Adding Value in the Selection Process of an Expert Witness

1. Adding Value in the Selection Process of an Economic Expert Witness
The Illinois Paralegal Association 2010 Fall Education Conference
November 4, 2010
Rick Nathan, ASA, CFA
The Sorbi Group, LLC

2. The Backdrop
 People are generally unaware of how they make decisions and
sometimes why they make certain decisions
 People are minimally concerned about the quality of their decisions but
show great concern about the quality of decisions made by others
 There are two (2) types of decisions – Evaluations (Preference) and
Predictions (Belief)
 Decisions are anticipation based off of intuitive judgments/choices
 Intuitive processes are not adequate in dealing with advisory matters
Paralegals need to manipulate their specialist knowledge, with that of the trial team,
using a reproducible process leading to better decisions in selecting a financial expert
witness.
November 4, 2010 © 2010, The Sorbi Group, LLC 2

3. The Nature of Human Judgment
 People learn primarily on the basis of what they observe
 People have a tendency to seek information to confirm their ideas rather than to
look for possible disconfirming evidence
 When interviewing experts, much of the information is redundant – much is also
consistent – however, consistency of information that is not independent adds little
to no predictive ability.
 Example:
o A candidate expert says that she has testified for plaintiffs 50% of the time
o A search of public record cases showed that the candidate expert testified for the plaintiff 50% of
the time
o We observe from decisions that the candidate expert is not plaintiff/defendant biased
o However, we don’t know about the 80% of the cases that the expert testified for the plaintiff that
are not in the public record
 2 Actions Enabling Better Choice
 Bolster memory by recording both predictions and the basis of predictions – leads to heightened
self awareness of one’s judgment
 Accept the fact that one does not necessarily learn from experience, and often cannot.
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4. Decision Analysis
 What are the consequences of alternative actions – what is at stake?
o The “Evaluative” Dimension
 What are the uncertainties in the environment relevant to the decision?
o The “Predictive” Dimension
1) Structuring the Problem
2) Assessing Consequences 3) Assessing Uncertanties
4) Evaluating Alternatives
5) Sensitivity Analysis 6) Information Gathering
7) Choice
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5. Structuring the problem
1) Structuring the Problem
 Who is (are) the decision makers? 2) Assessing Consequences 3) Assessing Uncertanties
4) Evaluating Alternatives
 What are the alternatives?
5) Sensitivity Analysis 6) Information Gathering
 On what dimensions should the alternatives be 7) Choice
evaluated?
 What are the key uncertainties?
 At what level of detail does the problem need to
be structured?
o To what level of detail can the problem be structured?
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6. Structuring the problem
1) Structuring the Problem
Who are the Decision Makers? 2) Assessing Consequences 3) Assessing Uncertanties
4) Evaluating Alternatives
 Department
5) Sensitivity Analysis 6) Information Gathering
o Litigation, Tax, IP, all or some mix
7) Choice
 Professional  Who is (are) the decision makers?
o First Chair, other  What are the alternatives?
 On what dimensions should the alternatives be
 Client 
evaluated?
What are the key uncertainties?
o Inside counsel, C-Suite, other  At what level of detail does the problem need to be
structured?
 Other Named Parties
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7. Structuring the problem
1) Structuring the Problem
What are the Alternatives? 2) Assessing Consequences 3) Assessing Uncertanties
4) Evaluating Alternatives
 Alternatives are not necessarily given but must
5) Sensitivity Analysis 6) Information Gathering
be sought and/or created 7) Choice
o Identification of Candidates  Who is (are) the decision makers?
• Internal firm database  What are the alternatives?
 On what dimensions should the alternatives be
• External research evaluated?
 What are the key uncertainties?
 At what level of detail does the problem need to be
 Imagination in the creation of alternatives structured?
greatly increases the scope for choice
• From where might experts be sourced?
• Invoking an “executive search process.”
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8. Structuring the problem
1) Structuring the Problem
 What are the dimensions / candidate 2) Assessing Consequences 3) Assessing Uncertanties
specification 4) Evaluating Alternatives
o
5) Sensitivity Analysis 6) Information Gathering
Years of Experience
7) Choice
o Academics
 Who is (are) the decision makers?
o Certifications  What are the alternatives?
 On what dimensions should the alternatives be
o Professional Associations evaluated?
 What are the key uncertainties?
o Past Testimony  At what level of detail does the problem need to be
structured?
• Venues
• Subject Matter
• Party Alignment (i.e., Defendant vs. Plaintiff;
Court or other)
o Past Publications / Presentations
o Industry Expertise
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9. Structuring the problem
1) Structuring the Problem
What are the Key Uncertainties? 2) Assessing Consequences 3) Assessing Uncertanties
4) Evaluating Alternatives
 Geographic Restrictions
5) Sensitivity Analysis 6) Information Gathering
 Fee Barriers 7) Choice
 Conflict Checks  Who is (are) the decision makers?
 What are the alternatives?
 Personality Clashes  On what dimensions should the alternatives be
evaluated?
 Accessibility  What are the key uncertainties?
 At what level of detail does the problem need to be
 “Bench Strength” structured?
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10. Structuring the problem
1) Structuring the Problem
Structuring Detail 2) Assessing Consequences 3) Assessing Uncertanties
• Nominal 4) Evaluating Alternatives
5) Sensitivity Analysis 6) Information Gathering
– Absolute reference
7) Choice
• Ordinal  Who is (are) the decision makers?
– Temporal positions  What are the alternatives?
 On what dimensions should the alternatives be
• Interval evaluated?
 What are the key uncertainties?
– Equidistant extremes  At what level of detail does the problem need to be
structured?
• Ratio
– Relative scale
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11. Assessing Consequences
1) Structuring the Problem
 Two (2) major issues as this stage 2) Assessing Consequences 3) Assessing Uncertanties
o How adequate are the measures of the
dimensions of which the alternatives are to be 4) Evaluating Alternatives
evaluated? 5) Sensitivity Analysis 6) Information Gathering
• How well do the dimensions chosen 7) Choice
Testimony
represent the alternatives?  30%
Subject Matter
 Does the candidate expert selection
criteria cover all relevant domains? Has an Non-Testimony
important dimension, e.g., “character” 0%
been omitted?
• Where and how can measures on the Direct Industry
30%
dimensions be obtained. 
 How do you judge a person’s motivation or
intelligence? In most cases, you need Experience (Yrs) Direct Function
0%
outside assistance – from who? Importance
o How should the different dimensions be
Noteworthy
weighted?  20%
Reflects Evaluative Judgments or Preferences Academic
 10%
Certifications
 10%
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12. Assessing Uncertainties
1) Structuring the Problem
2) Assessing Consequences 3) Assessing Uncertanties
 After uncertainties are identified – Need to 4) Evaluating Alternatives
be quantified in terms of probabilities 5) Sensitivity Analysis 6) Information Gathering
o What information is relevant to the uncertainties? 7) Choice
o What people can provide or where can information What are the Key Uncertainties?
 Geographic Restrictions
be obtained to make the necessary probabilistic  Fee Barriers
judgments  Conflict Checks
 What is the chance that sourcing an expert  Personality Clashes
 Accessibility
from the “Big-4” results in a rate per hour
 “Bench Strength”
greater than $400?
 What is the chance that a certain professor in
academia will not be readily available?
Reflects Predictive Judgments or Beliefs
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13. Evaluating Alternatives
1) Structuring the Problem
 What criterion, that is, decision rule do you wish to use?
2) Assessing Consequences 3) Assessing Uncertanties
 Weighting assessed consequences (dimensions) by the
assessed uncertainties (probabilities) 4) Evaluating Alternatives
5) Sensitivity Analysis 6) Information Gathering
7) Choice
Expert 1
Fee Barriers
50%
Expert 2 Accessibility Selected
0%
Expert
Conflicts
20%
….
x%
Expert 3
….
….
Expert 4 ….
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14. Sensitivity Analysis
1) Structuring the Problem
 How wrong are the estimated consequences and uncertainties? 2) Assessing Consequences 3) Assessing Uncertanties
o What degree of variation in the inputs of assessed consequences
and uncertainties would change the decision indicated when
4) Evaluating Alternatives
evaluating the alternatives? 5) Sensitivity Analysis 6) Information Gathering
• Vary both the estimated values of alternatives (e.g., using 7) Choice
different weighting schemes) and the probability of events –
what is the extent to which the decision is sensitive to such
changes?
o Important for 2 major reasons:
• Most inputs to the decision are subjective
 If the choice between 2 candidate experts is relatively
insensitive to ranges of inputs as opposed to precise values,
this provides some answer to the question concerning how
wrong estimated consequences and uncertainties can be, and
yet not affect the decision.
• When people disagree concerning subjective inputs to a
decision, disagreement does not necessarily imply different
actions. Through sensitivity analysis, one can test the extent
to which actions (e.g., Hire Expert “A”) are compatible with
ranges of opinions and values (i.e., weights accorded to
dimensions of consequences).
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15. Information Gathering
1) Structuring the Problem
2) Assessing Consequences 3) Assessing Uncertanties
 An important output of the preceding step can be the 4) Evaluating Alternatives
revelation that the decision is sensitive to lack of
knowledge concerning certain variables – that is, 5) Sensitivity Analysis 6) Information Gathering
there is a need for more information. 7) Choice
 What are the costs and benefits or securing additional
information?
o Includes “soft costs” such as delay, that is, the
cost of deferral
• Perfect information is not attainable
 Information gathering follows sensitivity analysis since
it would be a waste to collect additional information
on something that had little effect on the decision.
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16. Choice
1) Structuring the Problem
2) Assessing Consequences 3) Assessing Uncertanties
 Has there been sufficient analysis of the problem? 4) Evaluating Alternatives
o Relative to the costs, benefits, and constraints of the 5) Sensitivity Analysis 6) Information Gathering
situation.
7) Choice
 Which alternative has the greatest expected utility?
o Choose the alternative with the greatest expected
utility.
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17. The Final Choice
 Although the approach has been shown in a step-by-step process, in
practice, there is considerable recycling between steps.
o The process of analysis often indicates new alternatives or
dimensions of evaluation.
 Although the aim of the analysis is an explicit quantitative problem
formulation, the use of sensitivity analysis enables one to see how
quantitative the formulation needs to be.
o Important because most inputs are subjective
 If different decision makers independently utilize the approach, this can
highlight the real extent of agreements and their relative importance.
 By decomposing the selection process in this manner, it is possible to
synthesize the opinions of individuals with different domain knowledge
to the extent their knowledge relates to different aspects of the
selection process.
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18. Parsing the Financial Expert Domain
Cost-
Benefit
Persona
Vitae
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19. Parsing the Financial Expert Domain – Cost/ Benefit
 Rates Cost-
Benefit
o Expert
o Team
Persona
o Report vs. Testimony Vitae
 Expenses
 Reasonably Available
o Willing to devote necessary time
o Responsive to phone/email
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20. Parsing the Financial Expert Domain - Persona
 Articulate Cost-
Benefit
o From Wall Street to Main Street
o Educator/Mentor Persona
 Adaptive Vitae
o Can think on feet and react to difficult situations
 Ethical
o Objective
• Advocate for opinion, not for represented party
o No skeletons in the closet
 Likeable
o Personable
o Humble
o Voice/Demeanor
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21. Parsing the Financial Expert Domain
Cost-
Benefit
Industry
Persona
Vitae
Business Asset/
Stats
Model Matter
Functional
Discipline
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22. Parsing the Financial Expert Domain - Example
 Education  Asset / Matter
o Accounting o IP Infringement
o Economics
 Industry
o Finance Health
Care IT o Healthcare Information
 Designations Technology (“HIS”)
o ASA, CFA, CPA, CVA, Ph.D.  Business Model
BPO/ Asset/
 Certified/Daubert SaaS
Stats
Matter
o BPO/SaaS
 Industry Experience  Functional Discipline
o Direct? “Worth” o Worth - Valuation/Pricing
 Financial Advisory Exper. • Reasonable Royalty
o Testimony Exper. o Damages
 Publications/Press • Lost Profits
o Contrary opinions or
writings
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23. Accounting, Economics, and Finance
 Economics
o Analysis of production,  Worth
distribution, and consumption o Value, Price
of goods/services • Infinite
 Finance Economics Finance
o Analysis of the circulation of
money, the granting of credit,
the making of investments, and Accounting
the provision of banking (Output)
facilities  Damages
 Accounting o Loss, Harm
o Recording, verifying, and • Finite
reporting financial transactions
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24. Thank You
“…[i]t’s not what we don’t know that gives us trouble. It’s
what we know that ain’t so”1
1
Will Rogers
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