I was a Boy Scout back in the sixth and seventh grades and loved it. The summers at Scout camp taught me discipline and threw me together with new kids and adults, whom I learned to work with.
John H. Johnson credits Scouting as a life-forming experience that instilled skills he would one day use to turn his head for statistics into the profitable company Edgeworth Economics.
Edgeworth, a seven-year-old firm, provides expert testimony mostly for companies whose very futures may be at stake, or what is known in legal circles as “bet-the-company litigation.” Its deep-data analysis helps big corporations and others win lawsuits and get a leg up on labor negotiations. Its métier is producing experts who can testify in depositions — the pretrial interviews that can make or break a case.
“I got my business skills in the Boy Scouts,” said Johnson, a self-described “geeky kid” who became an Eagle Scout. “Boy Scouts forced me to confront a bunch of things. It taught me how to get things done, identify strengths and weaknesses of people. I can remember learning the hard way that if you don’t get the troop to collect enough firewood, you have a big problem when it gets dark.”
Edgeworth has generated enough wealth for Johnson, its co-founder, chairman and sole owner, to afford a couple of nice homes here and on Martha’s Vineyard.
He has had an impact on big issues, such as where the National Football League should place the ball on kickoffs and whether players’ careers would be shortened if the league added two games to the regular season (the answer was yes).
His success also allows this numbers cruncher to moonlight as a radio-show guest, TV polling expert and author who distills his data into bite-size, digestible nuggets.
He can discuss everything from autism to climate change to whether coffee causes cancer. Does living near a Starbucks increase your home’s value? (No). Do grilled-cheese lovers have better sex? (No). Want to know if your child will make more money if he or she plays high school sports? (It’s a contributor.)
A lot of this is in his book, “Everydata: The Misinformation Hidden in the Little Data You Consume Every Day.”
Most of those who testify for the company are economists, academics and statisticians with graduate degrees whose intelligence is off the charts. The company recruits PhDs at all the top universities, including MIT, Yale, Princeton, Chicago and Columbia. People from other consulting firms will also approach the company. The trick is taking that bandwidth and getting them to explain it like a game-show host.
“You must be able to explain complex concepts simply and directly,” Johnson said. “You must be honest, objective, a good teacher, and you must answer the relevant questions.”
Johnson wouldn’t identify his clients, but according to public records over the years, Edgeworth has represented Hershey’s, Bloomberg, Starbucks, Google and Hostess.
Edgeworth has about a dozen people who testify, and they are paid well for their work. Hourly billing ranges from $500 to more than $1,000. That means the company makes money. A lot of money. There are small companies like dry cleaners or framing shops that are known in business school circles as NLOs — for “Nice Living for the Owner.” I regard Edgeworth as a really nice living for the owner.
There is no debt on the company’s books, and Johnson financed the company himself. As with most professional services businesses, labor costs consume about a third of the revenue. There is also $850,000 in leases to be paid on offices in Washington, San Francisco and Los Angeles. Johnson said employee benefits amount to more than $1,000 a month per employee. That includes health, gym and transportation benefits as well as a 401(k) match.
Johnson, 43, grew up near Buffalo and was blessed with smarts. “When I was a kid, I was totally into school. I was always the best in my class.”
He earned a doctorate in economics from MIT in 1999 after getting his undergraduate degree from the University of Rochester. So he has some gray matter to work with.
His doctoral dissertation sought to answer the question of whether long work hours lead to divorce.
The answer: Not if you make at least $35 an hour.
“There was a cutoff point where more money meant it was likely that you were to stay in the marriage.”
Johnson decided early on that he didn’t want to stay in academia, so he and his wife came to Washington in search of opportunities.
He went into economic consulting and took at a job at National Economic Research Associates. That was his baptism into the world of answering practical questions and learning about litigation and how to testify. He also managed teams of young researchers and learned how to manage the firm’s clients as well. Many were law firms trying to untangle a client from a sticky case.
His first big case had all the sex appeal of a rope burn. It involved a product called Polyester Staple Fibers — tiny fibers that make up suits and rugs — and a class-action suit on price fixing. (It was settled out of court.)
After seven years and a taste of everything National Economic Research Associates had to offer, Johnson launched Edgeworth, naming the firm after a 19th century Irish philosopher and political economist whose work inspired Johnson to create a collaborative culture that shared more of the firm’s wealth.
After early success with the NFL Players Association, other big clients began to roll in. Revenue started climbing — from $750,000 in 2009 to $13 million by 2012 and $25 million last year.
Edgeworth’s head count has climbed, too, going from six in 2009 to just under 100.
As part of his collaborative culture, Johnson promotes his employees to become testifiers and give themselves a shot at some big bucks. He said he doesn’t hog the cases himself.
“We recruit the best and the brightest and turn them into experts,” he said. “I train people on how to improve their career. Nothing makes me happier than when a lawyer who worked with me calls one of my colleagues and says, ‘I want to give you an opportunity to testify in this case.’ ”
Johnson is sitting pretty these days, with an expansive office that has a block-long view of 19th Street NW and is filled with sports memorabilia. A conspicuous trophy case houses his collection of professional wrestling belts from World Wrestling Entertainment. Go figure.
Toward the end of our interview, I asked Johnson why he left National Economic Research Associates, where he had a sinecure and where a good future awaited him. All he had to do was wait his turn.
“I didn’t want to wait,” he said. “I had my own ideas of how to treat employees, how I wanted to develop business and how I wanted to create a culture. I learned early on in my career that it’s not only okay to be impatient, but it’s an imperative to advancing and getting to where you want to be.”