Regeneration

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Thacher Proffitt & Wood, a 160-year-old US law firm established the same year The Communist Manifesto was published, the Second French Republic was founded and Wyatt Earp was born, will close its doors tomorrow. Following failed merger talks with Spalding & King, Thacher Proffitt arranged for 100 of its lawyers, including its managing partner, to be acquired by Sonnenschein Nath & Rosenthal, which itself laid off scores of lawyers earlier this year.  Thacher Proffitt becomes the third major US firm, following Heller Ehrman (which has now officially gone bankrupt) and Thelen Reid, to collapse with little warning this year; countless other firms cut hundreds of staffers, associates and even partners. Most of the forecasts out there say 2009 figures to be substantially worse.

So this is a post about hope.

No, it’s not just the spirit of the season talking. Let’s look briefly at the state of some other industries at the close of 2008 before circling back to the legal profession to see from whence springs hope.

Let’s start with the newspaper business. The steady buzz of unease surrounding traditional media these past several months has, just in the last few weeks, risen sharply to the high pitch of imminent disaster. The Tribune Company, owner of the Chicago Tribune, Los Angeles Times and Baltimore Sun, among other famous brands, filed for bankruptcy. The E.W. Scripps company placed its largest newspaper, the Rocky Mountain News, up for sale, and few offers are expected. Detroit’s Free Press and News are dropping delivery frequency to three times a week. Even The New York Times, all but synonymous with newspaperdom, froze wages for non-union staff and warned employees of a “daunting” year ahead. The end of newspapers, mooted as a someday-down-the-road possibility, is suddenly a frighteningly immediate prospect.

Frightening especially for those who subscribe to the notion that print journalism is a pillar of democracy. Jeff Jarvis collected more than a dozen columns and editorials from veteran media professionals published in just one weekend to that effect. They all believe that a just society depends in part upon independent, responsible, public-service journalism (correct), which in turn depends upon newspapers (not so much). They can’t envision any credible alternative to their industry: they look at what passes for free news and analysis on the Internet and despair for the future. And amid all their misery, you can hear the you’ll-be-sorry-when-we’re gone message to those who deserted papers for the web — James Suroweicki in the New Yorker warns that “soon enough, we’re going to start getting what we pay for, and we may find out just how little that is.”

The thing is, we do need journalism; what we don’t need, or at least want anymore, are newspapers. The newspaper industry is in terrible shape and will be a shadow of its former self within a year or two, but journalism is still with us and will re-emerge at the other end of the print media crisis no less necessary and no less in demand. If every newspaper in the world disappeared tomorrow, readers would still want the best of what newspapers provided, reporters and editors would still have skills to meet those needs, and advertisers would still have dollars to spend on that exchange. It’s a mistake to assume that online news will never get better or develop a workable business model —  in a digital world, both of those outcomes will be necessary and inevitable.  The inability to look beyond the collapse of an industry and see the outlines of the one that will replace it lies at the heart of newspapers’ dilemma.

The same goes for the recording industry. The major recording labels feared (accurately) that online file sharing and music swapping would destroy their business model, a fear that led them to irrational acts like prosecuting and jailing their customers (a course the RIAA has finally changed). Alternatives like LiveNation agreements, performer-authorized free downloads, and even Guitar Hero licensing and iPhone applications are now getting tryouts — but the labels generally haven’t led the way, because they can’t see the emerging industry over the impending collapse of the current one.

The same goes for book publishing, Online distribution is also a challenge here, but the real disruptive force for the publishing industry is the Kindle — an innovation from outside the industry — which has the capacity to change everything we assume is true about books. Many book publishers fear the Kindle, because it makes redundant their print and distribution business models and they can’t see a way to make that model work within the new parameters it has created.

The same goes for the three major Detroit automakers, which have been telling horror stories about the consequences of the collapse of entities too big to fail. They’d have us forget there’s not only a worldwide auto industry waiting to fill the void they’ll leave (including a burgeoning one in India and China), but also another US auto industry lined up behind them too. They can’t see beyond their own fate, and they don’t want us to look either.

The same problem afflicts all these and many other legacy industries: an inability to accept that the death of a business model or even an entire industry is not the death of the product or service that underlies it. Journalism will outlive newspapers; music will survive record companies; books will still be here after publishers or even print; American companies will make cars after Detroit. These essential features of the marketplace will outlive those companies and business models that happen to have turned a profit during a  specific historical and economic period that is now ending.

And the same, of course, goes for the legal profession. Starting now, and stretching out over the course of the next several years, we will see many familiar law firm names, many traditional legal careers, and many comforting business models stagger and fall. It’s no surprise, and to be blunt, in many cases, it’s no tragedy either: they’ve outlived or mutated beyond their usefulness, and it’s time for them to go.

So goodbye, overleveraged law firm that bills by the hour and burns up its associates. Farewell, repetitive work billed out by associates at the highest possible price to unsuspecting clients. Nice knowing you, legal secretary who prints out partner emails or coordinates his datebook.  So long, legal publishing behemoths that organize and sell publicly available knowledge. Say good night, law schools that teach narrow curricula for 100% final exams with little regard for the clients their graduates will one day serve. Your day is drawing to a close.

Still waiting for the hopeful part? Here it is: the end of our traditional ways of conducting business in the law — including many types of work off which we’ve been able to turn a profit — is not the end of the legal profession; it is not the end of lawyers.  And not only can we look forward to more efficient and effective models emerging to replace the anachronistic and even harmful institutions that overstayed their development in the latter half of the 20th century, we can celebrate the fact that the law is already ahead of other legacy industries in transitioning to the new realities. Believe it or not, for all that the legal services marketplace has rightly been considered a graveyard of innovation, new models and approaches are flourishing all over the profession as examples and inspirations. Even if not all of them succeed — and most of them are looking pretty good — they’re assembling the foundation upon which the new legal profession will be built.

The law firms of the future will look a lot more like Valorem, Summit, Exemplar, Marque, and Virtual Law Partners than Thelen or Thacher. Or they’ll look more like Axiom, Paragon, Outside GC and Cognition, bypassing law firms altogether. Solos of the future will be powered by the likes of Virtual Law Office. Legal secretaries of the future will resemble Halo Secretarial. Legal periodicals of the future will look like LexMonitor. Legal research of the future will be done through entities like JD Supra and  The Practical Law Company. Law schools of the future will copy Washington & Lee, Northwestern, or even more radically, Solo Practice University. Lawyer recruitment of the future will resemble DiscoverLaw. Legal software of the future will be provided online by the likes of RocketMatter. Legal associations of the future will look like Legal OnRamp. And this is just a handful of examples.

Thanks to some pioneers with vision and courage, the legal profession already has a set of templates for how to bring itself into the 21st century. We’ve already seeded the ground to replace the overgrown giants that will be blown down in the coming windstorm. And we’re actually in a better position than other legacy industries whose obliviousness to change, and fierce resistance to that change when it did come, fatally compromised not just their businesses, but also the professionals and skilled workers within their ranks. We can’t afford to let that happen in the law.

Make no mistake, there will still be casualties in our profession, lots of them. We’ll all be shaken at the speed with which many familiar institutions fall apart, especially large law firms. It was only a few months ago that the mainstream legal media was fawning over firms that generated $2 billion in annual revenue, another chapter in big firms’ history of garnering a disproportionate amount of attention and prestige within the profession. But just as General Motors is now a counter-example for how to run a business, some big law firms are at most a few short years away from sharing GM’s fate.  The course of the next decade will also see some well-known law schools close their doors, some established legal service companies disappear, and some longstanding legal jobs simply cease to exist. This is going to be frightening, just as it was for newspaper publishers, record executives, book publishers and Detroit automakers before us.

But the upheavals to come, painful as they will be, will also invest our rigid, reactionary profession with unprecedented dynamism and fluidity, making real change possible, if not inevitable. The next several years will give us our best chance to remake the law into the kind of profession we all wish it were but have given up thinking it ever could become. This is exactly the time for us to identify and isolate what we really value about the legal profession, save and shelter it from the coming storm, and use today’s innovative blueprints to rebuild tomorrow’s legal services environment with these values as its foundation.

People will always need lawyers, and lawyers will still be here to do what we do best: counsel, advise, advocate, analyze, facilitate and connect. The legal profession will be transformed, but if we do this right — and I know we can — the transformation will be a regeneration: stripping away the obsolete and counterproductive and elevating the best of what the law and lawyers hold at their heart: service to clients, the community, and the greater good.

We won’t recognize the legal profession of January 2014. Or then again, at its core, maybe we will.

Happy new year.

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5 Responses to “Regeneration”

  1. michael webster

    Jordan,

    The disintegration of the media industry is to be expected when it became impossible to enforce the traditional copyright remedies because of technology. New business models, which are not stable, had to spring up.

    But the change in the practice of law, the ones you hope for, are not likely to arrive, in my opinion. The vast majority of consumers of legal products are unable to determine the value of the services they consume. Attorneys are then forced to construct substitute – large offices, expensive paintings, absurd billing structures- measures of value. Credence goods are hard to evaluate in the marketplace.

    Law, like religion, will have to tend to the more absurd forms of worship, until dispute resolution becomes a business and not a calling.

  2. Laurie/Halo Secretar

    I really LOVED this post Jordan and thank you so much for the mention!! I was especially struck by the comparison to the auto industry. I feel terrible for the employees being so affected by the economy BUT, I know that only if we change and try to have vision for the future can any of our businesses succeed – small or big, legal, auto or banks. I make my consumer choices based on companies that have vision – so as a business owner I need to make my choices the same way. I can’t just think about profit, but about accountability and results. I hope more companies start to get that message before their employees suffer the consequences.

  3. Susan Cartier Liebel

    Jordan,

    From the ashes arise new enterprises and opportunities for those with vision.

    It is a cycle which repeats itself over and over, again yet one which never fails to shake people to their core.

    Great post as always.

    An adoring fan :-)

  4. Victoria Pynchon

    Jordan,

    As a lawyer who has survived a practice group failure (insurance coverage: Buchalter); bailed from a sinking ship prior to a merger (Hancock, Rothert into Duane Morris); and, moved on to greener pastures before the collapse of the local office of an old-line firm (Pepper Hamilton’s L.A. outpost); and as the spouse of an attorney who left Heller before its collapse and after 34 years with the firm, I can pretty confidently say that these losses have not to date doomed the megafirm as an institution.

    Nor are these firms all over-leveraged. Heller certainly wasn’t.

    Most of the lawyers in the merged, failed or re-organized firms simply moved to other large firms — often larger than the firm they left or the ones that cratered beneath their feet.

    Practice groups splinter with some members staying together; some jettisoning their dead wood; and others opening boutique firms of their own.

    After more than two decades of practice, I see the same lawyers with the same clients litigating the same type of cases. Only their business cards and their geography change (downtown to century city or vice versa).

    I’ve seen many large firms fail about me — in the 80’s, 90’s and 00’s. During that time, law firms in general just kept on getting bigger; salaries and billing rates higher; and litigation lengthier.

    I believe that each of these firms failed for reasons unique to each, with the present economic cataclysm being the final push at each firm’s weakest point.

    Granted, this is not empirical evidence.

    Still, I thought you’d appreciate getting a little feedback from the street.

    As always, one of your biggest fans.

    Vickie

  5. Carolyn Elefant

    I loved your post, Jordan, but with all due respect, I think that in some ways, the future has been here for a while, residing in solo and small firms across the country, populated by lawyers who have found a way to serve clients, make precedent and have a life on the side. This is not the end of lawyers, not by a long shot – it is just the beginning and from where I sit, the future has never looked brighter.

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