Advice Worth $1 Billion

Usually, when people talk in terms of billions of dollars, they are referring to macroeconomic questions. Recently, however, three economists (Jeremy Bulow, Jonathan Levin, and Paul Milgrom) were hired as consultants to advise a group that was bidding in a spectrum auction that would allow them to provide wireless service.

By following the advice of the economists, the group was able to purchase wireless coverage for the United States for $2.4 billion, while their major competitors ended up paying $3.5 billion for the same spectrum in the same auction. Thus, their advice was worth more than $1 billion to their clients.

Unfortunately for the economists, they were not paid as a share of the value they generated. They got a flat fee that was many zeros short of what they could have earned if they had negotiated a different contract.

The ultimate proof that these guys are academics at heart: they wrote up the results in an academic paper, giving away their billion-dollar secrets to anyone who wants them.

I’ve talked to one of the authors, however, and he says they have more secrets up their sleeves. He also told me that if I could convince a future client to sign a contract that made the consulting fee a share of the value they add, he would give me a piece of the action. So if you have any plans to bid in a spectrum auction anytime soon, please contact me.