The folks at Landslide have figured out a great marketing strategy: If you view a demo of their "sales workstyle management" system, they'll give you a free copy of The Virtual Handshake--Opening Doors and Closing Deals Online.

Alex Salkever of Inc. wrote in Turning Sales Into Science that Landslide "gives sales staffers what they need, when they need it, to close a deal."  In other words, Landslide provides salespeople more infrastructure, so that they can focus more on selling and less on all of the other activities that distract them from their main job.

Link: Watch a Landslide demo, get a copy of The Virtual Handshake

I hope to see you at this upcoming event:
      
        Sponsor: InfoWorld
        Title: Social Media Breakfast: Overhyped or Under-executed? Strategies for Success.
        Location: Roosevelt Hotel, New York City
        Time: Tuesday, May 15, 2007, 8:00 a.m.-10:00 a.m.
      
        Register for this complimentary event by clicking here:http://www.infoworld.com/3909

       
        Social Media is experiencing phenomenal growth. As a highly effective and efficient way to communicate with Information Technology professionals, IT Peer to Peer Communities are gaining ground quickly. Yet key questions remain on how to best market to this new media.
      
        Topics includes:

        * New proprietary research on Social Media trends and technologies
        * Hear from expert panelists on Social Media implementation and ROI opportunities
        * Testimonials from marketing and advertising executives using Social Communities today
      
        Experts participating in panel discussions:

        * Julien Blin, Research Analyst and Social Media Expert, IDC
        * Allen Fear, Director of Online Content & Production, InfoWorld
        * David Teten, Co-Managing Director, Nitron Circle of Experts; Author, The Virtual Handshake
        * Mike Walsh, CEO, Leverage Software
        * Additional speakers TBD
      
        By attending the InfoWorld breakfast you will gain expertise in the following topics:

        * Tips for developing ads that connect with your target audience
        * Measurement techniques and how new tools/metrics are being used to determine ROI
        * Ideas on building IT Community loyalty
        * Evaluating communications potential and coverage
        * Marketing vehicles used to best communicate in an IT Peer to Peer Community.
       

       http://www.infoworld.com/3909
       
        If you would like to invite a colleague to attend this event with you, please forward this email and have them register for a complimentary pass.

I look forward to speaking at the MIT CIO Symposium on May 17 in Boston. 

"This year’s theme explores how social networks in business can revolutionize the processes by which people, partners and customers work together to create value. Social networks and related technology have gained prominence recently as sources of entertainment."

Speakers include:

    * Dr. Paul Barth
      Managing Partner NewVantage Partners LLC
    * Mr. Gary Beach
      Publisher CIO magazine
    * Mr. Sean Belka
      SVP Fidelity
    * Mr. Sheldon Borkin
      VP of Technology Progress Software
    * Prof. Erik Brynjolfsson
      Professor MIT Sloan School
    * Alan Chhabra
      Principal, Technical Program Management Team, Egenera
    * Mr. Peter Cohen
      General Manager Amazon Mechanical Turk
    * Mr. Rich Corley
      CEO Akorri
    * Mr. Frank Enfanto
      VP of Healthcare Services Blue Cross/Blue Shield
    * Mr. Glenn Engler
      EVP Digitas
    * Mr. Charlie Feld
      Snr. EVP, Applications Services EDS
    * Ms. Mary Finlay
      Deputy CIO Partners Healthcare
    * Mr. John Gallant
      Editorial Director and President Network World
    * Prof. John Henderson
      Professor, Faculty Director Information Systems Department, Boston University
    * Ms. Rosalee Hermens
      VP and CIO Timberland
    * Ms. Jo Hoppe
      CIO Pegasystems
    * Ms. Maryfran Johnson
      Founding Editor in Chief, CIO Decisions Magazine
    * Mr. Kumud Kalia
      CIO Direct Energy
    * Mr. Stephen Laster
      CIO Harvard Business School
    * Prof. Thomas W. Malone
      McGovern Professor of Management MIT Sloan School
    * Mr. Thornton May
      Futurist, Executive Director and Dean IT Leadership Academy
    * Mr. David McFarlane
      COO, Nexaweb
    * Mr. Mark McGinness
      Vice President, Business Development Expedient
    * Mr. Paul Nielson
      SVP Monster
    * Mr. Steve Papa
      Co-founder and CEO Endeca
    * Mr. John Polizzi
      SVP and CIO BJ's Wholesale Club
    * Mr. JP Rangaswami
      CIO, Global Services BT
    * Mr. Tim Rowe
      CEO Cambridge Innovation Center
    * Ms. Joyce Salisbury
      Manager of Interactive Research Tool Development GM
    * Mr. Claudio Silvestri
      CIO Cognos
    * Mr. Richard Soley
      Chairman and CEO Object Management Group, Inc.
    * Prof. Glen Urban
      Professor MIT Sloan School
    * Prof. Peter Weill
      Director, CISR MIT Sloan School
    * Dr. George Westerman
      Research Scientist MIT Center for Information Systems Research
    * Prof. John Williams
      Prof Information Engineering and Director MIT Auto-ID Lab

  Register here

Dealmaker Magazine has a useful survey of 2006 compensation at top private equity firms and investment banks.

They've done their best to make it hard to replicate this data without sharing your own personal data with them.

The page with this data in the printed magazine is written with hard-to-copy formatting, and the online version is presented in graphical form so readers can't just cut and paste it.

Click here and register for the data: http://www.dealmakerdaily.com/magazine/article/4444.html

UPDATE: For another excellent compensation survey, see TheFundBusiness Survey .

I was a judge tonight at an event sponsored by the MIT Enterprise Forum-NY, presentations by three social networking companies. (Sponsor: Fish & Richardson P.C.) The other judges:

- Steve Brotman, Managing Director, Greenhill SAVP

- Jim Coleman, President & Certified Facilitator -The Alternative Board - Chelsea New York

- Russ Fein, Managing Director, Corporate Fuel Partners

- Lori Hoberman: (Moderator), Co-Chair, Corporate & Securities Group at Fish & Richardson P.C.

------------------------------------

Company 1: RevCat.com

Pitch: "RevCat is the creator of the Relationship Value Index (RVI), the first technology to enable employees to build and effectively use organizational networks. RVI provides a new approach to knowledge and contact management. It enables individuals and groups to navigate organizations guided by their performance objectives to effectively get the information, decisions and expertise necessary to meet their objectives. The solution includes software and consulting."

Jim Caruso, CEO:

2 year old firm.

1^st year in business was working with Honeywell Corp, with cross-section of their 100,000 employees.

Industry trends they're riding:

- social networking expanding into corp. workflow

- organizational network analysis has identified clear ROI (e.g., Rob Cross at UVA)

Pain points:

- wasted time communicating expectations and needs

- uncertainty on how to prioritize the people who can help

- difficulty reaching someone who can help

- ineffective at asking someone to help you reach someone else

- frustration waiting for email/vmail response

Goal: RVI becomes the social networking standard used in business to drive individual effectiveness.

RVI measures: mutual benefit, cycle time, invested success, gain access, feedback, walk away, referral, meet objectives

Value proposition:

- Reuse and distribute expertise residing in informal networks (call it knowledge management upside down)

- Reduce costs related to ineffective use of people resources

- Identify faster ways to leverage colleagues to meet business objectives

Honeywell case study: employees didn’t know how to get things done, because of constant reorganization.

Fidelity case study: employees frustrated maneuvering across 40 business units in company.

Their goal is to be the standard measure for relationship value. Generating revenue thru software licensing.

Competitors and potential partners: contact management, social networking (Contact Network Corp, LinkedIn); Human Capital management (Softscape, Kenexa, Halogen); CRM (Salesforce);

RVI is different approach to business relationships. Real-time capture of knowledge and relationship strength.

Barriers to entry: have been at this 7 years.

Customers are typically large complex organizations. Raytheon, Credit Suisse, Pfizer, Dunkin Brands. 350,000 users right now.

MY FEEDBACK:

What I like:

good management team that worked together in the past

-real clients

Feedback on presentation

- should work with KM companies

- not clear how to use it day to day

My Concerns

- long sales cycle, because they have to sell to General Counsel, CTO, CEO

- I'm concerned about relatively little progress after so much time has passed

FEEDBACK FROM PANEL

Responses from Caruso

- they're talking with some big consulting firms about white-labeling this. Have been in business 2 years.

- They approached some of the early adopters (Spoke, Visible Path, etc.) about being the corporate front end for them, but those conversations didn’t bear fruit.

- people are stingy about their relationships

- they mainly sell to CTOs

Responses from Audience

- why not target NGOs?

----------------------------------------------------------

Next Company: YourLocal.com

Pitch: "YourLocal.com is the first website that enables users to navigate their entire local experience. Featuring a wiki-enabled event guide, user-generated reviews, and the community-building tools of a social network, YourLocal.com produces abundant, dynamic content. At the same time, an individualized recommendations engine helps guide users through the "white noise" of events, and towards the events they're most likely to enjoy."

Scott Stedman presenting

Scott Stedman and his brother are founders/owners of "The L Magazine", 102,000 circulation biweekly, largest NY tristate event guide. They cover both venues and events.

Events that you see will be customized for your particular interests. Will incorporate both user-generated revews and events.

Interface guide is modeled on Netflix.

Competitors:

EventMe.com, Bernardoslist.com, Upcoming, Yelp, down2night, whatsupNYC, renkoo.

None have recommendation engine. They don’t amalgamate user-generated reviews.

My feedback:

- very crowded space. Instead why not build "ntag for the social networking/dating space"? Help me meet the women at the party who meet my specs, who will be interested in me. No one's done that well, and that's very valuable. I'd pay for that.

Other feedback from panel:

- don't say you want "5-8 employees"; it's too wide a range

- don't put a pre-money valuation, because someone may think it's worth more.

- Clarify conflict between L Magazine and YourLocal.com . It's better to just get investors in L Magazine as one entity, which owns YourLocal.com . What happens if you expand to Seattle and want to launch a local presence there?

- Go deeper on problems that current users have with their existing site and competitors.

Feedback from audience:

- partner with local weeklies in major cities to get their content

- no evidence in presentation of technology expertise

-----------------------------------------

Collectors Quest

Pitch: "Collectors Quest is a Broadband TV Network targeting the collectors community and advertisers seeking access to this high-value group. Collectors Quest combines a mix of high-quality broadband video, social networking and ecommerce to address a passionate community already online, that spends significant time and money on collecting interests."

Elizabeth Kressel, Founder & CEO

Consumers spend $100b annually for collectibles. 73m Americans are collectors, with an average of 2-3 collections. Over 10m people annually attend collector events.

3 prongs: content, commerce, community.

Very strong management team; 4 with experience in this sector, and 3 worked together previously

COO was founder of auctions.com .

Revenue model:

- targeted commerce. Margins 50-75% on collectible items (standard in this industry).

- Advertising. CPM of $10-$30 due to niche focus. Pre-roll ad rates of $25 but as high as $75 .

- Publishing

Entertaining and informative videos. No one else is offering this in this sector.

1-to-1 marketing in its purest form.

Revenues from UGC and community. Profiles are based on dating profiles. "Make me an offer" feature to provide CQ opportunity to get additional revenues. Use technology to make collecting easier.

"Collecting is all about bragging"---so it's easy to get detailed demographic data

Milestones: secure call center, finalize inventory mgmt, website launched,

Partners; hearst, primedia, mbeckett, Today Show

Collectors clubs with 500K members have agreed to promote CQTV.

Competitors:

Very fragmented area.

Content: collecting sites, cable programmers, network programmers

Commerce: TV , internet auctions, other retail outlets

Have raised $400K to date, and seeking $3m in capital.

Process patent is in process

My feedback

- Great presentation, very professional. Best of the evening by a big margin.

- Raise more money

- Copy MyThings.com

eBay is 1.25% of the $100B/year in revenues in this area. This is very fragmented market. EBay started with collectors market but has since abandoned it.

Other panelists

- this is very viral

- what is your liability in case of fraud, given there's extensive fraud in this market (e.g., signed baseball cards)? Answer: they'll use the same guidelines as ebay.

The team from AQ Research (at whose conference I'll be speaking tomorrow in London) has written a blog post about an idea I've chewed on for a while: ‘A Marketplace for Research’.

There are a number of gross inefficiencies in the current research business, and inefficiencies are usually the breeding ground where new business models can be created.  Among those inefficiencies:

• Many people on Wall Street are paid large amounts of money to do identical work, e.g., probably hundreds of investors have slightly different models of what Microsoft's earnings will be

• Money managers pay a lot for a product, research, whose exact value they don't know.   

• Research analysts, who are supposed to be experts in valuation, don't know exactly how to price their own product.

The idea of a marketplace for research addresses many of these inefficiencies. As one small example of a research market, I know of a boutique research firm which explicitly auctions off certain new analyses to, e.g., the top four bidders among their clients.

Another model: there are quite a few startups which provide a marketplace for retail investors to share their research, although of course in the vast majority of cases this research is far inferior to what is sold to institutional investors.  These sites are hoping to benefit from the wisdom of crowds effect, as does the Circle of Experts.

• SeekingAlpha.com, which channels contents from hundreds of bloggers to provide insight on a range of industries. They pay the bloggers nothing, but monetize the traffic through advertising. Bloggers participate for exposure.

• Marketocracy , a research company and fund which has recruited over 55,000 people to manage over 65,000 model portfolios. It then invests based on the best picks of those participants.

• Feeling Bullish, BullPoo, Digstock, and SocialPicks - all of which are discussion sites in which your public discussion of investment ideas is systematically ranked. The SocialPicks site is currently down.

• Stocktickr positions itself as a "trading journal" in which you can keep track of your trading ideas. Asking people to submit this information manually won't work—they need to have partnerships with all the major online trading services. (Update: compare with Mint, which has executed this idea well.)

• Bivio, a site which helps individual investors form investment clubs. They provide accounting and fund management services, including investment partnership accounting and tax software.

• Motley Fool CAPS, a Motley Fool service that lets users place predictions on a publicly listed stock’s performance vs. the S&P 500 over a given time frame ( See Techcrunch's writeup)

Shirky describes this generational shift in terms of pidgin versus Creole.

“Do you know that distinction? Pidgin is what gets spoken when people patch things together from different languages, so it serves well enough to communicate. But Creole is what the children speak, the children of pidgin speakers. They impose rules and structure, which makes the Creole language completely coherent and expressive, on par with any language. What we are witnessing is the Creolization of media.”

That’s a cool metaphor, I respond. “I actually don’t think it’s a metaphor,” he says. “I think there may actually be real neurological changes involved.”

The site’s name stems from old school programmer Ward Cunningham’s invention of the first wiki, which originally drew its name from the Hawaiian word “wiki,” which means quick.

 In the case of Wikipedia, this refers to the site’s facilitation of quick collaboration between users in the creation of informational pages.

 On Monday, Wales unveiled a new, free-hosting service called OpenServing, a site that will offer free hosting and use of the powerful Wikia software to anyone interested in creating a community site.

 The kicker: Wales intends to make this all available while permitting users to keep 100 percent of any advertising revenue they earn on their site from ad networks such as Google Adsense. more

I enjoyed meeting with Jim Fowler yesterday, CEO of Jigsaw (our wiki profile). Jigsaw is a marketplace for business contact information. It's very useful for salespeople, recruiters, researchers, jobseekers, and so on. Some noteable data points:

+ We know from our (Nitron Advisors') own experience that the problem with most traditional list services is that their data is often out-of-date, whereas Jigsaw has attracted a community who are motivated to cleanse the data on their behalf. 80% of Jigsaw phone numbers are direct dial, in part because of their approach to gathering data.

+ Most Jigsaw revenues come from recruiters and financial advisors. 50% of revenue is from corporate clients, who find the data cleansing service that Jigsaw offers particularly valuable. All of Salesforce's salesforce uses Jigsaw . Only a small percentage of corporate customers upload data, but Jim sees that percentage increasing over time.

+ 1/4 of revenue is from resellers/partners --- you can see a list at http://jigsaw.com/company_information/partners.xhtml .

+ He's identified several competitors: WillyLoman.com, 7 Chinese competitors. Jim claims that he is the only player with significant traction.

+ As with all social networks, Jigsaw has some users who abuse the system. So like all data vendors, Jigsaw has started to insert dummy records to track abuse, resale, and so on of their data.

+ Jim claims that some corporate sales brokers have stopped selling databases with emails, because of their concern that their lists will end up on Jigsaw.

+ Although many people (Michael Arrington, Rafe Nadleman) are critical of Jigsaw on privacy grounds, to date only 200 people have asked to be removed from Jigsaw, and >2500 people have asked to be added to Jigsaw so they can proactively manage their data.

+ The database is used heavily; 70% of all contacts in the system are "bought" at least once a year.

+ Jim claims that the people who are really hurt by Jigsaw are CEOs like him and me, because it makes executive recruiters more efficient---so that they can steal our employees more readily. He says "As soon as we're cash flow positive [this year], I've told all our employees that we're giving free lunches every day. We have to do what Google does, because I know that so many people are working hard to recruit our employees."

One of the questions I get asked fairly frequently is how people can leverage Web 2.0 techniques in their applications and infrastructure today. Now that it's getting more well known, more people seem to be actively interested in making immediate, practical use of Web 2.0 ideas.

Career Hub, a career advice blog I contribute to, recently launched their second free ebook, Insider’s Guide to Resume Writing. The free download is http://careerhub.typepad.com/main/2007/01/resume_writing_.html

Sony, for instance, paid $65 million for a video-sharing site called Grouper.com and started a nifty service through which you can load your favorite clip from one of its movies — say, Jack Nicholson barking, “You can’t handle the truth” at Tom Cruise in “A Few Good Men” — onto your MySpace or Facebook page.

 Over the last few weeks, other media companies have accelerated their efforts in social networking.

For example, the Hearst Corporation on Jan. 8 bought a small company called eCrush.com.

And the Walt Disney Company, the CBS Corporation, Viacom and NBC have all been busy planning new social networking features for their various Web sites.

Thanks to some regulatory arbitrage, AllFreeCallswill let you make phone calls to many foreign countries for free.

 Dial 712-858-8094, and at the prompt dial 011, the country code you are calling, and the number you wish to call.

 Easy. Some of the bloggers writing about this call this "free", but that's a bit misleading.

Because AllFreeCalls is taking advantage of certain government subsidies, you as a taxpayer are really paying for this call.

I thought that some of our readers might be interested and qualified to attend one of our upcoming private hedge fund dinners. =======================================================

Seeking Ecommerce/Consumer Tech Experts for Chicago and San Francisco Hedge Fund Dinners January 2007 =======================================================

Nitron Advisors is organizing a series of dinners for e-commerce and consumer technology experts to talk with major hedge fund investors interested in this sector.

These invitation-only events will be taking place in Chicago on January 16 and San Francisco on January 17.

We will compensate you for flight expenses, and pay you an honorarium for joining us.

We're looking for senior industry executives and other experts with the following backgrounds:

Consumer Technology

 Ecommerce areas of interest:

+ Online specialty retail (eBay, Amazon, Blue Nile, Overstock, Audible)

+ Online auctions (power sellers on eBay, other auction sites)

+ Search engine space (Google, Yahoo, MSN)

+ Consumer generated media/free video hosting services (YouTube, MSN Video, Yahoo Video, Google Video)

+ Online advertising/marketing (ValueClick, 24/7 Real Media, aQuantive)

+ Lead generation players (Autobytel Inc, Move Inc, Bankrate, IAC InterActiveCorp, HouseValues, etc.) +Online media (PRIMEDIA, New York Times/About.com, etc.)

Qualifications: As an expert, you have at least four years senior experience in the eCommerce space or consumer tech space. You have a "big picture" perspective on different firms in the space. If you are not already a member of our Circle of Experts, please visit http://www.circleofexperts.com/apply-form.html?i=11and apply to be a member of the Nitron Advisors Circle of Experts. Please contact Mr. Jesse Mandell, 1-212-682-6455, JMandell(AT)nitronadvisors.com, with any questions. Please note that we must review your bio and talk with you before we can accept you for the dinner.

I enjoyed participating in AQ Research's recent conference on "The Future of Research", last December 5.

I finally had a chance to edit and post my notes on the panel on Research Pricing.

Speakers:

Lisa Shalett, Chairman and CEO,

Sanford C Bernstein Paul Spillane, CEO, Soleil Securities

Chair: Albert Alonzo, AQ Research Lisa Shalett:

 If research is really a discrete model, you could say that should have a fixed price.

 But I believe research is actually really an advisory service, an interaction, part of a broader process----part of the mosaic of ideas.

 No money manager on the planet will say he has just one source for investing. Research should be priced in direct proportion to the value creation or value destruction.

 By comparison, money management industry prices its service in proportion to its own value creation or value destruction. Unbundling and transparency are two separate concepts.

 The idea that research pricing should be tied to volume or fixed is another concept.

 I believe strongly that research should be tied to volume.

 Paul Spillane: For us to be successful, we have to determine a fee. We are the only part of the finance business that provides product for free.

 I don’t want us to be paid based on our stock-picking performance. 1-2 fund managers, and a batch of hedge funds, have given us a price schedule: you bring in a company manager, I'll pay X. you provide an expert, I'll pay Y. you set up road show for me, I'll pay Z.

We're trying to ascertain value of what we provide. Our analysts only get paid if customers say, "Pay them". It's all client-directed.

 Alonzo: Independents have always been transparent, but sell-side have dragged their feet in complying with menu pricing. Shalett: Trading commissions should be going down slowly.

 There's no reason why they should be flat or rising. The wool is being pulled over the money management industry's eyes.

Marginal cost of executing /clearing a trade is close to zero, and Sanford Bernstein is not even a scale player in this business.

If you want to save money on research & trading, start there first! Spillane: If you're head of research at a bulge-bracket bank, you focus your effort on minimizing outliers, so no one can sue you.

 You're not focused on creating alpha. Money management industry is afraid to say what they're paying for research. If a money manager says it's paying 2 cents for research someone can sue. But if you say you're spending it on execution, it's harder to complain about it.

Look at Jefferies settlement. Shalett: Broader public policy question: what does research provide?

 Buy side says they're paying for liquidity, for there to be a dialogue. Trading cost curve has gone down 6 pct. annually since 1975, to 3.5 cents now.

 The regulators want you to be democratic, give access to everyone.

Pricing mechanism should be scale neutral, to not overly advantage the largest money managers. Alonzo: Why do indies still get paid so much less than sell-side?

Spillane: Because we let them! We don't know what we should be charging. We don't have enough senior-level relationships. We don't know if we're being overpaid or underpaid.

 You have to be willing to walk away from underpayment. Shalett: We don't put a formal price on our services. But we use the concept of fair share.

We use polls, Greenwich polls. We're paid 1/3 of what we should be paid, if you compare our ranking in polls with the total payments to research providers.

That hasn’t changed in 13 years. The reason is that the sell-side has a lock on being systematically overpaid.

 Spillane: Lisa, you have the power to change this. Just shut them off. Shalett: We'd shut them off if Thomson would implement the change to make it easier to shut people off.

(laughter) Questions: What would it take for you to get out of execution?

Shalett: It will only happen if we can be confident that we'll get paid 3x what we're paid now. In Europe, implementing CSAs as follows: 8 bps for execution, 7 bps for research, plus 2 bps for proprietary research when paying sell-sides. These sell-side firms are holding the indies' money for 90 days, paying no interest.

If there were a DTC, a Switzerland, for these commissions, I'd join it and exit trading. But I don't believe in what's being implemented today.

 Alonzo: CSA gives firms freedom to use traditional payment mechanism. Is now the right time to push on pricing? Shalett: Depends partly on extent to which funds are generating substantial alpha.

 Hedge funds are willing to pay unlimited amount for good research. Spillane: How do you get a return on capital that you can't measure? If someone could provide a utility function for research, big banks would sign up and then focus on prop trading.

 We're entering dangerous part of cycle, because we've had good returns for several years.

This is first year in 10-15 yrs when more hedge funds closed than opened.

 So it's a tough time to talk about pricing. Shalett: Big banks are generating 30% ROE.

 They're good businesses. Mayhew: Will we see a more level approach between pricing of sell-side and indie research?

Spillane: We won't move to unbundling until we're forced to. We won't subject ourselves to the soft dollar pool, which is only 7-15% of giant pool of commissions ($14-$15B in US).

 I don’t want to be in the kiddie pool. Barry Hurewitz (Morgan Stanley): We have 500 analysts .

 Average buy-side person with a $50M commission pool has 11 buy-side analyst. Lisa might have highest per-hour price on the Street, today.

 I don’t see why you can't just price your services explicitly; that's what we do. Shalett responds: From 75 to 2000 (decimalization), trading was a commodity, because market was very concentrated.

 Most volume going thru NYSE specialists, whether it came from MS or GS, or it was OTC (fulfilled by market-maker). Post-2000, you had fragmentation of liquidity, which meant differential execution quality.

 Trading has become a more differentiated product.

 Capital commitment actually mattered. Now, pendulum is swinging back.

 Technology is reconcentrating liquidity. Buy-side can trade directly with the market.

Vast majority of executions are commodities, or will be in next 2 years.

 So prices should be going down. It doesn't make sense that prices go up.

CSAs favor some players over others. Macroeconomics don't stand up to scrutiny, and industrial behavior is being perverted as a result.

 Spillane: Morgan Stanley can't price by the hour, because there are too many constraints.

Customers aren't willing to set a price.

 There are way too many internal pressures calling your #1 ranked analyst to come to a meeting, go to a conference, etc., to say simply that he bills at $3000/hour.

Following are my rough notes from AQ Research's recent conference on "The Future of Research", on December 5.

The speakers on this very strong panel were:

 Scott Lessing, Chief Operating Officer, Citigroup Investment Research Shubh Saumya and

 Jai Sinha, Partners, Booz Allen David Weild IV, CEO,The National Research Exchange

 For more information on Booz Allen's views on this subject, see their report, Saving Sell-Side Research.

 Lessing: This question [of how to make investment research pay] is less pressing than it used to be 2 years ago.

 We're coming from a great year for our clients and research.

 There's been a shift towards payment for quality of research Jai Sinha:

News of death of research was greatly exaggerated. Components of value of research include distribution and service, as well as actual content.

Any time commissions are not explicit, there is waste. We don’t need to necessarily force change in the model Weild: Quality is in the eye of the beholder.

 What is quality to an actively traded hedge fund isn’t necessarily quality to a longer term account or a public company.

 I noticed Monika Schulz with Wall Street Letter in the back.

 She recently conducted an interview with Candace Browning, the Director of Research at Merrill Lynch.

Candace, when asked how the research product had changed, responded that it has become more "trading focused." It’s clear that public companies are having a tougher and tougher time getting the support that they need from the largest sell-side firms to reach long-term investors.

These accounts don’t generate enough commission volume to merit much attention yet they are the most important accounts for CEOs to reach.

As a consequence, more firms will need to ensure aftermarket support themselves. Let me share one interesting anecdote: I was talking with the CEO of $350-$400M Australasia-based company.

 A bulge bracket firm was taking this CEO on an all-expenses paid roadshow in New York and Boston to see institutional investors. This CEO couldn’t believe his good fortune and asked me “Why?” I asked him to share the list of accounts he was visiting and it was clear that most of these accounts (e.g., Tiger, SAC, Goldman Sachs Principal Strategies) were so large as to likely be prohibited from owning a stock of his market capitalization.

The CEO went on to say that all of his conversations focused on industry trends and not his company – a clear sign that they were mostly wasting his time.

We recently did a project for a $750M VC. They were working with a $500M company going public.

The bank with whom they were talking about going public didn’t have coverage on even one company with a market cap under $1billion.

While I might choose that firm to take me public, I sure need to be careful about who is going to support my “little” company in the aftermarket.

 Lessing We cover 3000 stocks. We've been expanding small/mid-cap stocks. Weild: We run one funny analysis. We look at daily volume per analyst per stock.

 This analytic shows that if you cover a firm within Dow 30, you're still competing for more volume/analyst than smaller cap stocks.

In fact, the median Dow 30 stock generates about 300,000 shares of volume per analyst per day, which drops to about 90,000 shares per analyst per day for the median stock in the S&P 500.

 Compare this to the NASDAQ Composite, which is more actively traded than the NYSE Composite, and the median stock generates only about 30K shares per analyst per day.

 This is partly the reason why if you're analyst #30 on IBM, you're still competing for more volume than analyst #2 on a mid-cap stock.

 A rule of thumb is that you are generating about $0.01/share/day available to research. The balance is siphoned off by program trading and low cost algorithmic trading.

Thus, despite the fact that accounts reject the need for more "maintenance research" on large cap stocks, the fact is that the stocks are so broadly held and generate so much volume per analyst that the economics are compelling.

Lessing: Volume of trading doesn’t drive our coverage decisions; it's investor interest. In addition, there is very little correlation to an idea that we generate and how we get paid.

 We can get paid in IBM trades for a small cap idea.

 Weild: Yes, but investor interest tends to be correlated to trading volume.

 Plus, your definition of small cap is apt to be higher than ours.

We’re looking at sub $500 million market cap companies and Citi is probably closer to $750 million and larger. Lessing: Agreed. Sinha: Unbundling will allow people to pay differentially.

Lessing: there's room for many different payment models. We're very adaptable in how we get paid. Greenwich Associates surveys say that 20-60% of commissions are allocated to research, and rest is execution (capital commitment, execution services, etc). I suspect that FSA data will be roughly comparable.

 We'll hold on to a larger percentage of this pot than competitors, and it's because our quality is higher. Sinha: The more street-dependent buy-side firms will allocate a larger percentage to research.

 I see a hollowing out of the middle, of the 35th person providing IBM coverage.

 Weild: Citigroup provides a whole host of products and services that the independent firms don’t – equity derivatives, enormous sales trading, algorithmic trading (Citigroup bought Lava Trading not that long ago), securities lending, and Citigroup is the #1 underwriter of equities globally.

Citi has a great portfolio of services that go beyond simply research and that gets reflected in commission payments.

Sinha: There is aligning of consumption with spend Spelling: We have a discussion with client about what resources we can commit to them; what % of payment pool should be sent to them.

Audience Question: What threats can you make?

I had a client say, "Show us what you're giving us. If you don't have that, how can you tell us what you're going to take away?" We have 3000 accounts.

 There were 4 contacts at one particular account who were heavy users of our research. They were the people we needed to upsell.

Tiers are binary: you turn it on or off. If you want research to be a profit center, how do you do that?

Saumya: How often is there a mismatch of clients who are dramatically underpaying? One of our clients asks, 'What is the research product?'

 Lessing: We don’t talk about resources cost in dollars per hour. We talk about where the client ranks with us, and say we believe you're underpaying.

I've recently talked with a few people about 'social commerce'---the idea that our online business activities will both reflect and in part be driven by our personal social network.

My coauthor Scott Allen recently did a market research study on "Transactional Trust in Social Commerce", which provides some context on this.

For example, many people would prefer to buy a used car from a friend or a friend of a friend, rather than a stranger.

 The social context is particularly important, in my experience, when purchasing services as opposed to products. Why?

Because the quality of a service varies wildly depending on the motivation and context of the service-provider.

 For example, my wife and I are currently evaluating some contractors to do some renovation for us, and a contractor who lives near us and knows some of our friends socially is less likely to rip us off than someone who is a stranger.

Amazon has a primitive version of this functionality, in that I can see that people who like book A also like book B.

I've also seen quite a few startups who are working on various variations of, 'What is an efficient way to buy stuff from friends as opposed to strangers?"

See for example www.stylehive.com and www.thisnext.com.

This was supposed to be a significant part of Tribe's business model, and some of the local services directories (e.g., Yelp, LinkedIn) are also trying to leverage the fact that you trust your friends' (or friends of friends of friends) recommendations. I see several advantages of socializing commerce, in general:

1. Higher likelihood of truth in advertising.

 The friend is less likely to lie about how lemony the used car is, because he knows that interacting with you is a repeated game, not a one-time game.

 2. Reduced purchase cost because of fewer intermediaries.

By buying a car from a friend, you don't have to pay a dealer's markup.

3. Reduced costs of identifying the right product.

 Friends (or friends of friends) tend to have similar tastes. If my friend is (like me) a city dad with a child, then my friend is also likely to have a car to sell me that suits the needs of me and my family.

4. Helping out your friends/your community.

 No one does a business transaction unless he/she derives some benefit. You'd rather that your friend gets the economic benefit of selling a car than a stranger.

So does it make sense to use online networks to make commerce more social?

To evaluate against the criteria I listed:

 1. Higher likelihood of truth in advertising.

 Possibly also true online. However, online we already have measures of reputation that are not dependent on me knowing someone who knows the person in question: eBay's reputation functionality, Rapleaf, etc.

 2. Reduced purchase cost.

I think in most cases this doesn't apply online, and in fact the purchase cost when buying via a social network can be higher because I lose the advantage of a broad seller base competing with one another. In addition, somehow the intermediary (e.g., Amazon, eBay) has to make a markup. If I'm buying something online anyway, then I've got access to a shopping comparison engine which will lower my purchase cost to the bare minimum.

3. Reduced costs of identifying the right product.

This is likely true, but only for a small number of products. For many products, my friends are not necessarily more knowledgeable about the product category than Cnet.com---so I should really just buy what Cnet recommends, not what my friends are buying. The one advantage of buying what my friends recommend is that, if conforming is my goal, this helps me to conform.

If everyone else pays a premium for an iPod or Treo 650 then clearly I must buy one too.

4. Helping out your friends/your community.

 To some extent this is also true online.

 However, I doubt it's a big motivation for many people. Research from the likes of Forrester, Resource Interactive and Morgan Stanley is also beginning to focus on a new generation of consumers they term the Millennials (aka, “Generation Y”) who range in age from 18-26 years old.

Their buying patterns differ from prior generations. The Millennials exceed the Boomers in size, distrust media and have little to no affinity for brands.

 As opposed to earlier generations, they value their peers’ advice and validation: therefore, CNet recommendations are less valuable. Jeff Leventhal, CEO of Spinback, observed, "this generation is the largest consumer group to date and will shift the commerce paradigm."

It's clear that many people like doing business with others in their community, or with others to whom they're interconnected. Think how many offices have an internal email list for people to sell sporting tickets, TVs, etc.

Think of the bulletin boards with things for sale that you'll see in many churches or synagogues. However, if you are already doing commerce online as opposed to face-to-face, I'd argue that in many cases it's irrational to make your commerce decisions dependent on your social ties.

 In most cases it's more rational to just buy things via a comparison shopping engine (Shopzilla, Froogle, etc.), particularly when buying a commodity good that could otherwise be found in a few block radius.

The good news for the startups trying to do something in this area: first, many people are irrational and will prefer to buy via a social intermediary, even if they get a worse deal. And second, for certain types of purchases buying via a social intermediary can be more rational, especially when the item is a not a common good, but rather a unique or collectible item.

Used cars are the most obvious example, because there are so many ways in which the seller can deceive you about the true value of the product.

If you're a Pez dispenser collector, fellow members of your community can also turn you on to an impulse purchase which you would not have searched for yourself on Shopzilla, but which you are excited to buy because a trusted peer refers you to it. Feedback welcome.

I look forward to speaking at AQ Research's conference next week on "The Future of Research", Dec. 5, Grand Hyatt, New York.

Full schedule here.

 AGENDA THE FUTURE OF RESEARCH MORNING SESSIONS


08.00 Welcome and Introduction: Graham Field, Managing Director, AQ Research 08.15 Keynote address: Dan Chornous, Chief Investment Officer, RBC Asset Management

08.45 Major Trends in Research A review of the main factors influencing the development of research in North America: - The aftermath of the global settlement - The future of independent research - The impact of unbundling - The rise of hedge funds Speakers to include: Stefano Natella, Global Head of Research, Credit Suisse. Chair: Michael Mayhew, co-CEO, Integrity Research Associates; Eric Frank, Global Managing Director, Investment Management Division, Thomson Financial

09.40 Research Performance Measurement Performance measurement will be a key ingredient in assessing and pricing research.

 But who performs well – and which metrics make most sense? - Quantitative and qualitative tools - All round performance measurement – integrating the elements - Implementing organizational change Speakers to include: Robin Hodgkins, President, Cogent Consulting;William Russell-Smith, Commercial Director,AQ Research; John Wiseman, Manager, AlphaMetrics North America.

Chair: Michael Mayhew, co-CEO, Integrity Research Associates

10.25 REFRESHMENT BREAK

10.45 Research pricing Fidelity has already struck hard dollar deals with research providers. How much further will the research pricing trend go? - Is hard dollar the way of the future? - How does the buyside evaluate and price research? - Should the sellside go down the menu pricing route? Speakers to Include: Lisa Shallett, Chairman and CEO, Sanford C Bernstein; Paul Spillane, CEO, Soleil Securities.

Chair: Albert Alonzo,AQ Research

11.45 Expert Networks Expert networks have become a powerful addition to the research proposition.

 But how can they be built and where are they most effective? Speakers to include: Stanton Green, CEO Vista Research David Teten, CEO, Nitron Advisors, LLC

12.30 LUNCH Michael Mayhew Integrity Research Associates Stefano Natella Credit Suisse John Wiseman FactSet Lisa Shallett Sanford C Bernstein Dan Chornous RBC Asset Management William Russell-Smith AQ Research Robin Hodgkins Cogent Consulting

AFTERNOON SESSIONS

13.30 The Global Research Picture How does the research outlook for North America compare with – and relate to – what has been happening in Europe (and Asia).

 - Does a global offering still make sense? - What will the impact of MiFID and unbundling be? - Is outsourcing part of a global solution? Chair: Sanford (Sandy) Bragg, co-CEO, Integrity Research Associates Speakers to include: John Lowrey, Head of European Electronic Client Services, Lehman Brothers; Charles Gepp, Global Head, Research Initiatives, Reuters

14.30 Equity and Fixed Income Research Convergence The buyside can see the advantages, but how far can it go in reality? - Does regulation encourage or discourage convergence? - Is cooperation the realistic alternative? Chair: Sanford (Sandy) Bragg, co-CEO, Integrity Research Associates Speakers to include: Margaret Cannella, Head of Americas Corporate Research, JPMorgan; Jim Linnehan, Managing Director, Investment Banking and Research,Thomson Financial

15.15 REFRESHMENT BREAK


15.30 Research Product Management The creation and delivery of an effective product has to lie at the center of any research business. - How can the research product be differentiated? - What role can RIXML play in improving distribution and utilization of research? Speakers to include: David Richeson, Global IT Program Manager, Deutsche Bank; Skye Hauptman, CEO, BlueMatrix

16.30 Making Research Pay How can research be changed from being a cost center into being a profit center? - What role can research play in the equities business? - What organizational structures will deliver the best research product? - Does research on small and mid cap stocks make economic sense? Speakers to include: David Weild IV, CEO,The National Research Exchange; Shubh Saumya and Jai Sinha, Partners, Booz Allen; Scott Lessing, Chief Operating Officer, Citigroup Investment Research

17.30 COCKTAIL PARTY – Sponsored by BlueMatrix

I had lunch recently with David Jackson, CEO of SeekingAlpha, and a former neighbor of mine.

I thought that many of our Circle of Experts would benefit from contributing to David's company.

Briefly, www.SeekingAlpha.com is the leading blog source of stock market related commentary by money managers and industry experts and a major provider of financial content to Yahoo! Finance.

Articles published on Seeking Alpha reach over a million readers per month, about 17% of whom are finance professionals.

 Crucially, each article published by Seeking Alpha (including those syndicated on Yahoo Finance) contains a link to the author’s biography or URL of choice, and can therefore be used to publicize your availability for consultations via Circle of Experts.

If you are already writing any sort of analysis, there's no marginal cost or effort to you. Just send SeekingAlpha your work, and they'll do all the editing and production for you.

 You can read about Seeking Alpha at http://seekingalpha.com/about, view a list of sample contributors at http://seekingalpha.com/contributors, and submit an article for publication (Seeking Alpha’s editors will contact you directly after doing so) at http://seekingalpha.com/do/content/submit.php or by emailing Mick(at)SeekingAlpha.com.

(As disclosure, Nitron Advisors does not get any sort of commission or payment from SeekingAlpha if you sign up; we just think that publishing through their channel is valuable to you.)

(from my friends at Accolo) The Great Recruiting Discrimination Debate - Round 2.5 with sound You are invited to participate in our next Webinar Debate with the EEOC and OFCCP on December 5th from 10:30 am to noon Pacific Time.

For more event details and to register, go to http://www.accolo.com/streets/ .

 This is a redo of the debate we held on November 14, 2006 where there were difficulties with the sound.

 Thanks to the willingness of the panelists and vastly better technology, we are holding another live Webinar debate.

 The great news is that you can now participate in a bigger and better event! The audio will be delivered through the speakers on your computer.

Title: The Great Recruiting Discrimination Debate - Round 2.5 with sound

Date: Tuesday, December 5, 2006 Time: 10:30 am to Noon Pacific Standard

Time Cost: Free Capacity: Limited to the first 1,500 participants

 Link: http://www.accolo.com/streets/ As a bonus, we will be combining all the questions and answers into a web page for easy reference after the December event.

 We will send you an e-mail with the web page link when this is ready. If you have any burning questions for the EEOC/OFCCP, you can ask it when you register.

 Even if there is not enough time to have your question answered during the debate, we will make sure it is added to the Q&A section on the web page following the event.

 Round 1 was held in May 2006, and 94% of all participants wanted to hear more! Round 2.5 with sound will be bigger and contain tougher questions.

 The panel not only includes additional senior members of the EEOC and OFCCP, but also a litigator representing companies fighting these agencies.

 This content rich Webinar is free thanks to the generous donations from PeopleClick and Accolo, and the tireless volunteer efforts from Daniel Parrillo of Strategi LLC, Karen Mattonen of Advanced Career Solutions Inc. Pre-registration is required.

 We know how valuable your time is and hope you will join us for The Great Recruiting Discrimination Debate – Round 2.5 – with sound.

Nitron Advisors is featured on the front page of today's Wall Street Journal:

Big Investors Turn to Network of Informants "For professional investors, something akin to what Match.com has done for the nation's singles...hooking up middle managers from hundreds of companies with professional investors desperate for an investing edge." More (requires subscription or two-week trial)

UPDATE: Michael Mayhew posted the article's text in full, without the graphic which discusses revenue of Nitron and other players in the space.

I took some notes on Sandra Manzke's talk at this week’s World Hedge Funds Summit .

I have enclosed slides from her Toronto presentation and a Eurekahedge presentation.

 Biography of Sandra L. Manzke Sandra Manzke, Chairman and Chief Executive Officer, founded Maxam Capital Management LLC in April 2005.

Prior to that, Sandra was the founder and co-CEO of Tremont Capital Management.

She was responsible for the oversight of Tremont’s operations and the development of Tremont’s business plan.

 She was also a member of the Investment Advisory Board. Sandra oversaw the creation and sale of Tremont’s life insurance products, which were the first to use hedge fund investments.

 Prior to the formation of Tremont, Sandra was a principal at Rogers, Casey & Barksdale, Inc., a pension fund consulting firm, from 1976 to 1984.

 While there, she served as the senior consultant to a number of major corporate/ERISA clients. From 1974 to 1976, she worked as an independent consultant at Bernstein Macauley where she was responsible for reviewing the firm’s investment products.

 She was at Scudder Stevens & Clark from 1969 to 1974, where she established one of their internal measurement systems during her tenure as an Investment Manager.

Sandra holds a Bachelor of Fine Arts degree from Pratt.

NOTES

Managers close, but they never close permanently.

When they reopen, they reopen for existing investors.

 Such prominent managers as Marc Druckenmiller, Marc Kingdon, Marshall Wace are not in any index, so the indices are always partial. Managers are slow to report sometimes, particularly after a down month.

 When Cerberus closed to new investors, some indices took it out entirely.

 But then they reopened to new investors, and they weren't let back in. Providers of Investable Hedge Fund Indices include: EurekaHedge & MAXAM HFR: index is index of all funds that have managed accounts with them.

 CSFB MSCI FTSE Dow Jones Greenwich Van Royal Bank of Scotland Deutsche Bank—retail focused S&P is no longer offering investable hedge fund index Today 300 hedge funds in Hong Kong, about 300 in Canada Now launching a LatAm product.

 They launched a JV : Eureka is a data company, MAXAM is asset management.

How index is constructed: - Assets over $50m - Allocate initially to 30 largest managers - Flexibility to match country allocation, market cap, and strategy comprised in index - Rebalance semi-annually - If a manager closes ,the fund stays in the index A lot of fund of funds do not outperform the index, so people will move to the index.

It's much cheaper to move to the index. $250K minimum

I enjoyed the October 30 Hedge Fund Panel Discussion by the authors of, "Hedge Funds: Insights in Performance Measurement, Risk Analysis, and Portfolio Allocation", sponsored by the Chicago GSB Alumni Club of Greater New York. Heidi Christensen Goldstein did pre-introduction Then Cyrus Claffey, President Chicago GSB Club of NY, made formal introduction Moderator:

David K.A. Mordecai President Risk Economics Limited, Inc.

Mark Shore Former COO of VK Capital Inc.Morgan Stanley, New York

Hilary Till Co-Founder & Portfolio Manager Premia Capital Management, LLC, Chicago (Premiacap.com) Formerly Chief of Derivative Strategies at Putnam, and formerly at Harvard Management Company. BA Statistics UChicago. Fulbright Fellow LSE. Advisory board of natural resources hedge fund/fund of funds Now editing a book on commodity investing

Fabrice Rouah Ph.D. Candidate McGill University, Montreal Institute of Financial Mathematics Studies CTAs/hedge funds in general

 Jacqueline Meziani Senior Director Standard & Poors, New York – hedge fund indices. Chemical Bank, Citigroup MBA Stern 10 years at S&P Product Manager: Ops, marketing, licensing, research. My job is to catch things if they fall.

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Mark Shore Book excerpt and Slides Ch. 25 Study: modern portfolio theory assumes returns to be normal—but is this true?

Most asset classes are not bell-shaped normal curves. Can higher statistical moments (skewness, kurtosis) offer a clearer picture of risk-adjusted returns?

 How do hedge funds and managed futures perform individually and simultaneously as diversifiers in a traditional portfolio?---expanded Harry Kat 2002 study of hedge funds and managed futures Sharpe ratio is widely misused --- Sharpe Ratio = (returns-RF rate)/std deviation Assumptions: - historic results have some predictive ability - mean and variance are sufficient statistics for evaluating a portfolio - Distribution is symmetrical….BUT many studies have shown that time-series distributions are asymmetrical - An investment with lower correlations (such as alternative investments) may add greater value with a lower Sharpe ratio Sortino Ratio ----- (return-MAR)/downside deviation ---- is a better concept of downside risk.

 If Standard Deviation goes up, does that mean risk has increased? Not necessarily. Schneeweis & Spurgin (2002): the independent returns of alternative investments are not as important as how they may benefit the overall portfolio. Consider co-skewness of each portfolio component.

 Co-skewness may be utilized to reduce "volatility shocks' or tail risks Kurtosis- the fatness of the tail by the peakedness or flatness of the returns distribution Beckmann and Scholz (2003) Kraus and Litzenberger (1976) support a rational investor's preference for positive skewness and reducing volatility Till (2002): mean-variance metric is most appropriate when returns are symmetrical.

 Thus using it for asymmetrical returns assumes the investor is indifferent between upside volatility and downside volatility Kahneman and Tversky Kat study (basis of Mark Shore work): asked if hedge funds and managed futures complement each other? Answer: yes, when managed futures receive >45% of alternative investment allocation.

 Indices for Kat study: S&P 500 index, 10 yr Salomon Bros govt bond index, and a portfolio of 20 funds, and the Stark 300 index of managed futures Shore study: S&P 500 index, Citigroup Corporate bond index, HFR fund of fund index, and CISDM Conclusion: Sharpe ratio may overestimate the risk-adjusted returns by de-emphasizing the downside volatility of investments with negative skewness.

Sharpe ratio may understate the risk-adjusted returns of investments with positive skewness by penalizing positive volatility. S-ratio is a good ratio to use.

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Ms. Hilary Till Slides Hedge Funds: Quantitative Insights

1. Return Sources

A. Inefficiencies What is capacity of hedge fund industry (with an alpha advantage) ? (based on argument in Foss (2004)) If hedge funds are exploiting inefficiencies, someone must provide them. Assume: Maximum tolerance of average investor supplying inefficiencies: -50 basis points (assumption based on size of inefficiency in global fixed income markets) Size of global capital markets: $55 trillion Required excess return for hedge funds: 10%. Ergo: implies the hedge fund industry could go to $2.75 trillion under management.

 Caveat 1: prop traders also are fighting with hedge funds to exploit these inefficiencies

 Caveat 2: many strategies are based on earning risk premia, not on exploiting inefficiencies.: Relative-value bond funds, equity risk arb, value vs. growth, small cap stocks, high-yield currency investing. Examples drawn from Cochrane 1999ab, etc.) I.

Return Sources C. Illiquidity Reason: tick-by-tick evaluation of a good investment is painful. Nassim Taieb (2001), Fooled by Randomness, Table 3.1: An investment of 15% return, with 10% volatility/year, implies: Scale Probability of Making Money at Different Scales 1 yr 93% 1 q 77% 1 mo 67% 1 day 54% 1 hr 51.3% 1 min 50.17% 1 sec 50.02% So on a tick-by-tick scale, you'll suffer about half of all days from a feeling of losing money

-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=-=

Fabrice Rouah Review of the Academic Hedge Fund Literature (Ch. 13) Slides

1. Performance Persistence—do winners repeat? 3 methods to analyze this: + 2x2 contingency tables + binomial model (multi-period) + regression of current performance returns on past rerturns Summary: Little evidence of persistence, especially long-term Most persistence is due to losers continuing to lose Some losers increase volatility in attempt to boost returns.

 2. Factor modeling No transparency, so investors attempt to identify factor exposures.

Important for anyone holding several funds (pensions, FoFs) Helps to eliminate funds with similar strategies.

 Linear models are difficult because of the non-linear relationship between HF returns and asset returns (options, short-selling).

R squareds for hedge funds are dramatically lower than those for mutual funds (which are typically 0.8-0.9), i.e., these conventional factors have low explanatory power.

 Particularly important study: Agarwal & Naik 2004 Non-linear returns make linear modeling difficult

3. Portfolio diversification Many styles have low correlation with equity & bond indices. Stress testing indicates they hold up well during market downturns.

 Funds should not be co-integrated with markets or with themselves Adding hedge funds to a traditional portfolio increases its risk-return profile Simulation indicates 5-20% allocation Correlations: tend to be low (0.37 vs. S&P 500).

High p value means there's not enough evidence to show that correlation is anything other than zero.

4. Survivorship bias Compares returns of portfolios.

 This is the bias you will experience if you analyze a portfolio that contains only live funds. Usually about 300 bps.

In Mutual Funds, it's usually <100 bps.

This is the most important of all biases.

 5. Survival analysis how long can HFs be expected to survive, and how fast do they die? New area of research New inflows are from institutional investors They wish to invest long-term, but are worried about high attrition rates.

Seek funds with longevity Factors driving survival are the same factors driving survivorship bias. 50% survival time (i.e., half-life)= one-half funds die before this date, and one-half die after.

 Estimates are of 5-6 years. Most of these studies are very biased because they usually only use funds born after 94. But one of the better studies says >10 years. No surprise: low returns, small asset base, young manager age all correlate with high mortality

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Jacqueline Meziani Disclosure: "I am not a quant." Edward Blum, my former colleague, is the major researcher on this chapter Studied equity long/shorts Short position serves following purposes: alpha generation, hedging of market risk, earning interest on short position while collecting short rebate Managers may use futures and options to hedge their positions. Overall, net exposure of E L/S funds tend to have a positive bias.

High beta funds usually have high net market exposure are often concentrated.

Moderate beta funds hold proportionately more short positions that would lower net market exposure.

 High beta variability may indicate several things: manager consistently includes securities different from those in benchmark. A market-timing fund manager is controlling beta.

 A stock-picking fund manager does not manage beta b/c he is concerned primarily with fundamentals of stocks in the portfolio Investable E L/S indices are fairly clustered Managers tend to go long small cap stocks and go short large cap stocks. Managers want more liquidity on short side.

Negative relationships with value premium.

These managers were taking long positions with growth stocks and short positions with value stocks (although this finding is less robust).

 On average, E L/S hedge funds returns are drivne by returns of the global equity market, size premium, and the value premium.

"If they don’t fail outright, most businesses fail to fully achieve their potential. That’s because the person who owns the business doesn't truly know how to build a company that works without him or her.. which is the key." - Michael Gerber

Michael Gerber is the founder and CEO of E-Myth Worldwide, and best selling author of The E-Myth Revisited, and E-Myth Mastery. He defines E-Myth as:

1: The entrepreneurial myth: the myth that most people who start a small business are entrepreneurs,

2: the fatal assumption that an individual who understands the technical work of a business can successfully run a business that does technical work.

Since its publication in 1995, this business classic has sold over one million copies, and is published in 16 languages. Michael observes that most small businesses are started by "technicians", that is, people who are skilled at something and who enjoy doing that thing.

When these technicians strike out on their own, they tend to continue doing the work they are skilled at, and ignore the overarching aspects of business.

 Without clear goals and quantification benchmarks, they soon find themselves overworked, understaffed, and eventually broke. They come to hate the work they do. Rather than owning a business, Gerber writes, "they own a job." Click here for the interview.

Many online stores allow for a "coupon" or "promotion" code when you order to automatically assign discounts, deals and freebies (kinda like money for nothing). RetailMeNot.com is a place for finding and sharing these coupon codes. So... when you buy online, check here for discounts first (unless you're frikkin crazy).

New York County Lawyers’ Association’s Cyberspace Law Committee

presents

Web 2.0: Upgrade Your Web Marketing

The Internet is upgrading to version 2.0 and so should your law firm's marketing. More and more lawyers are taking their practices to the next level and this forum should help you do the same. Take an evening to familiarize yourself with how blogging, online referral networks, research-sharing wikis and more can expand your firm’s profile and attract prospective clients.

SPEAKERS

Scott Lichtman

COO, Nitron Advisors

Scott Lichtman is COO of Nitron Advisors (www.nitronadvisors.com), a provider of senior industry executives with specialized backgrounds to law firms for testimony and to investment funds for market advice. Nitron Advisors extensively applies Web 2.0 technologies – including blogs, peer referral networks, online expertise acquisition services, specialized professional search engines and live interactions – to acquire clients and experts as well as build awareness for the firm’s capabilities.

Partner, Schwimmer Mitchell Law Firm

Martin Schwimmer is co-founder and Partner at Schwimmer Mitchell. He represents owners of some of the most famous and soon-to-be-famous trademarks in the world. He focuses on international and domestic trademark and domain name counseling, prosecution and litigation. Martin was General Counsel to an ICANN-accredited domain name registrar and continues to represent domain name companies. Martin was a partner at Fross Zelnick Lehrman & Zissu. Managing Intellectual Property Magazine selected Martin as one of the best trademark lawyers in the United States. Martin writes and speaks frequently on trademark and domain name issues and is editor of The Trademark Blog, www.schwimmerlegal.com, one of the most popular blogs on the Internet in this field of law (and generally ranked #1 by Google in this niche).

Bruce MacEwan

Creator and Host of AdamSmithEsq.com

Bruce MacEwan is a lawyer as well as a consultant to law firms on strategic and economic issues. He publishes the site “Adam Smith, Esq.” providing insights into the business of law firms, which generates 250,000 page views per month. You can read it at www.AdamSmithEsq.com. In his consulting practice, Bruce provides guidance on how to expand one’s business in the legal world. A recent engagement, for example, was a return-on-investment analysis of a knowledge management initiative at an AmLaw 20 practice. He’s also produced empirical studies of the structure of the profession, working with leading law professors. Most relevant to tonight, he has witnessed fascinating situations in which Web 2.0 technologies are being used to the fullest in law and related professional services. Bruce has written for or been the subject of articles in: The National Law Journal, Law Firm, Inc., Law Technology News as well as the Wall Street Journal and Web 2.0 magazine. He is a member of the New York State Bar Association’s committee on Law Practice Management.

Natalie Sulimani, Event Co-Chair, NYCLA Cyberspace Law Executive Committee;

Ron Katter and Henry Diaz, Event Co-Chairs, Co-Chairs NYCLA Solo and Small Firm Practice Committee

Thursday, November 16, 2006, 6:00 - 8:00 PM

NYCLA Home of Law - 14 Vesey Street

(between Broadway and Church Street)

RSVP: DLAMB(AT)nycla.org, Subject: "November 16 Forum". Entrance and facilities for those with disabilities are available. For wheelchair access, a ramp is provided. Please call 212 267-6646 at least one day in advance to make arrangements.

My colleague Scott Lichtman took notes on Ian Bremmer's talk Monday night at this past week’s World Hedge Funds Summit . Dr. Bremmer's prediction that Rumsfeld would resign proved accurate within 48 hours.

Ian Bremmer, President of Eurasia Group, and author of The J-Curve: A New Way to Understand Why Nations Rise and Fall, spoke about understanding the stability of political regimes and how investors can pick the right countries/regions, sectors, and investment strategies to make the most of this analysis.



Opening question: Why is Iran a much greater risk to the world economy than North Korea? What does China take from the US during business negotiations that Russia doesn’t?



These questions are addressed through his theory of the "J-Curve". Imagine a graph with Societal Openness on the Y axis and National Stability on the x axis.

The graph line starts high on the left as very closed nations are very stable, plunges downward moving right as nations that attempt small become much less stable quickly, then gradually rises towards greater stability as open policies such as rule of law, freedom of press and democratic voting proceed.

 Think of the Nike swoosh with the tail opening on the right – or a check mark with a rounded bottom.



Iraq, on the upper left, was stable under Hussein’s closed (oppressive) regime policies, in terms of impact on the economic markets. The direction of shifts in the J-curve has implications for the size, type and duration of investments in a given country.

 Some of this is common sense, but Bremmer’s knowledge of the political environment, layered on the J-curve analysis, makes for very worthwhile food for thought.

See more below on China (and role in Africa), India, North Korea/Japan, Russia and oil, and the US elections.

North Korea: The j-curve tells us that regimes like this naturally rebound to maximum ‘closed’ status. Open democracy is far too risky for the regime to ever consider, so trying to isolate the country through sanctions actually is a reward for Kim Jong-Il. They’re calculating their position – alerting the world ahead of a nuclear test, so that the US and China could coordinate positions, with China’s interest in maintaining status quo to gradually ascend as regional superpower, damping any real sanctions.

The worst case for Korea is if Japan and China agree and N. Korea can’t play them off each other. Japan may become the ‘Israel of Asia’ – close US ties, longstanding differences with its neighbors, nuclear capable . If Japanese and Chinese economies slow and their governments want to bolster popular support through rhetoric, watch out for potential sea-based military conflict. But it’s most likely that those economics grow and N. Korea is relatively harmless - all the government really wants is money and self-preservation. (and cigars and brandy)

China: In China, the pro-growth politicans are out. That’s not a problem, because for 5 years there has been gridlock on any issue like IP protection or foreign investment in assets. With a more conservative government in place, they can actually afford to make a few accommodations in these areas that will keep relations stable with the US.

Bremmer predicts a worsening situation in ’08, at the time of the Olympics in Beijing. "Scheduling it in 08 was a mistake." That’s in the middle of a US election, when congressman will use the high profile event to put pressure on trade and human rights issues. While the Chinese will do their best to focus on a smooth Olympic event with an agenda on Tibet, free press, the Shanghai faction will attempt to make noise or worse. There’s a 20-40% probability of a modest shock occurrence during the event. Compare the Atlanta Olympics.

China is taking maximalist investment positions in unstable countries. Chinese is being taught as second language in African schools. 2 months ago in Zambia elections, a candidate promised he would recognize Taiwan as a nation. That even being an issue shows a lot of anger about China investing in copper, being close to dictatorial local governments, smashing trade unions, etc. China is starting to control commodities sources.

One offsetting factor for the decline in US influence is Bill Gates and the Gates Foundation, which has more influence in certain failed countries than the US and many European nations. "Bufffett's donation to the Gates Foundation was some of the best foreign policy news I've heard."

India: A great environment for the top 2% of the population, which makes a case for investing in luxury products. But will they gain a solid middle class? Bremmer thinks most pundits are too optimistic and we’ll see slower than expected growth in metrics like purchase of cars.

Russia: Relations with the US are in their worse state since Kosovo. The government is going after the metals, telecom, auto, aviation industries – anything they perceive as strategic. If you are working or investing in a strategic sector and not aligned with Putin, you are in trouble.

Russia has a rising middle class, even in Siberia. If you’re part of this market – consumer brands, high-end services, corporate office building – then you’re making money.

Russia feels humiliated about zero sum game with West in last 10 years. Under Clinton, we created an oil pipeline from the Caspian Sea to Europe bypassing Russia. Russia lost control over Georgia and the Ukraine, now they’ve gotten the Ukraine back and are trying to get Georgia back. If that happens, the trans-border oil pipeline contract will be renegotiated.

The good part about investing in Russia is they just want to rip you off monetarily. In contrast, in China they want to take your intellectual property, then compete with you.

Russia sees Iran as a useful geopolitical hedge against US in the region. China sees it as a problem to be contained.

Eastern Europe: looks good/stable. Romania/Bulgaria are relatively closed and hard to invest in, but their P/Es are cheap compared to other Eastern European countries.

Iran – He predicted some sanctions will pass unanimously. The markets won’t react immediately. Somewhere in 2007 it will get ugly. Iran has open press, young activists, which puts it on the volatile part of the j-curve. It benefits them to focus their population on the nuclear confrontation with West. Sanctions help them. But military action by Israel wouldn’t help him (stability-wise).

We have 18 months until the point of no return, when Iran can make nuclear weapons on their own, then 3 years until weapons are readily transportable, according to intelligence in US & Israel. Similar in Britain.

If moderates gain ground, then maybe political actions from the West will make a difference. But oil prices are too strong, which makes the closed society more stable. Israel will likely choose to attack Iran if it comes down to a close-range nuclear threat.

US elections: Bremmer predicted the elections’ impact, noting "Elections are tomorrow, so I get the chance to be wrong immediately."

He predicted Rumsfeld and/or Cheney stepping down, Cheney ostensibly for health reasons.

 This would allow the GOP to insert a fresh VP that could gain national prominence and become a momentum leader for the presidential race in ’08, saving the GOP from a wide-open (unstable) race.

McCain is a front runner but is having good and bad days now (even for a President, he’s relatively old at 72).

 It’s very likely that neo-isolationism will pick up on many fronts – you’ll see it in trade protectionism, reactions to offshoring job losses, and immigration restrictions.

I'm enjoying visiting Toronto this week at the http://www.worldhedgefundssummit.com/ . Here are my notes on today's Investment Research Panel, preceded by the speaker biographies.

Moderator: David Weild IV

The National Research Exchange (The NRE) is the originator of Intermediated Research^SM, which helps public companies to secure greater visibility and liquidity in the public markets and research providers to establish new sources of sustainable revenue. Their proprietary analytical tools enable users to evaluate the competitive strengths of research providers and the equity capital markets performance of investment banks.

David Weild IV served as vice chairman of The NASDAQ Stock Market and spent fourteen years at Prudential Securities, where he served as president of PrudentialSecurities.com, head of corporate finance, head of technology investment banking, and head of equity capital markets. He also chaired Prudential’s Equity New Issues Commitment Committee.

Doug Atkin

Majestic helps investors gain an independent perspective of companies and their sectors based on our exclusive relationships with proprietary data sources. We are experts in identifying and securing industry data licenses and turning that information into meaningful research. Doug Atkin was previously President and CEO of Instinet Group, where he conducted the IPO (NASDAQ: INGP), developed Instinet’s research, international trading and correspondent clearing businesses, and led a consortium of nine global brokerage firms that took a majority stake in the virt-x stoc exchange. He served on both the Trading Committee and Market Structure Committee of the SIA. Doug was selected one of the Top New Yorkers of 1999 by New York magazine for his leading role in redefining the financial marketplace. In 2000, Institutional Investor profiled Doug as one of the top 10 individuals making the greatest impact on e-finance, and was presented with The Travers Bell Memorial Award of Distinction sponsored by the SIA. Doug serves as a member of the Board of Directors of Starmine and WR Hambrecht. He is a graduate of Tufts University.

Scott Lichtman

Nitron Advisors, Inc. is an independent research firm, specializing in providing institutional investors and law firms with real-time, frontline information through our proprietary Circle of Experts. Our clients learn from our experts through one-on-one consultations, customized surveys, and interactive events. Our clients include investment banks, hedge funds, mutual funds, private equity firms, and law firms. Visit www.NitronAdvisors.com for more information.

Scott Lichtman has nearly twenty years of experience in financial services, technology and consulting companies. Among his previous positions were oversight of Messaging/Collaboration Product Management and Marketing at Communicator Inc — a provider of communications, compliance and operations-related information services for institutional investors and brokers; Senior Director of Marketing at InterWorld, the e-commerce software provider that drove the online growth of firms including Nike, Disney and GTE; Senior Director of Strategic Marketing at Oracle Corporation — where he managed pricing, e-commerce sales support and business development; and IT & Strategy consultant at Deloitte Consulting. Mr. Lichtman also ran his own online-collaboration consulting firm, Vitaltouch Consulting, and in that capacity guided operations for a firm that provided banking services to low-income individuals. Scott has written analyst reports and articles on topics ranging from pricing strategies in the technology industry to online communities. He received an MBA from Harvard Business School, a Master of Economics from the London School of Economics and a Bachelor of Science degree from the Massachusetts Institute of Technology.

Paul Spillane

Through experienced sales and trading professionals, Soleil Securities Group connects institutional investors with an expanding network of accomplished independent research providers. They gather and filter insightful, actionable research ideas and deliver them to portfolio managers, buy-side analysts and trading desks. They also provide trading services through which asset managers can direct order flow as payment for the ideas and services they value. Paul Spillane has been in the securities industry for over 25 years. He started his career at Goldman Sachs, where he worked in fixed income, foreign exchange, commodities, futures, and options products. He then moved to Deutsche Bank, serving as managing director and head of global market sales for the Americas. Spillane subsequently transferred to global equities as a senior member of the executive team responsible for building the global equities businesses. Most recently, he was responsible for establishing Deutsche Bank’s Global Relationship Management program.

Paul Warme

Lusight is an independent investment research firm, with a focus on Global Emerging Markets. They have taken a unique approach to the production and distribution of investment research by developing a web-based Open Research Platform that allows clients to access our research reports, plus all of the inputs and tools we've used to produce our research, including company data, interactive financial models with base case forecasts, and a powerful analytical tool. Lusight conducts much of its operations in Toronto, leveraging an international research staff that has emigrated to Canada. Paul Warme is a co-founder of Lusight, and currently serves as Managing Principal and Head of Research. Paul has 15 years of international banking, M&A and capital markets experience. He began his career with Scotiabank's strategic investment group and was involved in evaluating and executing acquisitions in Latin America and Asia. He also spent two years in Chile advising Scotia's local affiliate on banking best practices, and one year in Mexico restructuring a distressed bank. Most recently Paul spent five years in New York as a senior analyst covering emerging markets financial institutions at Paribas and ING Barings, where he was also head of Latin America research. A Canadian citizen, Paul holds an MA from the Johns Hopkins School of Advanced International Studies.

PANEL

Doug Atkins: Majestic is a data-intensive research firm. Very technology- and data-based. Just like technology augmented the trading model, we're augmenting research through technology. We scrape 100m websites/month: number of eBay listings, what people are paying for keywords on Google, what 3500 doctors are prescribing, what they're offering as samples. Our team brings these multiple data sources together to give another perspective to investors on the companies and markets they have holdings in. The goal is to either track, confirm or refute their hypotheses.

Scott Lichtman: Nitron helps institutional investors increase their returns by providing direct access to senior industry experts. The experts we provide are used via phone and in-person consultations. These industry executives have highly specialized expertise and are provided on short notice, to comment on questions ranging from likely customer response to a new technology, to means of estimating production from an oil or mineral deposit, to predicting the impact of regulation impacting healthcare service providers.

We serve hedge funds, bulge-bracket prop desks, mutual funds, private equity and venture capital investors in the US, Canada and Europe. Our clients particularly find our service useful in two situations: a) a quick take on a situation for opportunistic investors that are scanning across sectors and continents for opportunities, and b) specific due diligence on an investment target by long-hold and private equity firms.

Paul Spillane: Our goal is to be the premier aggregator and distributor of intellectual content, providing a range of services to our clients. We do specialty dinners, bringing management on the road, etc. Our analysts only get paid if you, the consumer of research, value their insights and choose to pay them. We are a virtual research organization, partnering with outside, 3rd-party providers.

Paul Warme: announced as the ‘Canadian representative’ on the panel, as Lusight and all its analysts are based in Toronto. They not only serve BRIC (Brazil, Russia, India, China) but other countries such as Kazakhstan, Colombia, etc. We have both dedicated and opportunistic emerging market investors as clients.

David Weild: What does your firm do that investors value most?

Paul Warme: We focus on mid-caps/small-caps in those emerging markets. The companies usually are not covered at all, or only by local brokers. We deliver not only research product, but also all the models and raw inputs that went into that research. We do this with a proprietary research platform we developed---a workflow tool.

Paul Spillane: Some hedge funds like our anonymous trading desk, some like our recommendations, some like our access to management. Each and every client can use us as a virtual research dept.

Scott Lichtman: Clients value that Nitron’s industry experts are (1) senior, (2) specialized and (3) have fresh insights.

1) Senior. We seek the most senior experts to validate investment hypotheses of our clients. Example: a Senior EVP of Operations for one of the largest automotive firms; a chief strategist of a major group at Microsoft; the former chief of exploration for one of the world’s largest oil & gas firms.

2) Specialized. One client recently asked for an expert on the specific extraction costs and political conditions surrounding a proposed mining project in the Andes mountains. Only a small number of people in the world are qualified to answer that question.

3) Fresh. Because the questions posed to us are so specialized and because we reach over 100,000 experts to address requests, we’re careful to use experts sparingly. This means that the same opinion is often accessible to only one or two firms rather than the many that may receive typical published reports.

Doug Atkins: Majestic’s customers are looking for info that tracks, confirms, or blows out their investment thesis.

David Weild: What specific services are you focusing on now?

Paul Spillane: We're looking at 3-5 new research models/week that come out. Moving into fixed income—recently signed with partner that covers 350 fixed income issuances. Will soon expand into international services.

David Weild: I've heard of funds saying, "I'll be your 12^th customer, but I don't want you to take anyone else." How do you balance their desire for limited access, with your desire for growth?

Paul Spillane: Every client wants to feel like your #1 client. We spend a huge amount of time understanding our clients. They all want to be treated as individuals. In our model, we'll just provide best service to the funds who pay us the most----which is often not the largest company.

Doug Atkins: The traditional Wall Street model is hard to fathom. As an analogy, I'd love to get a car, drive it for a year, then tell the auto salesperson how much I’ve decided to pay for it. And maybe say, "I didn't use the car so much; I don't want to pay." We have 90% client renewal rate. Cover 110 names in 9 sectors. We also do a lot of custom work.

The way we address the challenge of balancing exclusivity with growth is through tiered access. We also will Dutch auction off our 'silver-bullet' data to 2-3 people.

David Weild: How do you all price?

Scott Lichtman: We provide more help when customer shares more about their strategy. We charge a quarterly retainer, or occasionally charge on a by-project basis.

Paul Warme: We're primarily a commissions-based model, which is what clients prefer. We spend a lot of time trying to figure out how to charge for our services.

Paul Warme: Subscription model. A lot of custom/bespoke work, priced on an ad-hoc basis. For clients who have formal internal voting processes, we're on the voting list for about 10 firms, and usually generate additional votes that mean clients pay us more than their base subscription price.

David Weild – It’s a sign of the dynamic nature of the research business that each firm here is using a variation of pricing models.

David Weild: How do funds measure value?

Doug Atkins: First, some thoughts on the regulatory backdrop:

+ Big issues are soft dollars. SEC just says there needs to be more disclosure.

+ Reg FD.

Paul Warme: A lot of Asian Emerging Market IPOs are taking place in London, partly to avoid the Reg FD/Sarbox issues.

David Weild: Good news: the SEC is very sensitized to the issue of over-reactive regulation, and trying to make US environment more friendly to attract more listings. I expect this legislation to be right-sized to be more accommodating.

David Weild: What are the biggest changes you expect to see in the research product or industry over the next three years?

Paul Warme: You'll see a proliferation of research models. Some of the innovations will be completely unexpected from today’s standpoint.

Paul Spillane: There will be a lot of consolidation. This is the most exciting time to be in the research industry. Next 3-5 years will be a cornerstone of next 25 years.

Scott Lichtman: Certain trends are evident though it’s hard to time the future. The New York State Criminal Code used to state that persons "Pretending to Forecast the Future" shall be considered disorderly and liable to six months in prison. But in terms of trends, traditional/background research is becoming a commodity---can be delivered quickly and thoroughly by PhDs offshore who are paid $25,000-$50,000/year (e.g., Evalueserve).

What you will see as one response to research commoditization is the aggregation of different forms of research in tools that aggregate multiple viewpoints on a market or issue. For example, with a research aggregator, we're now piloting the capability to pull up a ticker, review related research reports, then click on a 'talk to a relevant expert' button with professional biographies to review, all from one screen/one interface.

With the commoditization of traditional research and the decline of that economic model, I think we’re also seeing a significant reduction in coverage of smaller cap firms. The economics just aren’t there for the sell-side to provide as broad coverage as before. So instead people will come up with new economic models to address the ‘long tail of coverage’. In fact, we are announcing today a unique partnership with the National Research Exchange. They serve companies that want to deepen their coverage by facilitating research coverage, and we provide the experts who are readily available to analysts and investors to comment on markets. The experts are chosen and accessed independently from the covered companies, providing greater independence to their commentary.

Doug Atkins: The analog is what happened to trading platforms. Customers will be able to take fundamental data from Majestic, and combine it in-house with their own research.

2. Use proactive recommendations. Instead of waiting for a hiring manager to ask for references, have your reference call immediately. This works well if you have a heavy-weight reference, like a well-known CEO or someone who knows the hiring manager. But it also works well if you have little professional experience.

There's a great write-up of danah boyd in Financial Times, which labels her the high priestess of internet friendship. I thought they did a great job, with the exception of not respecting her preference of not capitalizing her name. In addition to profiling danah, the article also chronicles the development of Friendster and MySpace, and others, as well as some of danah's insights on social networking sites. For one thing, danah found that while these sites have created a few celebrities of their own,

...apart from a few intense self-promoters, most people, Boyd found, were using the sites to present themselves to a small group of friends and get their recognition and feedback. The sites are an opportunity to define in public who they are. By providing an audience, and the tools to interact with that audience, the social networks are satisfying that need. Boyd calls this behaviour “identity production? and, employing a favourite phrase of hers, says that young people are trying to “write themselves into being?.

“The fears are so painfully overblown,? said Boyd. “Is there porn on MySpace? Of course. And bullying, sexual teasing and harassment are rampant among teenagers. It is how you learn to make meaning, cultural roles, norms. These kids need to explore their life among strangers. Teach them how to negotiate this new world. They need these public spaces now that other public spaces are closed to them. They need a place that is theirs. We should not always be chasing them and stopping them from growing up.?

That business has been launched: ReputationDefender. What I like about the model is that I think it addresses a real concern that people have (or should have). 10% of Internet searches are for proper names; you are being evaluated every day online. ReputationDefender's main competition will be the same competition that PR firms have: people providing the service in-house instead of using an outside provider.

An interesting question they'll have to address as they scale is verifying the identity of the person using the service. If I say that I want to monitor the activity of my child, who verifies that that person is my child? And this is a great tool for stalking and identity theft (as are ZoomInfo and many other online network services): perhaps I fill out a form indicating that I want to monitor the online activities of a certain individual, who may not be me personally. Verifying that a given credit card ties to the name of the person being investigated is an obvious way to verify identity, but of course large numbers of credit card numbers are stolen every year.

I agree with Pete Cashmorethat it would be preferable to offer a very basic automated tracking service for free to get people into the system - "entering your credit card details is a massive barrier for the casual visitor". After all, people can easily use any search engine/blog reader to view discussion of their name across the net.

More here and here.

"People who access the Internet for what have become routine functions -- sending emails, writing blogs, and posting photos and information about themselves on social networking sites -- do not realize how much of their personal privacy they put at risk, according to Wharton faculty and legal experts. Nor, they add, have the courts fully addressed the ways in which the Internet can be harnessed for questionable purposes that encroach on privacy. "

...[L]ots of situations that used to be private are now public. It's not a question of privacy but of social norms. Perhaps the answer is just, 'That's too bad.' If someone had snapped a photo of [the Korean girl who didn't clean up after her dog on the subway] robbing a bank and she said, 'You can't take a photo of me,' most of us would say, 'Too bad, you were robbing a bank.' In a perverse way, we're going back to the small town where everyone knows what everyone else is doing by virtue of the global information superhighway. My point is, right or wrong, this is going to happen. Google is not going to go away."