This is the first chart we’ve seen where New York’s green line lies above London’s red line. And I would posit the difference is material: London essentially not above $900,000 and New York essentially not below $1.1-million, or nearly a 25% difference on average.

The next chart is one for which, before creating it, I had low expectations. I expected it to be uninformative. But look:


This may be the most dramatic change we see in any of these charts: London’s total profit went from over 150% of New York’s in 2008 to about 110% for the five-year period 2009—2013. And if you look back at the second chart (total number of lawyers by city), you see no comparable change in headcount that would otherwise account for this, all else being equal. London went from about 195% of New York’s headcount in 2008 to about 160—165%.

Now, one you’ve doubtless been waiting for:


A dead tie in 2008 to a fairly steady run in 2009—2013 of New York above London by about $2.6—$2.7-million to $1.8-million, or about 50% higher. Over time, this is the kind of gap people with options begin to notice.

Next, we have:


Respected economists, business school professors, and just plain hard-headed CEO’s might tell you that to them this is the most informative chart of all: That New York has remained steadily in a range of 44—46% margins while London has been more volatile but has leveled off at about 40% (12% lower) means that New York firms have more resources year upon year to invest in the organization, pay for talent, and so on. As with PPP, over time this kind of gap begins to tell.

But the next thing all those imaginary observers would focus on is why such a difference exists and whether it refects intrinsic and enduring competitively differentiating strengths or whether it’s merely a creature of a particular time and temporary circumstance or even (worse) reflects short-term profit extraction and maximization at the cost of mortgaging investments in future opportunities.

I think the primary answer may be quite a bit simpler: By and large, the New York firms derive the vast majority of their revenue from New York-centric work, whereas the Magic Circle have far more widespread geographic footprints with proportionately much more of their revenue generated outside the high-margin precincts of Manhattan and the Square Mile.

To see this more vividly, let’s disagregate these groupings of “New York” and “London” and break out firm by firm performance (here’s one chart in particular you might want to click on to see full size):


Indeed, Freshfields and Linklaters have embarked on a more selective, more tightly focussed, and frankly more rigorous performance-driven reconfiguration over the past several years, while Allen & Overy and Clifford Chance have continued to expand their office networks to follow clients globally. Debating which structure is “right” or “superior” can be a source of endless entertainment, but for present purposes it comes as no surprise that the consequences of these choices are on display in this very chart.

I’ve provided a fair amount of data for you here, and you may be wondering what particular aspects of it I think really matter.

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