On Why I Responded to A Forbes Interview Request

One thing I have never been accused of is being shy and retiring. Yet I was very hesitant to answering any interview request from Dan Lyons of Forbes Magazine. But when Forbes editorial attorney basically told me they were going to quote from my article discussing Radicati Ventures, she was quite correct that if I did not respond, I risked not having any editorial voice on the next article being written by Mr. Lyons. Many of my colleagues said "don't do it, it's a setup!" or "there is no way you can trust that guy (Lyons)".

But I decided to do so on my terms, dictating how I wanted his questions posed and copying not only his editor and the lawyer, but also Stephen Forbes himself (yes I correctly 'guessed' his email address). This ticked the editor off and he asked me to stop copying him and Forbes. The question is why did I take these steps?

The answer is simple. What follows next are the initial questions posed to me by Mr. Lyons in his first two e-mails to me on the topic.

Message One

I wanted to ask you about your posting from last year about Radicati's venture capital group.... In that post you compare Radicati to people who carry out "pump and dump" stock schemes.You also warned companies about hiring consulting firms: "What they have to be careful of...is that they are careful that the issuance of any reports by the hired firm contain full disclosures so they do not get caught up in a "pump and dump" scheme. If they do not know of any allegations of unethical behavior by a firm, they had better be ready to face the music if problems do arise."

Why are you saying Radicati is an unethical firm? Do you have any proof that Radicati ever participated in a "pump and dump" stock scheme? Do you know of any charges ever brought against Radicati by the SEC? Or any convictions? If not, do you think it's a bit unfair to compare Radicati to stock swindlers?

Message Two

"I never heard back from you re: the Radicati flap. Just wanted you to know that we will be citing some material from your blog. And we will of course invite you to discuss it. Specifically I'm citing your comparison of Sara Radicati to people who run "pump and dump" schemes; and your warning to readers that companies that hire consultants with "allegations of unethical behavior" that they could be in trouble too. This looks like an attempt to hurt Radicati's consulting business by warning readers not to hire the Radicati firm. And what specific ethical breaches do you allege Radicati is guilty of?"

Well needless to say not only were these questions based on false assumptions by Mr. Lyons, but to me are at best inflammatory. So I decided to accept his interview request with the following e-mail:

"Dear Mr. Lyons,

Your editorial attorney has advised me that despite my objections, you all plan to cite from our company web site under the "Fair Use" legal
doctrine. As such, I feel I have to work with you to answer any specific questions you may have for me.

Here are my terms and conditions to provide comment (which I will end up doing in one place or another). For each of the questions you have posed, provide the exact full text (not something out of context) from my article which relates to each question (including those sections you plan to quote) and the question associated with that section.Explain how you reached your interpretation of what was written (i.e. was it an independent assessment or what another party told you during a long phone call?). Then I feel I can adequately respond to your questions.

I will only do this in writing and will cc your editor and the editorial attorney with my responses so that what I respond with is documented.

So if this meets your needs, I look forward to your email. If it does not, I will consider responding the accusatory nature of these questions (I thought Journalists were supposed to be objective and neutral???), which have no basis in reality, in a public fora.

Fair enough?"

The Interview

Mr. Lyons then emailed me the questions in the format requested above. Here are the quotes, questions and answers, as sent to Mt. Lyons and unredacted:

"My answers/responses are below each question that you posed. I am not comfortable doing any follow-up/interview by phone because I want a paper trail of all the correspondence. Many people (colleagues and friends) advised me to not respond, but I am now doing so in good faith and will let the results speak for itself, since this is the official documentation (blind copied to another account for verification if need be).

Quote/Question 1

1. Re: this quote: "Greg said that, unfortunately, "mergers and acquisitions are rife with every kind of unethical behavior". He went on to say that if an analyst firm such as the Radicati Group were providing reports and analysis that potential shareholders relied on, they would be required to disclose who or what organization(s) funded the study. In addition, the report would have to be filed with the Securities and Exchange Commission <http://www.sec.gov/> . This is in stark contrast to what we have seen with recent reports published by Radicati and the Meta Group."

Question: Who are you suggesting funded the Radicati report from last June? Others have mentioned Microsoft, but Sara Radicati insists Microsoft only paid for reprint rights AFTER her report was published. She insists she was not paid by Microsoft to write the report, and that it was NOT "sponsored research." Do you have any evidence to the contrary and can you share that with me? What should Dr. Radicati have disclosed? If she's telling the truth and was not paid by Microsoft in advance to write the report, should she still have disclosed something and if so what?

ANSWER 1

Answer: The issue being addressed here is what should be disclosed in a report issued by an analyst firm. There is a general consensus in the IT world that reports issued by Radicati, Meta, Forrester and others may or may not have any validity because it is unclear whether or not the studies/reports are truly independent or have been funded by a particular company/organization. In the case of the disputed report put out by the Radicati Group, there is a very strong appearance, at least to the Lotus Community, that the report was written with the intention of selling redistribution rights to Microsoft. Why? Because it is our understanding that IBM cut off all ties/business relationships with the Radicati group over issues we do not have all the details on. So if a firm has lost a MAJOR client, how best to sell their wares but to write reports, that at least on their face, are biased and based on faulty information? This is a question you will have to ask Ms. Radicati.

But consider this. I also mentioned the Meta Group in the subject article and the reason is that they did publish a report fully funded by Microsoft and did not disclose this until challenged on the issue by who? The bloggers out there in the world. They then admitted the funding, but failed to revise the report as promised.

And this is the challenge facing companies like the Radicati Group if they choose to enter a new business model like Radicati Ventures. What I am talking about in the above section you quoted is that it is a whole different set of rules, rules that will require full disclosure to the SEC. Nobody wants to incur the wrath of Eliot Spitzer do they?

It is my position, shared by some but not all, that all independent analyst reports, should have a standard disclaimer that says either that the report was not funded by any outside group or if it was, the outside groups that did fund the report. In our mind, this would at least add some small measure of credibility to products/reports being touted as independent if they really are, and would show others for what they are: PR pieces for the companies that paid for it upfront or bought it after the fact. And note that I can and do criticize any company involved in this practice, whether it be MS, IBM or even Forbes Magazine.

Think back to your '98 "Notes Is Dead" article. Is it dead? No. Is it bigger than ever? Absolutely? Is competition with Microsoft tight? You betcha. Do all of your articles show a wee bit of bias? People out there sure seem to think so and that is why they will not respond to your inquiries.

Finally, lets look at the latest report issued by the Radicati Group on Lotusphere 2005 and selling for a pretty penny. Why would anyone in their right mind buy a report from a company that did NOT EVEN ATTEND LOTUSPHERE 2005 and talk to vendors and customers to get their feelings?

See http://www.controlscaddy.com/A55A69/bccaddyblog.nsf/plinks/CBYE-648UYZ

Quote/Question 2

2. Re: this quote: "Greg and I continued our conversation about the Radicati incident and the "astroturfing" that had occurred, as well as the fake name e-mails sent to peoples' employers demanding their firing. He likened this to the "pump and dump" schemes you often see in internet chat rooms (and I have seen in spam e-mail I receive). People enter these chat rooms with fraudulent name and e-mail addresses to "talk up" a company to push the short term price of a stock up. He said that all too often, it is hard to trace the real identity of the person or persons engaged in this behavior (I need to introduce him to Volker;-)). This is one of the main reasons he tells his clients to stay out of the chat rooms, lest they get into trouble."

Question: Dr. Radicati admits that one of her employees, under the screen name "keiot," posted some things to Ed Brill's blog supporting the validity of Dr. Radicati's research. But how is this like a "pump and dump" scheme? What stock was being "pumped"? "Pump and dump" schemes are serious crimes. In this case it appears simply that a junior employee posted some items supporting his boss on a blog where lots of people post opinions, some of them anonymously. Dr. Radicati says she wishes the guy hadn't posted on Brill's blog and that she disciplined him for doing it. But are you maybe stretching things a bit by comparing what "keiot" did to a "pump and dump" schemer who is committing a crime?

ANSWER 2

I addressed the "Pump & Dump" part in the previous e-mail and it is an accurate, true representation of the intention and the facts.

Here is the content from that e-mail:

"Just a quick FYI on question number 2. What Greg and I were discussing in that area was the concept of "Astroturfing", which is the practice of going into on-line discussion fora with fake names/identities and posting information that advocates a position or product, or tries to bolster a position (such as a "shill" in a live audience). It was this concept of "Astroturfing" that was related/equated to "pump and dump" schemes that is seen in Internet Chat Rooms. It was not discussing any kind of Pump and Dump on the part of Radicati (which were not my words, but Greg's words. In fact, Greg had no idea of what company or companies I was talking about when we had this discussion). It was focused on the topic of venture capital, analyst reports, and  "astroturfing".) It is not even feasible for me to have made this an accusation of Radicati (or any other company) doing a "pump and dump". That would have been way too much of a stretch.

This is an example of why I asked you to read in detail what I had written because this is very different than how you read it. I asked a colleague of mine to read what I wrote so that I had fresh eyes looking at it and this person said to me after reading it:

"You never did accuse Radicati of pump and dump.  The lawyer brought it up as a situation that could occur in a scenario such as this, and that companies hiring venture firms have to guard against that.  At no time did you say Radicati is guilty of pump and dump."

See where I am coming from and why I did not like the tone of your initial questions?"

However, Ms. Radicati did not give the full story:

A. It is very, very rare for someone to post anonymously on blogs like the ones "keiot" posted on. That is why we are a community. We speak openly and publicly and take our licks when deserved.

B. Ms. Radicati forget to also mention that this same person also posted under the names "Joe Silverstone" and "Daniel Johnson". Here are some of the postings that riled up the community, especially when executives at IBM and other companies started getting e-mails from Daniel Johnson demanding that the owners of the blogs be fired for their writings. (And yes, the community has all of the message headers to prove that all of these postings and emails came from the *SAME* computer at the Radicati Group:

B1. "Geeze guys, does anyone sleep here? 45 comments? an all time ed brill dot com record. now, i am flattered that you folks would stay up till the wee hours of the morning searching for, it appears, my college 'business ethics' project. But for the moment, i'll have to take leave from this wonderful group. Why don't we all take a little break here from the googling 'keiot', and get on with our normal lives. See that lady next to you...that's your wife...make some conversation...see those little people inthe room next door, those are your kids...take a break from the computer and play with them a bit...don't forget to feed. If you want to get in touch with me, there are 3 e-mail addresses in this thread that are purportedly mine. keiot - out!"

B2. "I am flattered that an exec at a $140 billion company spends the time to cross check my IP addresses from a blog..but I think you're missing the point. The numbers speak for themselves, Lotus revenue down 2%, MS Exchange revenue up over 20%...you may not like the analysis, but it's hard to
disagree with the numbers.You're right, it's just a quarter..not enough time to call it a trend...but the difference between the two 8Ks leads me to think the
analysis is more on target than Lotus would like to admit. Another thing - It's incorrect to assume that because the e-mail and blog entry addresses match, they are both from the same person. they are not - perhaps just the same ISP."

Note that the SMTP header on some of the messages said "SaraPC"

B3.  Joe Silverstone on 7/27/2004 11:41:05 AM -

Perhaps the issue at hand here is not the power of the blog, but the power driving force behind it - aka IBM Lotus' decreasing revenues?

B4. Followed immediately by keiot:

Radicati Group follow-up
keiot on 7/27/2004 12:20:30 PM - "...revenues for Lotus software, which enables customers to communicate, collaborate and learn effectively, decreased 2 percent." IBM 8K, July 15, 2004 "...Microsoft (r) Exchange enjoyed revenue growth rates of over 20%" MSFT 8K, July 22, 2004. The most recent quarter does not make a trend - but it does suggest that IBM execs should spend less time blogging and criticizing analysts, and more time managing their bottom line."

B5.  Daniel Johnson

See http://colinp.dominodeveloper.net/plink/040803-0149 and http://www.bruceelgort.com/blogs/be.nsf/plinks/BELT-63GP6R for details
that Ms. Radicati did not share with you (I have no idea if she did or not).

These are the behaviors that got the community so riled up. The truly ironic thing is that this reputed 27- year old "expert analyst with extensive experience/knowledge" thought he could engage in this behaviour and not be tracked down?

OFF THE RECORD - DEEP BACKGROUND:
OK I am redacting this.:-)
END OFF THE RECORD

Quote/Question 2

3. Re: this quote: "This is where our conversation turned to what responsibilities companies like Radicati, as well as companies that hire a group for services such as those Radicati are offering, have when establishing this type of relationship. Greg said that the responsibility of due diligence falls on the company doing the "hiring". If they know about allegations of unethical behavior on the part of a company, they will likely still hire them if they have a
solid track record of performance, as this always is the deciding factor as to whether or not to hire a consulting firm. What they have to be careful of, said Greg, is that the are careful that the issuance of any reports by the hired firm contain full disclosures so they do not get caught up in a "pump and dump" scheme. If they do not know of any allegations of unethical behavior by a firm, they had better be ready to face the music if problems do arise."

What are the "allegations of unethical behavior" about the Radicati group? Are you referring to the astroturfing by "keiot" or something else? It seems that in this paragraph you are suggesting that companies should be wary of hiring Radicati Group to do consulting for them, and that a company that hired Radicati to do consulting could "get caught up in a `pump and dump' scheme." Is that what you meant to convey? Were you trying to warn people not to hire Radicati Group to do consulting for them?

If a company told you they were considering hiring Radicati Group to do some consulting for them, what would you tell them? Would you advise them against hiring Radicati and if so why?

ANSWER 3

NO, NO, AND NO...If you read what is written here is the fact that if a company delivers, they will be hired, regardless of any allegations or implications that may be out there (unless of course they have been "Spitzerized". What I am advising here is that if a company hires any analyst firm to write reports or provide advise, they should exercise due diligence and make sure that any reports issued on behalf of the hiring company have full disclosures so that problems do not arise later. This is far from advising anybody to not hire a particular company. That is not my business model/role. I address policies,
procedures and due diligence, not who to hire and when. This begs the question if any independent analyst firm should enter a new market without having strong controls in place to avoid any appearances of conflict of interest.

Quote/Question 4

4. It seems to me that you have suggested Radicati did not adequately disclose sponsorship of reports; but you haven't proved that Radicati actually did this. She insists she did not do this. Of course she might be lying. But if you can't prove she did this, is it fair to suggest that she failed to disclose sponsorship?

ANSWER 4

See response to Question 1 above.

Quote/Question 5

5. It seems to me that you've taken this unproven allegation and used it as a reason for companies not to hire Radicati, warning them that
this firm has faced "allegations of unethical behavior." Do you think it's fair to do this?

ANSWER 5

From the quote you included in #3 above (*EMPHASIS ADDED*):

"This is where our conversation turned to what responsibilities *COMPANIES LIKE* Radicati, as well as companies that hire a group for services *SUCH AS THOSE RADICATI ARE OFFERING*, have when establishing this type of relationship...responsibility of due diligence falls on the company doing the "hiring". If they know about allegations of unethical behavior on the part of a company, they will likely still hire them if they have a solid track record of performance, as this always is the deciding factor as to whether or not to hire a consulting firm."

There is nothing in here that tells anyone not to hire a company. It says that this happens all the time and that due diligence falls on the part of the hiring company. So fairness is not a question as I did not do what you are suggesting.

Early on in this whole debacle, I sent Ms. Radicati an e-mail about this issue, but she did not. And she also never came out and apologized for the behaviour of the employee in question. Is silence then an indicator of condoning the behaviour?

This is the type of business risk I wrote about at

http://www.controlscaddy.com/A55A69/bccaddyblog.nsf/plinks/CBYE-63H2FT
http://www.controlscaddy.com/A55A69/bccaddyblog.nsf/plinks/CBYE-63AULQ

Ethics may be in the eye of the beholder, nut unprofessionalism is pretty cut and dry.

I hope this address your questions and provides a more balanced light to what you are writing. If you have any questions or need further clarification, please let me know.

What Do You Think?

You can read the original article, Jaws II: Has Radicati Found a New Niche?, and tell me how you read the content.