I recently delivered my 15th and final presentation of 2012 about the changing legal market. Over the past 12 months, I’ve given speeches and keynote addresses to large firm retreats, sole practitioners, bar leaders and regulators, chief justices, law students, CLE providers, law librarians, and other groups and organizations throughout the United States and Canada. If I had one piece of advice to share from all these excursions, it would be that you will never regret bringing backup versions of everything electronic, especially should you accidentally spill a full bottle of water onto your laptop just before a presentation.

I haven’t just been speaking to these groups, however; I’ve also been listening to what these diverse stakeholders in the legal marketplace have to say. And I’ve taken away two sets of impressions.

The first is that a very wide spectrum of knowledge and perspective exists regarding the nature of change in the legal market. I’ve met lawyers and legal professionals who flatly dismiss any suggestion that the market is changing in ways that are revolutionary and permanent. I’ve met others who saw these trends developing years ago and have already re-engineered their businesses to adapt. The vast majority of audience members lie somewhere in between. Most of the people I’ve spoken with, however, have been surprisingly and encouragingly interested in what’s going on in the wider legal world and what it might mean for them.

My second takeaway, and the one I’d like to explore in greater depth over the next five days, is that there’s no real consensus within the legal market about just what’s happening to it. We don’t appear to have a collective sense of what kind of road we’re traveling, where it’s taking us, and at what stage of the trip we currently find ourselves. This is important, because without a shared understanding of both our journey and our destination as marketplace participants, it’s difficult to talk about how to make the trip better, shorter, and more productive.

So I thought I would set out for you my views on the state of the legal market and how change is rippling through it: where we’ve been, where we are, and where we’re likely to go. It seems to me that there will be five stages in the ongoing evolution of the legal market — and by extension, of the legal profession itself. By my reckoning, we’re about halfway through Stage 2. Today’s post will explore Stage 1; each of the next four phases will be examined in separate posts over the course of this week.

Stage One: The Closed Market

Features:

• Law is a protected industry, with one legitimate, authorized, self-regulating provider (lawyers).
• Legal knowledge and tools are largely inaccessible without lawyer involvement.
• Lawyers regulate the market, policing their own conduct but also investigating and eliminating non-lawyer competition.
• Lawyers “compete” with each other in genteel fashion, rarely undercutting other practitioners on rates or introducing systemic improvements to methodology or workflow.
• Lawyers, facing no real competition and under no real pressure to innovate, create inefficient enterprises to deliver legal services, measure cost in hours, and price their services on a cost-plus basis.
• Lawyer jobs increase proportionately, if not out of proportion, to legal service demand — the lawyer population grows year after year, like an expanding balloon.
• Most legal services are expensive, and most lawyer careers are highly remunerative.
• Legal technology is almost entirely “sustaining,” offering more convenient ways of carrying out traditional tasks without re-engineering those tasks.
• Legal education is almost entirely academic and delivered to baccalaureate standards; professional experience is gained through on-the-job training, at clients’ expense.

Era: From most of the 20th century up until no later than 2008.

This is the legal market as most of us found it when we were called to the bar. In Stage 1, we run the show, and we run it to our liking. Not only do lawyers own the only saloon in town, we’re also the local sheriff, keeping the peace by prohibiting anyone from opening up a competing tavern. We enjoy the luxury of running our businesses as we please, safe in the knowledge that our collegial competitors in the profession will not create undue disruptive pressure through pricing or service delivery innovations. We deliver good products and half-decent service to a very limited, deep-pocketed clientele. Most lawyers make a fine living, and in many larger firms, they make an astoundingly fine living. These are good times for lawyers.

But they aren’t perfect times, of course. Our reliance on cost-plus pricing, our desire to increase profit, our aversion to risk, and our unwillingness to innovate all combine to create an over-reliance on individual hourly labour as an engine of growth. This in turn leads to burnout and emotional problems among lawyers and growing dissatisfaction with the lawyer’s life, not to mention frustrated clients who seek greater price certainty and more proactive interest from their providers. It also leaves us vulnerable to the possibility of competitors who might choose to play by different rules; we fail to develop any natural defences beyond regulatory action.

Legal education, meanwhile, underperforms its potential: most faculty have little experience with practice, and almost all faculty view the practicing bar with a certain degree of contempt, leading to generations of law graduates singularly unprepared for a legal career. Self-regulation, while critical to our independence, breeds bad habits of protectionism and self-indulgence. And it perhaps goes without saying that access to justice belongs primarily to those with the money to afford lawyers and the time to see legal matters through the labyrinthine legal process.

You could certainly argue the cut-off point for this era. Some might trace the beginning of the end to 2004, others to 1999; if you practised residential real estate, you can go back considerably further than that. There was no single “light switch” moment at which everything changed and a new paradigm emerged fully formed; evolution isn’t like that. Some of these tendencies weakened throughout the 2000s, while others are still going strong today. But it seems fair to assert that by 2008, when the financial crisis was breaking and the first provisions of the Legal Services Act were being enacted, the longstanding era of the lawyer-centered legal marketplace was drawing to a close.

An observer from outside the market could easily see how this artificially calm state of affairs might be ruptured, and would hardly be surprised to learn that such a breakage was imminent. Tomorrow, we’ll take a look at what happens when this long-closed market is abruptly breached by numerous external forces.