How to compete against data scientists charging $30/hour

While companies complain about lack of analytic talent, professionals complain about lack of jobs. Everyone wants to work for Facebook, LinkedIn, Google, Intel, Apple, Twitter or some hot start-up. It creates fierce competition getting a job interview, let alone a job. But companies that do not belong to this circle see very few candidates applying for their data scientist open positions; in addition, they are only hiring what I call technical developers (defined by a narrow set of technical skills, usually R, Python, NoSQL, Hadoop, Map-Reduce, software engineering). They are not interested in real data scientists, so many data scientists that would apply would (erroneously) not be perceived as bringing value, and not interviewed.

The problem with consulting is of a different nature. Companies are looking for the cheapest consultant having the minimum set of qualifications to perform the task (the candidate will be asked to provide details about previous projects). Because the work is performed from home, consultants compete with people all over the world to land a gig. Analytic professionals in India, found on websites such as Elance, charge $30/hour. On Statistics.com, you can hire consultants in India for $59/hour.

When I wrote my article about my salary history, a few people mentioned that my consulting rates (from $45 to $100/hour) were absurdly low given my expertize. But compared with rates in India or Romania, it is actually not low. Those charging $150 to $250 per hour are having a difficult time finding new clients. And if all your great skills and expertise are not considered useful to a client, he won't pay for it, especially if this expertise is not used to generate greater revenue. Indeed, many PhD statisticians work as part-time adjunct professors with salaries even far lower, or write other PhD students theses for a fee - typically for $5,000 - as these are the only clients that they can get. So, in some sense, there is more talent than the job market can absorb, especially for PhD's.

So what are the solutions, for a consultant?

Here's a list of ideas:

  1. Work on big data projects, a lot of automation is possible, and big data is cheaper to process. You need the correct expertize though, but many companies lack talent to properly identify the right data and extract value. I would charge by the project rather than by the hour, for such projects.
  2. Work on stuff no one else know. Avoid stuff everyone know such as logistic regression, decision trees, neural networks, as you will be competiting against dozens of professionals who can do that too - some in India or Romania.
  3. Automate your analysis and EDA (exploratory data analysis) as much as you can
  4. Outsource mundane tasks (reporting, data gathering and cleaning, EDA) so you can lower your bill: use an intern or someone in India paid $20/hour to do 80% of the analysis, pay yourself $200/hour for the 20% high level stuff; the average turns out to be $56/hour for the client - a rate lower than what haircut professionals charge.
  5. Make sure you can measure value added and convince clients about the amount of (quantifiable) added value that you provided. Many clients (you need to find them - I am one of them) would not mind paying you $100,000 if you helped them generate another $500,000 in revenue, even if it took you only 50 hours of work.
  6. Reduce your costs: I work entirely from home (I don't need a car), I have no health insurance (by choice, not a good idea for many people), I bought a house well below what I could afford (and same with car), I use open source tools, and my education is mostly free (no expensive training, I read stuff online, buy books). I'm lucky to have no marketing costs; if you can (you need to build a strong social presence), your marketing costs - which typically eat 50% of your revenue and include attending conferences - could drop to zero. I can charge low rate because I have no expenses.

Some arguments to convince a client to work with a more expensive, US-based consultant

  • Your data is confidential: it is protected in my hands. Data processed outside of the country could destroy your IP, patents, can be re-sold, can cause privacy violations etc.
  • Easier to sue me or collect money in case of problems
  • Easier for you to deduct these consulting fees (for the IRS)
  • We are in the same time zone, avoiding unecessary delays every day
  • We can meet in person rather than via video-conferencing
  • We can work on sensitive data (security clearance)
  • We are an established business, not a one-man operation
  • Our English is easy to understand
  • We use professional, enterprise tools; we have a SAS license (we don't use pirated software or virus-laden computers)

Finally, if you really have great expertize spanning across multiple domains, the easiest solution might be to just stop consulting and make a living as a business or growth hacker:

Instead of helping businesses protect themselves against hackers, you become a hacker, knowing that you can outsmart all the consultants and experts working for these companies. I'm talking about legal business and growth hacking. You can create your company, for instance a website selling books listed on Amazon; you don't actually sell the books, you get a commission each time a website visitor goes to Amazon to purchase a book listed on your website. Traffic hacking (one of the hacking systems among many others used to optimize your business) could consist in generating a huge volume of high quality web traffic, through creation of hundreds of (fake) interesting profiles that automatically post interesting stuff via a well diversified set of mailing lists and social networks, without being detected (each profile posting no more than 3 links or pieces of content per day; a different IP address is used for each profile). Your business acumen, network security, traffic scoring, and fraud detection expertize allow you to defeat the algorithms designed to block you. Instead, these algorithms generate false positives because they rely heavily on spam reported by users; you can take advantage of this to get your competitors blocked. Note that this business model does not require any sales or talking to people and is typically run from home. Other advantages include higher revenue, no meetings, no boss, and better job security. If you are good at financial engineering to reduce taxes and other money issues (I call it financial hacking), you will even make more money.

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Comment by Vincent Granville on March 4, 2014 at 5:53pm

Tony: Yes, a rate that is too low does not inspire trust. There's an optimal pricing for each country/consultant. I once offered to do consulting for free (just as a test), nobody was interested despite heavily promoting my offer. I guess potential clients thought "too good to be true", despite the fact that it was real. Also some PhD's are not good at selling themselves.

Demanding higher wages might not be the best strategy. Moving in a different direction is an interesting solution, possibly working as an employee or as an entrepreneur, I know bloggers (true experts in their field) paid $3,000/month to post 2 blogs a week and do community monitoring; it takes them 10 hours of work a week, so their actual salary (if they combine 4 jobs like that) would be $144,000 per year (with no benefits, but plenty of deductions). Not bad. Or you can sell data, like trading signals based on predictive modeling, accessible via an API. I did it for a while, and I will probably do it again (though it will be a different type of data, more similar to research data). You can write great papers (in PDF format) and sell them on Amazon/Kindle -  no need for middlemen - you are the publisher, and buyers download your PDF (it's paperless). It worked better than I thought to generate good pocket money in my case, and I'll do it again on a bigger scale. All these alternatives involve working exclusively from home, which is a plus. 

Comment by Tony DiLoreto on March 4, 2014 at 4:22pm

Dr Granville,

I can totally appreciate the competition argument, especially since clients sometimes (for better or worse) see consultants as interchangeable, regardless of where they are. However, there is a reason that Giorgio Armani charges thousands of dollars for his suits, even though there are people in China, India making suits for much less. There is an appearance to uphold; if Armani was to lower his prices down to market levels for suits (not Armani-quality suits), people would not value his products as much. Sometimes price is indicative of quality and experience, both which you have an embarrassment of riches. If I was to hire a data scientist, and I saw you and a few others for $100/hr, I would easily choose you. 

Don't you feel the same applies here, where those with experience and talent should demand those wages? Perhaps if PhDs and those with great experience are having trouble finding work, it is a function of their selling points and not their price?

Comment by suganya on March 4, 2014 at 1:56pm

This information is a real eye-opener and so shocking to hear . you have an awesome experience and expertise .

Comment by Vincent Granville on March 4, 2014 at 1:12pm

These PhD writing services frequently write chapters dealing with statistical analyses, for PhD students in economics, sociology, computer science etc. but also sometimes write entire statistics PhD theses.They are usually qualified and not doing anything illegal (I've found some of them listed on Amstat.org in the consultant directory, so these are ASA members). But the issue is with PhD students (usually those coming from upper middle class) hiring these services. Poor students can't afford these services. Like you wrote, it indeed raises multiple issues.

Although I do not offer these services, I was once contacted to fully design and implement a superior copyright infringement detection system (a web crawler) available as an API, for a student doing a PHD thesis in computer science in Europe - basically to do his job. 

Comment by Mark L. Stone on March 4, 2014 at 10:31am

"many PhD statisticians [work as part-time adjunct professors with salaries even far lower, or] write other PhD students theses for a fee - typically for $5,000"

This is appalling, in more ways than one.  Can you name some schools at which Ph.D's are awarded based on theses written by other people?  Perhaps list the most prestigious schools and departments at which this is done.  Does the fee go up, the more prestigious the school awarding the PhD?  Are the advisors or members of the reading committee ever in on this fraud, as ghost author or otherwise?

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