The end of inevitability

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If you want an example of how the legal profession likely will respond to new competitors and a future marketplace very different than today’s, take a look at how Canada’s real estate agents are coping with change in their market. (Short answer: not well). The Globe & Mail reports on a rising wave of sell-it-yourself home realty, prompted by both Canada’s Competition Bureau and its intention to deprive Realtors of their near-monopoly as well as technological advances that allow people to buy and sell homes without professional assistance. Realtors — and this might sound familiar — have responded by fighting the Bureau’s efforts to open the market, scaring homeowners with the dangers of proceeding without professional assistance, and confidently predicting that these amateurs’ mistakes will simply produce more work for Realtors in the end. A few excerpts:

The letter, which comes from the Nova Scotia Association of Realtors, warns homeowners that they are “accepting with open arms increased risk of liability, threats to you and your family’s safety. Realtors protect you and your family from any ill-intended strangers that will come in to your home under the pretense of wanting to buy,” the letter advises, before it goes on to warn of lower sale prices and longer sale times. …

Jim Carragher insists a lot of his new business comes from private sales gone bad. “I’m telling you that it is so terribly sad when I get that phone call at the 11th hour from someone who was trying to sell their home who suddenly realizes they have made a terrible mistake,” he says. “Their deal falls through, they already bought something unconditionally. I try to help, but I tell you sometimes it’s just too late to undo the damage.”

Nonetheless, as the article explains, sell-it-yourself realty continues to grow, in part because the times are passing Realtors by. Read this excerpt from the article (and change “real estate agent” to “lawyer” throughout): Real estate agents … tend to be middle aged or older, and growing out of touch with a younger generation that prefers online options and is more comfortable with the idea of private sales than their parents would have been. “These kids aren’t going to use an agent,” he says. “That’s just the way this is going. The agents are older and the buyers are younger, and they’ve had the Internet their whole lives.”

Lawyers also are under regulatory pressure (in England & Wales through the Legal Services Act, in Canada by the Competition Bureau, and the Missouri lawyers suing LegalZoom for the unauthorized practice of law better hope their suit doesn’t produce the wrong kind of finding). But still we resist new competition through UPL restrictions, we seem to regard technology as a nuisance more than a service facilitator, we routinely warn clients of the dangers of going it alone, and we maintain (patronizingly) that we always end up fixing the messes left by unrepresented clients. And like Realtors, we remain amazingly confident, even smug, about our indispensability. I once sat through a focus session in which lawyers, asked what would happen if laws and their practitioners disappeared, solemnly predicted that anarchy and blood in the streets would follow.

The one thing that concerns me most, as an observer of the extraordinary change in this marketplace, is that the majority of the profession has no idea what’s coming. Most of the lawyers with whom I’ve dealt over the past several years simply can’t envision a world where lawyers aren’t considered essential to the social and economic fabric. They might recognize that times are tougher and costs are rising and prices have topped out and clients are more demanding. They might be resentfully aware that providers outside the profession are entering the market with lower-price offerings, and they might grudgingly accept that technology allows things to be done faster and cheaper than they used to be. But they’re not putting it all together. They’re not following this road to its conclusion, because they can’t really see how the world could get along without us. The inevitability of lawyers is our fundamental precept, and it has become a mental block.

It’s this sense of inevitability that we need to shake to pieces, because it seems to lie at the heart of the profession’s blasé attitude towards change. Lawyers are far too complacent for the circumstances we’re facing, maintaining a sense of privilege born from decades of profitable work in a protected environment. I’m not trying to persuade anyone that lawyers will disappear (although I’m no longer prepared to discount that possibility 100%), but rather to help lawyers understand that we face an immediate mandate of transformation in order to remain relevant to and valued by the marketplace. We can’t charge according to our time and effort anymore. We can’t use a model that sets our financial interests in opposition to our clients’  anymore. We can’t tell our clients who may and may not offer them legal services anymore. We can’t serve the market on our unilateral terms anymore. Many lawyers don’t believe any of those things, and very few lawyers believe all of them. But I believe them all to be true, and I’m not the only one.

The plight of Canadian Realtors probably matters little to us — in fact, to the extent we hear about changes in the real estate marketplace that increase consumer choice and lower prices, we’re probably cheering on the trust-busters and the innovators. It doesn’t seem to occur to us that we’re as vulnerable as they were — just as secure in our monopoly, just as highly rewarded for our efforts, just as dismissive of the potential power of the market. The inevitability of lawyers might once have been a fact. But now it’s fiction, one that’s sustained in our minds but less often in anyone else’s. The sooner we abandon that fiction, the better our chances of responding in time to survive in some recognizable and profitable form. And it has to be soon. Lawyers should know better than anyone else what a ticking clock sounds like.

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6 Responses to “The end of inevitability”

  1. Mark Tanney

    Thanks Jordan.

    Sometimes I feel a mild sense of dread when I see a new post from Law21 in my in box. I know I’m about to have my butt whipped. It’s not always fun seeing these glimpses of the future.

    But I always feel good after reading the posts. I come away feeling like I’m armed with a bit of inside information that gives me a better chance of landing on my feet ten years from now.

    Thanks,

    Mark

  2. Susan Cartier Liebel

    It’s a certain type of individual who can put the jigsaw pieces of a puzzle together. You do it. Most people don’t want to see the finished product, though, as you’ve pointed out.

    You’re not doom and gloom. You’re not the little red hen yelling the sky is falling. You are recognizing some things which are inevitable and there are those who will listen and find a way to prosper as a professional…and the rest won’t.

    Will this be the culling of the profession which others say should come from closing law schools? It just might be. But the one’s with the blinders on might just be the ones shuttering their doors.

  3. Doug Cornelius

    I have a problem with the over-generalization of the legal industry. What you do in criminal defense bears little resemblance to what I do in regulatory compliance or and did in a real estate transaction practice.

    Internet and technology are changing all industries, including legal services. The impact on legal services is as varied as the type of legal services.

    Buying a house is a fairly standard process 90% of the time (maybe that is too low). You need to a lawyer for rest of the transactions because its complicated. You probably need a lawyer to help you figure out whether you need them or not in the first place. It’s not always clear that the lawyer is helping. You just want to buy or sell the house, have few headaches and pay the least amount in costs.

    When the handcuffs are on, the analysis is very different.

    I used to be a residential real estate broker before the internet age. I made my money based on an inequality of information. I had access to market information. Buyers and sellers did not. Clearly, the internet has destroyed that information assymetry and changed the way residential real estate brokers work.

    Most people can make better decisions about buying and selling houses if they have better access to the market information. Most people will NOT make better decisions if they have better access to the underlying law.

    Lawyers are not realtors.

  4. Richard Granat

    Jordon this post is right on target. However, unlike the UK, the US legal profession is still heavily regulated and a monopoly. As long as non-lawyers can’t give legal advice, the legal profession enjoys a protected space where they are protected from the most disruptive changes. That being said, there are many common legal problems that can be solved by just the provision of legal information and intelligent and automated legal forms. LegalZoom is really no more than a high priced legal form service, with a very limited value proposition, yet reportedly they will generate more than$50,000,000 in annual sales volume this year. This fact should be a wake up call to the US legal profession that despite the rules, solos and small law firms are loosing marker share to non-lawyer, internet-based providers.

  5. Jordan Furlong

    Doug and Richard, thanks for both of your comments.

    Doug, I agree that lawyers are not Realtors, and you’re right that there’s a big difference between what clients can accomplish simply through access to information in real estate and law, respectively. What I did find strikingly similar between the two professions was their reaction to the prospect of client empowerment: one part wagon-circling, one part fear-mongering and one part dismissiveness. What I don’t see in either profession is a willingness to take this development seriously as a strategic and competitive issue — even to suppose, just for fun, that the trend lines might actually take us where they appear to be leading us and working out responses to various what-if scenarios that result. I see that willingness occasionally among the bar’s leadership and hardly at all among the rank and file, and I don’t think that’s going to be nearly enough.

    As well, although I take your point about “pure information” asymmetry being different between real estate and law, there’s no reason to think that the “applied information” asymmetry that still largely exists in the law will last forever or even for much longer. Lawyers, like most professionals, are in the applied knowledge business, turning information into outcomes through the exercise of expertise. Even the relatively primitive online document assembly systems currently in use can do that now, and while I don’t discount the complexity of creating a sophisticated engine for advanced tasks, nor do I think it’s impossible. Like I say, I think we need to be having this discussion openly in the profession, and soon, as to what happens when we’re no longer indispensable from a market perspective.

    Richard, you’re right about the American legal services industry and the web of regulation and restriction that sustains a large and generally profitable legal profession there. All I can say is that if regulation is the immovable object, market forces are the unstoppable force barreling down on it, and I think the smart money is shifting towards the immovable force.

  6. Doug Cornelius

    Jordan -

    Don’t get me wrong, lawyers need to become more efficient, delivering more value to their clients. That is true for every industry.

    I agree that lawyers have under estimated how much of the practice of law can be commoditized. Small law firms are seeing that pressure from things like Legal Zoom. Large law firms are failing to see that parts of the practice are a commodity business. Since the work is more complex, the commodity stuff is just part of a more complicated, more bespoke engagement.

    Biglaw in particular could be more efficient, there is just little incentive to do so.

    While a big firm lawyer I was a big proponent of document assembly. (see: http://kmspace.blogspot.com/2007/11/document-assembly-update-and-problems.html) There is little incentive for the investment in the system under a billable hour model. In fact, it has a direct measurable ROI that is negative.

    One problem was the approach of many users to have the doc assembly produce a final document. I thought the real value was in producing a better first draft. Then the lawyer can add value with the aspect of the documents that needs their expensive attention. There is little value in merely filling in names across a set of documents.

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