"The importance of lawyers has never been greater, yet the legal industry has come under great pressure. One result may be a change in the business model."
Alternative Assets: Big Law Steps Into Uncertain Times
The central argument is that the law firm partnership model is “broken”. In other words, that law firms as they exist now, with their business model of charging high hourly fees for their specialist services, to customers (whether corporate or small businesses or even individuals) is no longer supportable. Instead it is, or may, be replaced by non-partner law “companies” such as Axiom.
Axiom has no partners, offers lower fees, has over 900 qualified attorneys. These are lawyers who want to work from home, or don’t want to work in the demanding and rigidly structured law firm environment any more. Keep in mind the fact that they aren’t Axiom employees, nor does New York Times Dealbook author Andrew Ross Sorkin make mention of medical insurance, 401k’s or other employee benefits.
Axiom takes the products of big law who no longer want to work crazy hours [i.e. people who have want to spend time with family] and provides a forum for them to connect with price-sensitive commodity work.
So far, so good.
There’s a problem… but isn’t there always? I wouldn’t be writing this blog if there weren’t endless problems that I feel compelled to point out or feel anxious over ;o)
I am not conservative, nor Conservative, just leery of “innovations” that might be more like backwardations (backwardation is a real term used to describe behavior in commodities markets, when the spot price is lower than the futures price, or vice-versa, but I am not using it in that context). That is to say, a step backward in terms of reward structure moving away from meritocracy, and instead, causing power and priviledge (I can never spell that word) to become more concentrated among fewer people.
Power and wealth could be modeled as a gravitational force field. When there are large accumulations, they resemble the gravity wells that surround large celestial objects. Like moons, or planets, or neutron stars. Or black holes.
That might seem like misplaced concern, particularly regarding the nature of the potentially oppressed workforce: Attorneys. I would respond by saying that the only aspect about it that is different is that biglaw* is among the last to experience this. It has happened already, for nearly every other professional field, and even some skilled trades.
A more significant issue (with this post) is that there are probably holes in my plutocrat-as-voracious-black-hole model of physics. Let’s continue though.
The problem with the disruption of biglaw begins with this:
Their [Axiom’s] model depends on biglaw refugees—Axiom is able to provide the services they do by getting experienced people with 5 - 10 years of experience who were trained by biglaw.
Axiom [isn’t] interested in hiring recent law school grads. In other words, Axiom can’t exist without big law supplying them with a talent pool.
Here’s the logic for that:
… historically it took 3 years for a young associate to become profitable, which is why recruiters always chase after second year associates—firms are willing to pay the fee of 1/3 of a 3rd year’s salary to avoid paying for the first two unprofitable years of training done by someone else.
This is the conclusion made by the author (actually, it was someone who left a pseudo-anonymous comment, a Mr. D.):
Axiom can compete on commodity legal services, but they won’t replace them for high end services…
Emphasis mine, throughout.
Maybe. Yet it has happened elsewhere already e.g. Information Technology, where outsourcing has resulted in less qualified, less experienced people replacing existing staff, in order to save on costs. It is unwise, short-term thinking. Also, this sort of contracting reminds me of employment structures of the past, such as the garment industry, and being paid for piecework.
There is a reason that businesses charge what they do for services. Some of the costs are due to training new staff. Without big law, who will hire and train new law school graduates?
Let’s expand the scope, away from the legal industry in particular. Traditional businesses with employees are more accountable to regulatory authorities. They pay taxes and provide stability to a community. There is continuity and a means of establishing reputation, as well as the opportunity for customers to validate trustworthiness or lack thereof. There is opportunity for many businesses to co-exist, and prosper.
Ultimately, I do not foresee a major shift, away from the traditional business paradigm, working well for anyone. No, that isn’t entirely correct. It will work well for a few, specifically, the owners of the Axiom-type services. The new plutocrats.
* Bigdata seems to have spread and morphed, as I have noticed usage of so-called biglaw recently.
