As some of you doubtless know, I’m a Stanford Law graduate and, both on general principles and more pointedly with undying gratitude for the rigorous and exciting analytic education it gave me, a loyal one. (Stanford could learn volumes from Princeton when it comes to alumni loyalty, but that’s another topic, and not one for the pages of "Adam Smith, Esq.")
Today I’m here as a Stanford Law alum to deconstruct a column (picked up as well by the WSJ Law Blog) by Larry Kramer, the Dean, which prefaces the current issue of The Stanford Lawyer, and to tell you that what he has to say is shockingly naive or shameless pandering to the dark and caustic forces of political correctness or, conceivably, both. First, an extended excerpt from what he has to say:
"The focus of this issue is the state of our profession. And that is a worrisome topic. I have occasionally remarked, though only in small settings before today, that the state of the legal profession brings to mind Rome, circa A.D. 300. On the surface, it looks grander and more magnificent than ever, but the foundation may be about to collapse. It’s meant to be a joke. But the uneasy laugh this comment invariably elicits suggests that it may be closer to the mark than any of us wishes.
"Certainly our profession has changed profoundly in the past generation. The basic structure still looks the same: Most lawyers practice in firms, most firms are partnerships with cadres of associates, most work is performed for hourly fees, and so on. Yet it’s the traditional model on steroids: Big firms employ thousands rather than hundreds of lawyers, with offices around the world. Partner/associate ratios have changed dramatically, particularly if we focus on equity partners, while legal work has become increasingly specialized and expectations for billable hours have soared.
"Such changes have consequences. Clients, especially corporate clients, are less willing simply to pay what firms charge and much less willing to subsidize the training of young associates. Technology has exacerbated this trend, enabling clients to do for themselves things they used to need from outside counsel. Making a practice profitable has increased demand for lawyers to bill hours, which has, in turn, forced firms to raise salaries, which has further increased the need to bill hours. Partly as a result, new associates seldom join firms intending to stay for more than a few years. Lateral hiring has exploded, undermining the culture and sense of community of many firms. And factors like these have stymied or undone progress that was just beginning to be made in advancing women and minorities into the top ranks of legal practice.
"Twenty years ago, most lawyers would have scoffed at the idea that profitability, much less profits-per-partner, should be the measure of success and prestige. Yet that is where we are. Law firms are run like businesses by managing partners and committees whose time is almost wholly occupied with, well, managing. And competition is fierce: to be bigger, pay more, bill more hours, and open more offices. To be more profitable.
"Does anyone actually want this? The lawyers, managing partners, and general counsel I meet are deeply concerned about what’s happening. Yet they feel unable to stop it, powerless to resist the stifling market forces that drive their decisions. And for good reason, because the problems are complex and exist at every level. Students say they want a better work/life balance, yet invariably choose the firm that ranks highest in The American Lawyer’s list of the top 100 law firms. … And on and on. No one can be blamed when everyone is to blame.
"I have no answer to this. … "
Now, Dear Reader, are you asking yourself whether you haven’t heard this same cri de coeur before? And indeed you have, from any number of variously illustrious sources, Dean Kramer being only perhaps the most recent and high-profile.
We hear it in the "professionalism vs. corporatization" debates, in the "intrinsic invaluable culture vs. merger mania" debates, in the "home grown vs. lateral opportunity" debates, and, as the good Dean says, "on and on."
It’s time to for me to draw a line in the sand. I’m here to tell you this is nonsense on stilts.
- The Fortune 500 and the FTSE 100, BigLaw’s core clientele, have long since gone global.
- Law firms should therefore not follow suit?
- The total share of all private-sector corporate profits earned by the Fortune 500 has been on a 30-year upward trajectory (even while their share of total private sector employment has stayed all but constant).
- The AmLaw 100 should not therefore experience a similar growth path?
- We have been taught at Milton Friedmann’s knee, among others, that the purpose of a business enterprise is to maximize shareholder value.
- The partners being the functional equivalent of shareholders of a law firm, who is to gainsay what we are witnessing?
- "Law firms are run like businesses by managing partners and committees whose time is almost wholly occupied with, well, managing."
- Shall we then return to the days of managing on the backs of envelopes, at kitchen tables, and on the train while commuting? How, exactly, did that serve the interests of, say, Coudert Brothers, Jenkins & Gilchrist, or Dewey Ballantine?
- Is Athenian Democracy the way to manage a several-hundred-million-dollar global enterprise?
- Are lawyers, on average, actually very good at dabbling in management? Is anyone any good at dabbling?
- "And competition is fierce: to be bigger, pay more, bill more hours, and open more offices. To be more profitable."
- You bet. We call it "client service." Clients are global and want us to match their footprints. I have yet to hear of one firm opening one office not in response to articulated client demand but because it suited the firm’s egos—strike that: I should have said, one "well-managed" firm.
- Pay more? Quelle horreur! Perhaps to meet the market rate? Perhaps to attract a significant lateral? I would be surprised, but perhaps the Dean could disabuse me, if Stanford Law doesn’t take market rates for law professors into account in its hiring decisions.
- Bill more hours? Again, the constable is shocked. To be sure, there are human and economic limits (which I would be the first to proclaim we are running up against), but working hard comes down to two things: (a) client service; and (b) learning and practicing the craft. There’s a reason medical residents, surgeons, and emergency room doctors pull heroic hours, as do others in all demanding walks of life including our own corporate clients and, if we were smart, ourselves in younger days taking advantage of blessed institutions such as Stanford Law School.
- "Lateral hiring has exploded…"
- Actually, that horse left the barn about 20 years ago and in recent years the trend has been fairly flat. But I view the lateral market as both one of the great exerters of centrifugal-force on firms that don’t have the cultural or economic resources to exert countervailing communal forces, and as a genuine liberating influence for aspirational individuals who, through the passage of time and the evolution of their practices and client bases, find themselves through no fault of their own in the wrong firm. Would we wish them locked in forever? Isn’t bilateral employment-at-will the most humane and liberating (meaning supportive of individual freedom) policy we could hope for?
- "Technology has exacerbated this trend [of economic pressures on firms], enabling clients to do for themselves things they used to need from outside counsel."
- And the problem would be….?
- To be sure, technology "exacerbates economic pressures" on virtually every pre-existing business model. That’s part of its charm. And part of the charm of capitalism itself is to inflict creative destruction.
- Technology, lest we forget, is also perhaps the most empowering force for good (and for evil—al Qaeda recruits online like nobody’s business) our generation has experienced. I for one am not about to choose to roll back the clock.
- "Among my hopes for the coming years is to develop a program in ‘the business of law’…," the Dean concludes.
- May I suggest that program—which is devoutly to be desired, and for which I hereby volunteer to participate in its development and/or realization—begin with a realistic look at the economics of BigLaw today where, for example, the implication of a $160,000/year starting salary means an all-in cost for a first-year associate of about half a million dollars?
- It must also begin with a realistic view of the international landscape in which BigLaw operates. As the Dean himself says in today’s New York Times, "Globalization means you have to better prepare lawyers to work in a global context." What meaning can "a global context" possibly have if not that firms must match their global clients in scope and capacity?
- Finally, what can "professionalism" and "preserving the qualities that attracted so many of us to the study of law in the first place" (from the Dean’s concluding sentence) mean if not accompanied by the hard, thoughtful, time-consuming, dedicated, demanding work required to attain the heights of the profession—work for which there is no substitute or shortcut?
Further, "the business of law" program, and everyone reading this column, should recognize the Dean’s views are far from universal: So far from universal that, in my experience, he is in a distinct minority.
Virtually everyone I talk to and meet with, whether they admit it out loud or not, celebrates the larger canvas on which firms operate today, is engaged as never before in the challenges and opportunities of management, and is pedaling as fast as they can to figure out the contours of the 21st Century legal industry and position their firms accordingly. I for one cannot imagine a more exciting period than today to be engaged in "an inquiry into the economics of law firms."
Far from "powerless to resist the stifling market forces that drive their decisions," the people I know embrace the market and in fact try to get ahead of it. As Charles De Gaulle famously reminded us, "it’s a mistake to be on the wrong side of history." And as Adam Smith would doubtless adapt it today, "it’s a big mistake to be on the wrong side of market forces."
But this debate concerns so much more than the ineluctability of market forces: It concerns aspiration, vision, drive, and, yes, client service.
Simply put, globalizing firms are not wrong. They are aspiring to serve their clients, whose needs are morphing in the Flat World we now know we inhabit. I just remarked that it’s a "mistake" to be on the wrong side of trends in one’s world. But in this case, to fail—as the Dean would evidently have us do on purpose—to strive to serve our changing and globalizing clients’ highest-order legal needs would be worse than a mistake. It would be a moral, a professional, and only last an economic, failure.
Update 2 November:
I sent the Dean a note linking to the article within a few hours of publishing it and received the following in reply, which I offered to publish and he gave me permission to do:
Hi Bruce:
I had already seen the blog and considered writing you. So I’m glad you reached out. I think you misunderstood the import of my letter and the issues I was trying to raise. I am not opposed to the globalization of legal practice. Nor am I a Luddite who wants to preserve or restore some lost, imagined golden age. I am, however, acutely conscious of the rising dissatisfaction felt by so many lawyers, and I see the shifting patterns in what our graduates do and, more importantly, aspire to do. I wanted to raise these issues to see whether there are ways to continue operating in a modern global economic environment without at the same time having to sacrifice so many of the great qualities and virtues of practicing law. Change has happened very rapidly in our profession. As recently as 20 years ago, a 200 lawyer firm was considered huge; today it’s small. Expected billable hours have gone from 1600 to 2200 at the top firms in the same period. Legal practice needs to serve clients working in a multinational context in a world where everything is more specialized and so the demands on lawyers are greater. But can we find ways to do that while making the experience better for individual lawyers? The opening point in the letter: that despite these enormous changes, the basic model remains the same–that our profession has adapted to these changes by, in effect, becoming the traditional model on steroids—is not meant as a call for the legal professsion to turn its back on change. On the contrary, it’s meant as a call to change more: to find different and better ways to adapt.
Of course I don’t know enough to say what those should be on the ground. I am, however, privy to some really interesting efforts and experiments underway, things like Axiom Legal Services (which is discussed in the issue) and a variety of others. We want to start exploring some of these models.
The law school is changing in response to many of the same pressures. Only the first year will remain as it was, while the second and third years will become very different experiences to meet the needs of today’s profession. Can the profession do the same, and can we in the academy help figure out how? Those are the sorts of questions my letter intended to raise.
Best,
Larry
As always, I am delighted to hear from readers—especially those I identify by name!—and I thank the Dean for contributing to this discussion.
On a separate note, it has been a matter of no small interest to me that I have gotten more emails, and even the odd phone call, in response to this column than to any other in recent memory. And the reaction has been without exception extremely positive, typically along the lines of, "Finally somebody said what I’ve always been thinking." In at least one AmLaw 25 firm, the managing partner circulated this column to all of his partners and reports that "many wrote back with comments that basically counted as ‘wow.’"
