I’m coming to the conclusion that BigLaw is not one business, but two different businesses. Some firms (a minority) are in one business, but most firms are in another business entirely.
Note what I am not saying: I’m not saying some firms have one business model and some another. I’m saying something stronger, that a subset of BigLaw firms are in an entirely different business than the rest.
What’s the difference between different models and different businesses? For me, economics says the difference is whether the product/service delivered by Shirts Firms and by Skins Firms are plausible substitutes for one another.
The defining characteristic of two products or services being widely recognized substitutes for one another is not whether you are indifferent between them or whether you view them as alternatives on a single spectrum of possibilities; that’s a matter of personal taste. Rather, the test is posed to the market overall: The test is whether some meaningful cohort of the buyers of that product/service will switch from one to the other in response to price and quality changes and will be, all in all, equally satisfied with either one “depending.”
If you think outside Law Land to commonplace and familiar substitutes in the economy at large, here are some nominees that I hope will illustrate these points:
- Oil vs. gas heat.
- Uber or Lyft vs. a yellow cab
- Trade paperback vs. e-book.
- Bagels vs. English muffins.
- Milk for your coffee/tea vs. cream.
- Merino wool vs. cashmere.
- Red vs. white wine.
- And of course, a nearly endless litany of brand tradeoffs, at least if one can stipulate no fan-boy loyalty to a particular manufacturer:
- Nike vs. Reebok
- Honda vs. Toyota
- H&M vs. Zara
- Pottery Barn vs. Crate & Barrel
- Crew vs. Lands End
You get the point, which is, again, not that you are indifferent between all these alternatives (I confess I’m still partial to books printed on paper, bound between covers), but that a material cohort of the market is, and will respond to what are perceived as meaningful disparities in price, availability, selection, etc., by switching from one to the other.
So my hypothesis about BigLaw is that we can categorize most firms quite definitively as Shirts Firms or Skins Firms and clients do not view them as tenable substitutes for one another.
Shall I be specific?