A couple of trends have reinforced the lowering of even these door-sill height barriers to entry: First, thanks to the great real estate meltdown, Class A office space is available in many major metropolitan areas for less than it’s cost for years—particularly when you factor in the space available for sublet from major organizations who find they no longer have such a need for all that square footage they’re committed to. Second is simply the phenomenon of cloud computing and all it represents. Not only do you no longer need a rack of servers, you hardly need conventional desktop or laptop PC’s: Chromebooks are increasingly coming into their own in mainstream use, and depending on your personal preferences, a lot of work can get done on tablets.

It’s not just hardware, it’s software and services. Everything from generic data storage space to Microsoft Office “365” to better-and-better voice recognition/transcription services to business accounting software can now be rented monthly or annually with no minimum commitment and no upfront investment. Virtually anything you might want to accomplish in a law office in (say) the year 2000 can now be done for you by a combination of hardware, software, and human beings outside your office which you have no responsibility for maintaining, updating, or employing.

Perhaps the most powerful implication of this new reality is less economic than it is psychological: If you and a few of your closest colleagues want to set up Alpha, Beta, and Gamma LLC, you risk virtually nothing upfront to do so. Why not give it a try and see how it goes? What (literally) have you got to lose?

In this context, some of the periodic decisions law firms must make can take on existential dimensions—and quickly become existential threats.

What are those periodic decisions? Nothing out of the ordinary course. For example:

• Renewing a long-term office lease, or moving to new long-term space;
• Renegotiating a bank term loan or line of credit;
• Being liable for a relatively sudden and relatively large obligation in the form of return-of-capital to exiting and retiring partners;
• Or even going through an episode of busted merger discussions, which can occasion an unwelcome bout of self-examination as a firm.

Here we see the evil flipside of the virtually nonexistent barriers to entry to creating a new firm: The shocking rapidity with which existing firms can unwind if the reigning psychology suddenly flips from “all for one and one for all’ to something more querulous, myopic, or just plain pessimistic.

Is it any wonder the PeerMonitor numbers show what they do?