Losing the confidence game

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Here are six observations about the legal marketplace for you to consider, each supported by a news report filed just in the last few days.

1. Fewer people want to be lawyers.

Number of law school applicants continues to slide: “[US law school] applications submitted are down 13.6%…. That translates to about 66,696 applicants and about 484,576 applications…. Over the past two years, there’s been a 24.1% decrease in the number of law school applicants and a 19.6% decrease in the number of law school applications submitted… [T]he legal market … is expected to have difficulty absorbing the 45,000 students preparing to graduate law school in each of the next three years.”

2. Fewer new lawyers are finding legal jobs.

Two law graduates for every lawyer: “The [US] Bureau of Labor Statistics [BLS] estimates that 212,000 jobs will become available for [US] attorneys over the course of this decade, mostly as a result of replacement rather than growth. If the number and size of ABA-accredited law schools remains the same, that means 48% of law graduates this decade can be expected to get (not keep, get) a legal job.

3. More clients are using lawyer substitutes.

The low-cost lawyer is not a lawyer: “The financial constraints of the last few years have forced companies and law firms to consider whether every legal problem must be staffed with attorneys who, thanks to the high costs of their education, demand higher salaries.  If BLS’ projections bear out, it appears that clients and firms may have found permanent low-cost substitutes for many legal jobs in the form of paralegals, legal assistants and even accountants.”

4. Lawyers’ monopoly over legal services is dissolving.

Co-Operative Legal Services granted license to practice law: “In the past six years, [the Co-Op] has built a £25m-plus, 500-person legal business without needing to be an ABS, but the licence opens up more opportunities.They include launching a fixed-fee family law service later this year, handling legal aid work, and offering face-to-face legal advice through the Co-op’s bank network.”

5. Clients have access to lawyer-like technology.

Disruptive technology in the hands of clients: “The Association of Corporate Counsel today launched ACC Contract Advisor, a contract-drafting tool built on what is described as a “vast collection” of sample contracts and thousands of real-world clauses. Launched in collaboration with kiiac.com, the new resource is, unfortunately, available only to ACC members. … A user can search all documents for specific language. Model contracts and clauses can be downloaded.”

6. More disputes are being resolved without lawyers.

Coming soon: a global ODR system: “Businesses that have a really well-developed resolution system make a lot more money. Customers trust them,” added Rule, former director of online dispute resolution for eBay Inc., and PayPal, which collectively uses ODR to resolve 60 million disputes a year. … “We built a civil justice system. We built a walled garden. Now the challenge is more and more transactions are happening outside the walled garden.”

You could draw any number of conclusions from these six data points. But my strong impression is that we’re experiencing a switch in the legal market’s default setting.

Watching the legal profession today is like seeing a champion golfer, previously considered invulnerable, struggling with his game for so long that at a key moment, his opponents experience a sudden switch from feeling intimidated to feeling empowered. It’s like seeing a global business smartphone giant, whose products were once ubiquitous, suffering so many consecutive reversals of fortune that at a key moment, the market decides that the company’s products are no longer the default standard and switches en masse. It’s like seeing a national leader, in power for so long that everyone accepts his rule as a fait accompli, make enough bad decisions that the streets are filled with opponents who suddenly believe today, as they haven’t for many yesterdays, that change can happen.

The aura of incumbency is far more powerful than we realize. Politicians who “can’t” lose, products that “can’t” be outsold, majority opinions that “can’t” be swayed — in these and similar situations, the “can’t” is most often rooted in the challenger’s state of mind. The simple act of observing those who occupy positions of power leads us to credit them with more merit than they probably deserve. The incumbents, in turn, sense and absorb this impression, making them feel and appear even stronger, while also making them more complacent.

But when the aura of incumbency flickers or fades — when, for a variety of reasons, the “natural” leader suffers a series of setbacks and loses momentum — then a switch invariably occurs, first in people’s minds and then in the market. That’s where the legal profession is, right now.

We’ve held down the primary (if not the exclusive) position in the legal market for so long that everyone — ourselves included — came to believe that this was the natural order of things. Then things changed, as things tend to do. We’ve found ourselves losing much of our momentum and with it, much of our confidence. The aura of our incumbency has slipped. Everyone sees it, and everyone feels the change. And suddenly, we’re foundering.

Can we regain that momentum, restore our aura? I’m not sure. Confidence is a scarce resource in a marketplace: rarely do both the challengers and the champions possess it. Right now, the momentum belongs to the challengers, who see an opening they’re never seen before and had perhaps believed they never would. Lawyers are vulnerable, both in mood and in market reality, to a degree that I think we’ve never experienced. We need to find our confidence and re-establish ourselves as the favourites — but confidence, like liquidity in a financial crisis, is always available except when you really need it.

We’ve entered a crucial period in the evolution of the legal market, one that could usher in a paradigm change, a platform shift, a change on the leaderboard. Are we up to the challenge? The answer to that question contains the future of our profession.

Jordan Furlong delivers dynamic and thought-provoking presentations to law firms and legal organizations throughout North America on how to survive and profit from the extraordinary changes underway in the legal services marketplace. He is a partner with Edge International and a senior consultant with Stem Legal Web Enterprises.

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2 Responses to “Losing the confidence game”

  1. Dan Hull

    Well done, sir. Don’t forget we need to build much better lawyers, too. Maybe go back to some “old” mentoring models.

  2. Colin Rule

    “Lawyers are vulnerable, both in mood and in market reality, to a degree that I think we’ve never experienced. We need to find our confidence and re-establish ourselves as the favourites…”

    We will always need lawyers and the law. What is changing is the legal monopoly on problem resolution. The law plays a central and vital role, but it’s not always the best solution (to wit, high volume, low value cross border cases). In the new world, disputants will have more resolution options — and that’s a good thing. Absent self-interest, lawyers understand the wisdom of this change better than anyone.

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