pay dividends far and away above the cost of consulting an advisor via an expert network.
What are the discussion topics?
The majority of conversations are at the nexus of industry complexity and a commercially meaningful decision. For example, a client might be interested in a scientist explaining the beneficial properties of a new pharmaceutical. What an expert can provide that is not readily available in the public literature is an opportunity to ask clarifying questions to improve understanding.
In my case, I received a litany of requests on how tariffs imposed by the United States on Chinese imports might impact companies future supply chain decisions. Other questions focused on the trajectory of US-China relations and what implications that might have on returning to a more sustainable engagement between the two countries.
Because previous expert network interactions cast a shadow across the industry at the turn of the century, all expert networks (and their clients) impose robust compliance requirements limiting advisors to sharing only publicly available information in the consultation process.
What is an example project?
As someone with US-China relations and Chinese commercial policy experience, I was a natural candidate for projects that tied these threads together. This was particularly apparent in 2018 when China restructured its government and consolidated its previous three antitrust regulators into one new regulatory department.
This caused merger review delays that were further exacerbated by a deterioration in US-China relations. Merger reviews are clearly important for the two companies involved in the process, but why would anyone else care?
The answer is an investment strategy calledrisk arbitrage, a method of trading that exploits the gap between the market price of a target’s stock and the acquirer’s valuation of that stock in a fully executed takeover deal.
The interesting thing about this strategy is that the final price is completely transparent, it is what the acquirer has publicly confirmed it would pay for the stock. As a result, an investor can identify with complete certainty the upside in any purchase.
So why would anyone buy into a deal where the final price is known? Enter the risk of regulatory review and the opportunity between the market price and the acquisition price.
If a transaction is approved and finalized the stock price will reach the target amount. However, if one of the global antitrust regulators imposes conditions on the deal, rejects the merger, or takes too much time to approve, the acquisition can unravel. If that happens, then instead of reaching the aquifers valuation, there is unlimited downside once a deal fails.
An investor can make money on both sides. He can short the stock in anticipation of a failed deal or he can buy the target stock at a lower price than the acquisition price knowing that if the deal is approved the price will immediately close at the acquisition price.
Who are the industry leaders?
Expert networks are a niche but growing industry. Some of the most prominent are Guidepoint, GLG, and Alphasights. Each offers a slightly different group of advisors and focus area, but the theory behind each is the same.
Registering as a new advisor is similar to setting up a new LinkedIn profile. The new advisor then completes a compliance course and is ready to engage in projects.
Should you join an expert network?
There are many benefits worth considering.
Earn extra revenue: Advisors are paid an honorarium, at a rate they set, for all consultations.
Influence industry investors: Advisors offer nuanced insights to a community of clients through telephone consultations, online surveys and in-person meetings that shape investment and commercial decisions.
Flexibility: The expert chooses the projects based on their experience and areas of interest.
Expanded network: Experts drive dynamic exchanges with influential investment leaders. Those relationships can evolve into regular contact and sustainable career connections.
Strong compliance safeguards: Most networks insist that experts not comment on their company or employer; rather, advisors are invited to discuss general industry trends or specific products and services within their area of expertise.
It is free to become an advisor: Signing up for an expert network is free and as easy as setting up a LinkedIn profile.
I hope you’ve found the discussion of my own experience helpful. I would be interested in your own experiences and comments in the section below. Please don’t hesitate to reach out directly with feedback at info@mrfirepower.com
