What do lawyers sell?

The first time I heard Richard Susskind speak was at a Canadian Bar Association conference in Montreal in 2007. That was also the first time I heard one of the best parables about professional services ever told. I’ll try to paraphrase Richard’s delivery from memory:

“Black & Decker, the power tool company, had just hired a new CEO. He walked into his first meeting with his board of directors, held up a power drill, and asked, ‘Is this what we sell?’ The directors looked at each other and looked at the drill and said, ‘Yes, that’s one of ours; that’s what we sell.’ ‘No, it isn’t,’ replied the CEO, and he put down the drill and picked up a board with a hole in it. ‘This is what we sell,’ he said. ‘This is why the customer comes to us. This is what he wants.'”

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That’s a magnificent illustration of the best way, the only correct way, to look at the process of buying and selling anything — that is to say, from the buyer’s perspective. Given the legal profession’s struggles to cope with a newly evolving market — as exemplified by the shocking cuts and wholesale retrenchment of many large law firms recently — it seems like a good time to apply that question to lawyers.

What do lawyers sell? Ask 100 lawyers that question and you’ll get, not 100 different answers, but a very narrow range of familiar answers, repeatedly proffered. “I sell my time,” some lawyers will respond. “I sell my expertise,” others will reply. The MBA types: “I sell solutions.” The ones who’ve been paying attention: “I sell value.” The ones who haven’t been paying attention: “I sell excellence.”

None of these, however, is a good answer, because none of these are things that clients specifically need and that can be identifiably described.

  • Time: No one in history has ever bought or sold one second of time. It’s not a commodity in any sense of the word.
  • Expertise: No client needs legal expertise for its own sake. Specialized knowledge has only applied, not intrinsic, value.
  • Solutions: Getting closer, but this is a buzzword that’s meaningless without context. And not every legal matter is a “problem.”
  • Value: Closer again, but really, “value” isn’t much better than “solution” — it’s another way of saying, “I sell you what you want.” It’s circular.
  • Excellence: Must try harder.

There’s a better answer to that question, I think — one that unites the many incredibly disparate strands of legal services. There’s one response that can legitimately cover all the myriad needs of diverse legal clients — from getting a will made out to clearing up a tax issue, from overseeing a bankruptcy to managing a high-stakes acquisition, from defending an assault charge to gaining a permanent work visa, from enforcing a child support order to appealing the loss of a business licence.

That one answer is this: Lawyers sell peace of mind. This is what clients seek when they turn to a lawyer. This is their “hole in the board.”

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“Peace of mind” is what you get when you find someone with expertise, someone who’s excellent at what they do, someone who comes up with solutions to problems and avenues for opportunities — you find them, and you speak with them, and over the course of time, you come to trust them. You trust that they will help you, that they will use their skills to remove a worry, manage a process, or come up with an answer that has eluded you. That trust delivers peace of mind.

Almost every client, when he first contacts a lawyer, is legitimately anxious about something important. He’s worried, he’s not sleeping well, his emotional well-being is compromised. “Peace of mind” is what that client gets in that blessed moment when he can say to himself, “It’s alright. I’ve talked to a lawyer, and she’s given me options, and she’s working on the matter, and she’ll take care of it. Someone is looking after it, or will help me through it. I can start to relax now.” And he does.

Look at your own client relationships. Think about the most rewarding engagements, the most satisfied clients. Maybe they won their case, maybe not. Maybe the deal closed, maybe not. But in most cases, the clients who speak most highly of their lawyers are the ones to whom the lawyers gave the gift of peace of mind — the trustworthy assurance that someone is sharing their burden and helping get them to a place where the burden will be lifted.

Clients buy peace of mind — that’s what they want when they hire a lawyer. Gear everything about your practice — your first consultation, your personal manner, your client communications, your dependable prices, your transparent activities — towards increasing your trustworthiness and reliability and relieving your client’s worries and burdens. You will be a happy, successful lawyer with happy, satisfied clients.

Available now! My first two published books: Evolutionary Road (e-book published by Attorney At Work) and Content Marketing and Publishing Strategies for Law Firms (co-authored with Steve Matthews, published by The Ark Group). Click the links to learn more and order your copies today.

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.  

So you designed a law firm: Your survey results

Previously on Law21 … after discussing the apparent disconnect between what lawyers seem to believe they can accomplish within law firms and what they’re actually empowered to do, I set up a brief survey inviting lawyers to distribute 100 points among 10 features of a hypothetical law firm to create an ideal working environment. First, the results (click on each image to get a larger version):

Question 1: Below are listed 10 features of a law firm. You have been given 100 points to assign to these features. Please assign these 100 points among these features according to how strongly you would prioritize their presence in your law firm. 

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Question 2:

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And Question 3:

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Now, my comments:

1. Law21 readers, and those in their immediate professional circles, are not big questionnaire fans. The post containing the link to the survey received in the range of 1,500 unique page views over the past several days, yet only 82 people completed the survey. In future: free coffee with every survey filled out! Limit one per customer. Not actually redeemable.

2. Not surprising to me, anyway, but Law21 readers aren’t a typical cross-section of the legal profession. “Client Service” finished comfortably in the lead among all 10 options, to be followed by “Good Workplace,” with the pre-race favourite “Partner Profit” barely finishing ahead of “New Lawyer Development” for third place. I think it’s fair to say that few law firms in the physical world actually match that profile. But I’d happily work for the law firm you’ve collectively designed here.

3. Nor am I really surprised to see “Community” and “Diversity” in the lower third of results. But I do think you should all be more concerned about your pension situation than you evidently are.

4. Does it say something that the survey attracted more responses from support staff than from non-equity partners and senior associates combined? At this level of statistical significance, probably not. But it at least suggests that the “non-lawyers” (sic) who work in law firms have a vibrant interest in what their firms could and should be.

Now, given the small response size, I’m reluctant to break down and compare categories against each other. But you may find this interesting: when I isolate the “Equity Partner” responders from the overall group (40 in total), the results are virtually even: that is, out of the 10 responses, no option received more than 11% of the total and no option received less than 9%. The variations in the final overall results are almost entirely the work of non-equity partners, associates, and staffers:

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I want to draw two statistically indefensible but nonetheless interesting conclusions from this.

First: equity partners want their firms to be everything, all the time. They want to be profitable yet collegial, prestigious yet affordable, elite yet community-minded. This, of course, is not possible: when you try to be all things to everyone, you end up being nothing to anyone. My own extrapolation is that this is at the root of many law firms’ problems: the people running these firms can’t prioritize among competing visions and demands, making them vulnerable to those demands that have the shortest time frame and the most severe short-term impact (hello, Partner Profits).

The second statistically indefensible conclusion from this exercise is that when you move outside the equity circle, a law firm’s other stakeholders have a very clear vision of what they want in a firm: one that serves clients above all else, one that provides a positive working environment, and one that yes, makes lots of money for its equity owners  — so long as those first two conditions have been met. You might or might not think that’s a good vision for a law firm. But at least it’s a vision: it’s the result of choices among options that result in a firm with an identifiable personality and profile. The firm designed by equity partners, as described in the results above, might as well have been formed at random.

So my last word on this exercise is to reiterate my message to law firm partners: you can make your law firms into whatever you want them to be. You are not helpless victims, floating like flotsam of the surging tides of commerce — that would more accurately describe your associates and staff, who, as previously noted, have a much clearer idea of what your firms could be. You and no one else are the captains of your ships, and their direction and mission is up to you. Accept your power and embrace the opportunity to make hard choices about the purpose and personality of your law firms — you’ll be rewarded for your courage and determination with praise and recognition of your leadership. We’re all waiting on you — make it happen.

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.  

Design your own law firm: A Law21 lawyer survey

Not for the first time, and probably not the last, I find myself reading reports from the legal marketplace and wondering why lawyers are asleep at the switch.

The latest head-scratcher comes courtesy of Altman Weil and its fifth annual Law Firms in Transition Survey of 238 US law firms. Importantly, only one-third of the respondents were within the AmLaw 200 — we’re not talking about the giants here, but about firms whose lawyer complements range from 50 into the hundreds, and whose clients likely include some national companies, a lot of regional businesses, SMEs, and individuals. Here are a few highlights from the Am Law Daily report:

  • 80% of respondents think the move towards non-hourly billing will continue — but only 29% had made significant changes to their own pricing practices.
  • 96% believe the focus on improved practice efficiency has become entrenched — but only 45% had made significant changes to improve efficiency.
  • 67% think smaller annual rate increases are also a permanent change — but between 21% and 40% of all fees at all firms are still simply being discounted.
  • And despite all the foregoing, when asked to cite the greatest challenge they expect to face over the next two years, the #1 response (15.2%) was “increasing revenue.” Coming in at #8 (5.6%) was “delivering value to clients,” while the afore-mentioned “improving efficiency” — which, remember, 96% think is here to stay — finished at #11, with  2.8%.

Near as I can tell, many of these respondents must believe that permanent, radical change in the market is something that’s happening to other people. The disconnect between “This is really happening” and “We’re doing something about it” remains perplexingly wide.

Now here are the results of another survey, one that didn’t get quite so much attention, but whose implications are far more chilling. The UK’s Legal Services Board released the results of an incredibly comprehensive survey of small businesses — an astonishing 9,703 of them, ranging from solo entrepreneurs to companies with up to 50 employees. (Although the countries are different, the two survey populations suggest a high degree of overlap between the law firms and the clients in each.) Here are some of the findings:

  • 38% had experienced a “significant” legal problem in the past year, almost half of which had a tangible financial impact — a total market value of £100 billion when scaled up across all small businesses.
  • 91% of respondents took action to respond to their problems — but most either handled it themselves or got help from family and friends.
  • Of the minority who sought formal advice, only about 40% went to members of the legal profession — the rest sought out accountant, trade associations and the like, especially for tax issues.
  • Bottom line: Legal service providers were involved in just 16% of these matters. That means that roughly £84 billion worth of potential small business legal services are being resolved without the legal profession.

Oh, and here’s the kicker: When asked to assess the statement that “lawyers provide a cost-effective means to resolve legal issues,” only 13% agreed.

So I find myself wondering: faced with reliable, overwhelming, and readily available data that shows a near-complete misalignment between them and their markets, why are law firms doing so little in response? Why are firms, even while openly admitting that many essential marketplace fundamentals have permanently shifted, moving so slowly, it at all, to address these changes? I’ve previously suggested the confidence of the dinosaurs as a culprit, but I think there’s something more at work here.

When I talk with lawyers in law firms about these issues, I’m sometimes struck by the impression of powerlessness that I get. Lawyers, including partners, seem to almost shrug, as if to say, “Yes, but what can I do?” The structure and culture of the firm are presented as an unalterable reality, a mix of good and bad that’s just the way it is. The firm delivers profits, prestige, and security — albeit ever-decreasing amounts of each — but it’s also hidebound, reactionary, and highly vulnerable to change. But what are you gonna do? Priorities have been set and choices have been made, and we have to live with the results.

There are times, when confronting this malaise, that I feel like responding, with some force: “Yes, but you own the firm! It’s yours; you’re the equity owners. Nobody else is in a position to make the firm something different and better than what it is. The associates, the staff, the clients — they might not much like the state of affairs either, but it’s not their show; they consider both the firm’s successes and its shortcomings to be entirely your responsibility. If you’re not in charge, who is?”

What I would really, truly like is for more partners to accept full responsibility for their firms — to recognize the need for decisive action to adjust the firm’s bearings, to take that action, and to fully own the changes that follow. I’d like to see them act as the owners they are, not as the passive sideline observers many of them seem to have become.

To that end, I’ve decided to try introducing a third questionnaire into this mix — my own. I’ve created a very short survey — only three questions — at SurveyMonkey, and I’m making it available to anyone who wants to take it. It’s directed towards lawyers in law firms, and I hope they constitute the majority of respondents, but anyone in the legal industry is invited to take part as well.

The title of the survey is: Design Your Own Law Firm. And that’s exactly what you’re invited to do. The survey provides you with 10 features of a law firm, gives you 100 points to distribute among those 10 features any way you like, and asks you to use those limited resources to design the kind of law firm you want to be part of. Here’s a preview of the 10 features, listed in alphabetical order (they’re randomized in the actual survey):

  • Affordability: The firm’s services are priced for maximum client accessibility.
  • Client Service: Clients reward the firm’s efforts to provide extraordinary service.
  • Community Leadership: The firm is widely praised for its active community efforts.
  • Diverse Workforce: The firm is more race- and gender-diverse than its peers.
  • Elite Reputation: The firm is considered among the very top tier in its market(s).
  • Funded Pensions: The firm ensures post-retirement income for both lawyers and staff.
  • Good Workplace: A positive, collegial atmosphere produces collaboration and referrals.
  • New Lawyer Development: Junior lawyers receive superb training, mentoring and work.
  • Partner Profit: Equity owners derive highest levels of annual revenue from the firm.
  • Prestigious Clientele: High-profile or respected clients frequently retain the firm.

Here’s the link to the survey — it’s open today, May 23, and will stay open for either one week or until I have enough responses to draw some conclusions. Please take the survey — Note: print out your choices before pressing “Done,” so that you retain a copy — and forward it to your friends and colleagues. Be honest with your answers: give the responses you really feel, not the ones you think you “ought to” give.

I’m very interested in finding out how — when given several good options, but only a limited amount of resources — lawyers prioritize the structure and culture of a law firm. And I’m hopeful, maybe even optimistic, that by going through this process, lawyers will realize that they really do have the power to make their firms the way they want them to be.

Here’s your chance to be the architect of your law firm. You’re responsible for its priorities. What will you create?

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.  

 

Reinventing the right things

Warning: Lengthy Moral Philosophy Discussion Ahead. Worse luck for you, it’s from an English major who took exactly two Philosophy courses in undergrad and was entirely unsuccessful in trying to penetrate Kant’s Critique of Pure Reason, so govern yourselves accordingly. But it’ll take us a few paragraphs before we get there. First, we talk technology.

In Silicon Valley earlier this month, there transpired a conference that crystallized many of the current trends and topics regarding the rapid re-engineering of the legal marketplace. Reinvent Law is a laboratory based at the Michigan State School of Law and sponsored by the Kaufmann Foundation that seeks to combine innovations in law, technology, design and delivery to create a new and better legal system. The primary Reinventors are MSU law professors Daniel Martin Katz and Renee Knake, and if you’re not following them on Twitter, you should be.

ReInvent conferences had already been held in Dubai and London (the latter under the Law Tech Camp banner), but the Silicon Valley meeting was a breakout event that deeply connected with many people in the legal market and is still generating conversations. Here’s a roundup of commentary on the event: I especially recommend Ron Friedmann’s live-blog posts for your review, while the report by The American Lawyer’s Aric Press demonstrates that the issues #reinventlaw is exploring are of interest to some of the largest legal enterprises in the world.

I was seriously sorry to miss ReInvent Silicon Valley, and I hope to make it to a future iteration of the event closer to home. I’m a fan of what ReInvent Law is aiming to do and the methods by which it’s doing it (Dan Katz’s work with data and the law is particularly noteworthy). Technology offers us tremendous potential to improve the quality, delivery and accessibility of legal services, partly because technological disruptions are being applied from the bottom up and from the outside in (rather than top-down from within the legal profession, as previous reform efforts have been), and because the application of internet-based technology can provide benefits well beyond its costs.

This is not a unanimous view, of course, and Reinvent Silicon Valley had its share of critics, including Scott Greenfield of Simple Justice. Scott’s post on the subject expresses a deep skepticism about the conference’s focus on technology, especially as it relates to the criminal justice system. Scott’s take on these issues will be familiar to readers of his blog, but I’d like to single out one part of his post for further consideration:

The fear is that much of what is being promoted as the future of law will actually come to pass. We will have those paperless offices where we sell virtual legal services unbundled like the widgets they can be. And the prisons will still be filled with people whose computer programs told them they should be free.

It’s not that the people involved in all of this aren’t smart. Indeed, these are some very smart, very dedicated people, but they don’t see the law. Dreams of technological change may be very exciting, but to what end?

That last question is an interesting one, and it will do all of us in the legal marketplace reform movement some good to think it over for a while. What are we aiming to achieve with the growing integration of technology into the legal system? I think Scott may underestimate both the purpose and the impact of these new legal technologies: to reduce costly inefficiencies and improve effectiveness throughout the legal service process; to provide more avenues for people to access legal services; to break the monopolistic tendencies of the legal profession that have served the market so poorly.

But when Scott talks about “making the law actually work better for the sake of human beings, rather than make it point and click,” he reminds us that the end, rather than the means, is what we need to focus on here. And although I don’t think this is a mistake that the ReInvent people are making, nonetheless we are vulnerable to the risk that our newest tools — and some of them promise to be very powerful indeed — may cause us to value the tool more than the task. Automation is meant to serve a purpose, not to be a purpose in and of itself.

This brings me to the central issue I want to examine, and to the philosophical part of our program. Peter Thiel recently delivered a guest lecture at Stanford Law School’s Legal Technology course. You might know Thiel as the co-founder of PayPal, the first outside investor in Facebook, and a generally brilliant fellow worth roughly $1.5 billion. Blake Masters took notes on Thiel’s lecture and the Q-and-A that followed, resulting in an extremely thought-provoking and (for me) unsettling read, because Thiel essentially advocates a greater role for automation and technology in the justice system.

You should read the whole article, but it’s quite long, so here are some key excerpts for present purposes.

Computerizing the legal system could make it much less arbitrary while still avoiding totalitarianism. There is no reason to think that automization is inherently draconian. 

Of course, automating systems has consequences. Perhaps the biggest impact that computer tech and the information revolution have had over last few decades has been increased transparency. More things today are brought to the surface than ever before in history. A fully transparent world is one where everyone gets arrested for the same crimes. As a purely descriptive matter, our trajectory certainly points in that direction. Normatively, there’s always the question of whether this trajectory is good or bad. …

In some sense, computers are inherently transparent. Almost invariably, codifying and automating things makes them more transparent. … Things become more transparent in a deeper, structural sense if and when code determines how they must happen. One considerable benefit of this kind of transparency is that it can bring to light the injustices of existing legal or quasi-legal systems. …. If you’re skeptical, ask yourself which is safer: being a prisoner at Guantanamo or being a suspected cop killer in New York City. Authorities in the latter case are pretty careful not to formalize rules of procedure. …

The overarching, more philosophical question is how well a more transparent legal system would work. Transparency makes some systems work better, but it can also make some systems worse. So which kind of system is the legal system? … [Is it] pretty just already, and perfectible like a market? Or is it more arbitrary and unjust, like a psychosocial phenomenon that breaks down when illuminated? 

The standard view is the former, but the better view is the latter. Our legal system is probably more parts crazed psychosocial phenomenon. The naïve rationalistic view of transparency is the market view; small changes move things toward perfectibility. But transparency can be stronger and more destructive than that. …  Truly understanding our legal system probably has this same effect; once you throw more light on it, you’re able to fully appreciate just how bad things are underneath the surface.

Once you start to suspect that the status quo is quite bad, you can ask all sorts of interesting questions. Are judges and juries rational deliberating bodies? Are they weighing things in a careful, nuanced way? Or are they behaving irrationally, issuing judgments and verdicts that are more or less random? Are judges supernaturally smart people? The voice of the people? The voice of God? Exemplars of perfect justice? Or is the legal system really just a set of crazy processes?

Looking forward, we can speculate about how things will turn out. The trend is toward automization, and things will probably look very different 20, 50, and 1000 years from now. We could end up with a much better or much worse system. But realizing that our baseline may not be as good as we tend to assume it is opens up new avenues for progress.

On the surface, there’s much to like here. It’s difficult to argue that the legal system is not, at least in part, a crazed psychosocial phenomenon, inconsistent and frequently irrational in its operation. There is no shortage of error and bias in the law: Scott Greenfield might point to prosecutorial malfeasance and systemic discrimination, whereas I might point to the rampant inefficiency of law practice, the turf-guarding monopolism of lawyer market regulation, and the fundamental conflicts between the traditional law firm business model and the best interests of clients. Why not introduce into this highly imperfect system the discipline, objectivity and predictability of the algorithm?

And yet … something about Thiel’s narrative bothered me. Just the fact that the word “totalitarianism” came up in this discussion is enough to raise red flags about the possible risks we run here. Humans have a long-held apprehension about developing technologies that will eventually destroy them: I wrote about this in Blawg Review #252 back in 2010, when I tracked science-fiction tropes about technophobia from Frankenstein to The Matrix. Literature abounds with nightmarish future states in which our machines, given the power to execute the law, eventually become the law unto themselves. If we have a generalized dislike of bureaucracy, it’s because we fear the spectre of a faceless, mindless, autonomous system that knows who, what, where, when, and how, without ever knowing or caring why. And history supplies us with good reason to feel that way.

But I was also disturbed by what I felt was a deeper problem: that while this approach was clearly intended as a moral good that would improve fairness and correct injustices, nonetheless there was something vaguely wrong about the whole thing. So I did what anyone would do in these circumstances: I consulted a moral philosopher; in my case, Dr. Richard Matthews of King’s University College at the University of Western Ontario (who also happens to be an old and great high school friend) for his assistance. With his permission, here are excerpts from his illuminating response:

The article is deeply uneasy with human subjectivity. … The discussion of AI and improvements in legal computation suggests the possibility of improving on this, of making the legal system more rational. To be fair, he acknowledges that things could get better or worse with the introduction of AI. But what he does not notice is that the drive is to eliminate human fallibility as such from the process of legal reasoning — to render human judgment irrelevant.

Suppose that the trend towards legal computation is “successful,” whatever that would mean…. The consequence will be reduced human involvement in the most important aspects of the legal system, and thus increasing irrelevance of human beings as subjects in the process. This is, no matter what the ultimate results of the process are, the further objectification of human beings. Humans become the objects of judgments, not subjects.

What are some of the practical implications of this? Well, you have been mapping many of them in your blog already — the elimination of highly skilled and highly trained lawyers and judges from participation in a meaningful human activity; the organization and maintenance of law through mechanization of the kind that this article identifies; and by taking the labour that you cannot be bothered to mechanize and finding the least-well paid and most desperate people to do it. Obviously there are many others, but I find none of them attractive.

This is a mapping and reshaping of human life and its possibilities which has, at its root, the controlling and reshaping of human populations. The controlling will not produce better human beings or increased obedience to law. Instead, it always generates resistance. …

Such technologies also concentrate power in the hands of an increasingly small group of people, since they own and thus control access to the AIs. The issue of transparency is dodgy, in any event. We have to ask: To whom are computers transparent, since 99.9% of the world doesn’t have a clue what a computer is, even as we use them. Also, the computer does not function in a politically neutral environment.  I would be highly surprised to find transparency applied to powerful individuals in the same way that it will be applied to the vulnerable. 

I think Richard has struck several nails on the head here, which is why I’ve gone to such lengths to address this subject: because although the size of the risk that an increasingly automated justice system presents is very small, the potential impact of that risk is not. I’m fond of saying that lawyers were invented to serve the law, not the other way around. Well, the law was developed to serve people, not the other way around, and one of the services it’s meant to deliver is to support and extend the realm of human dignity. Humans aren’t always great at sustaining our own and others’ dignity; but we do try, here in the law, to accomplish that, and sometimes we succeed. Machines aren’t good at it at all.

Rest assured, I remain a strong proponent of improving and expanding the role of systems, processes and technology in the business of law and, to a more limited degree, in the justice system itself. The problem arises when we give in to the temptation to let these systems run loosely supervised, or not supervised at all — and that temptation is real, because every mechanized process is always telling us, “Go on, take a break, leave it to me, I’ve got this handled” — and, hard-pressed for time or money, we often acquiesce. Not everything requires watchful human guidance, but some things do, and the law is one.

The word “autonomy” comes from the Greek autonomos, which means “independent, living by one’s own laws.” (Emphasis added.) The implications of that definition for this discussion are too strong for me to pass up: these are our laws, meant for our good, and Peter Thiel notwithstanding, I recommend that we remain highly vigilant about and directly involved with their application.

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.             

 

And the walls came down

Last week, I had the pleasure of delivering a speech to the Institute for the Advancement of the American Legal System (IAALS), an innovative program headquartered at the University of Denver that addresses reforms to legal education, access to justice, and judicial selection. They had asked me for a presentation that would explain the challenges facing the legal profession today and outline the contours of the legal market of tomorrow.

I thought you might like to read a condensed version of my remarks, which touched upon many issues that I’ve canvassed here at Law21 over the past few years. Considering that this is also my 400th post here, it seemed appropriate to share what amounts to a summary of my views on the legal profession, the legal market, and the legal system.

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We face enormous change in the legal marketplace: primarily, the emergence of new competitive and disruptive forces that are mounting increasingly formidable challenges to our traditional assumptions and understandings about legal work. At the same time, we are grappling with a legal and justice system that is not giving anyone much satisfaction, and is in fact giving many people a great deal of heartache. There are numerous disconnects among how things used to be in the law, what they’re like today, and what we wish they would be.

So what can we do? Perhaps not surprisingly, I say we adapt. We need to see the legal world as it is and as it surely will become, and then we imagine what it might be and do everything we can to make that vision real. Our memories, our narratives, our assumptions and expectations about the law — both individual and collective — these are the walls we’ve built around the legal market and around ourselves, and they are limiting our vision. It’s time to lower the walls and let illumination come in.

Let’s begin by seeing the legal world as it is. What are we up against? What are we dealing with? Here are five points to get us started.

  1. Growth in lawyers’ business has stalled. With a few exceptions, law firms of all sizes have seen business slow down, revenues flatline or decrease, and new business become increasingly difficult to find.
  2. Lawyers’ pricing is under tremendous pressure from clients. I mean “pricing” in both a dollar amount sense — rate discounts are multiplying — and as a methodology — flat fees are proliferating.
  3. Low-cost alternatives to lawyers are picking up business. Large firms have seen the rise of law department insourcing and legal business outsourcing. Smaller firms have seen Legal Zoom, Rocket Lawyer and the like target their markets.
  4. A huge glut of unemployed new lawyers is building up. Employment rates for new lawyers in the United States have fallen sharply in the wake of the financial crisis. At large law firms, they’ve fallen off a cliff — down 40% in the last five years.
  5. And finally, although you may not have felt it, an earthquake struck the legal profession earlier this year. Its epicenter was London: it was the issuance of the first licenses to operate what’s called Alternative Business Structures, law firms owned by non-lawyers.

These, at least, are not predictions or suppositions. This is really happening, right now. And it’s happening because of a series of changes to the legal marketplace, both here in the US and worldwide. Once again, I’ll give you five to consider.

  1. A lengthy period of strong economic growth powered by heavy borrowing, interspersed with occasional hyper-growth bubbles and busts, has come to an end. We are not in a “recession,” in the usual sense of the word. We are in a lengthy period of slow deleveraging and weak, fitful growth. It should last at least another five years, and maybe longer, give or take a fiscal cliff, a Euro collapse, or a hard landing for China’s housing boom.
  2. Clients have acquired a potent combination of knowledge, power and urgency. Basic legal information is more widely available today than ever before. Basic legal tools are easily accessible at low cost or no cost across the internet. And clients cannot and will not spend a dollar more than they absolutely must on anything, and most especially on lawyers.
  3. New providers and new technology are starting to enter the market. I mentioned companies like LegalZoom and legal process outsourcers a moment ago, companies in their infancy that have already generated a surprising amount of business. But there’s also new, disruptive technology that can replicate basic lawyer functions and, in some cases, more complex lawyer functions.
  4. Generational change continues. We tend to forget about this — partly, I think, because everyone was talking about the rise of the millennials and the retirement of the boomers, right up until the financial crisis. And then suddenly, we didn’t hear much about work-life balance anymore. But generational turnover continues, and it affects legal organizations of every kind. And let’s not forget: it also affects clients. The cultural values of both legal buyers and legal sellers are slowly transforming.
  5. Finally, the regulatory environment for legal services is changing. Lawyer self-regulation is gone in Australia and it’s gone in England and Wales. In my home province of Ontario, paralegals are members in full standing of the Law Society of Upper Canada, lawyers’ governing body. The United States will hold out against this trend longer than anyone else — except possibly India — but its arrival here is still only a matter of time. Lawyers will be sharing the market with non-lawyers, and I cannot overstate how important that will prove to be.

So where will this lead us? What does the “future of the legal profession” look like? Here are some of the key features I think we can expect in the legal marketplace of the future.

1. Systems and technology will make substantial inroads into the legal market.

Today, if someone asks me, “Can machines replace lawyers?” I’m inclined to say, “Well, only if the lawyer in question isn’t very good.” Now, that’s a little harsh, and it’s not entirely fair — to either the lawyer or the machine. If you were to ask me instead, “Can a machine replace aspects of what lawyers currently do?” —  well, that’s a different question, and the answer in many cases is yes.

Automated contract creation, data-crunching analysis systems, expert applications that answer regulatory and compliance questions, online dispute systems powered by game theory — all these programs are available right now. They are solidly built, they are attracting investor interest, and they are only going to get better as they grow. They do their jobs in minutes, not in billable hours, and they are more reliable and sophisticated than many lawyers would be prepared to credit.

We’re at least 10 years away, probably more, from machines that can completely replace lawyers. But we’re already in the era when machines can displace lawyers — take on some aspects of their work, some percentage of their tasks, bump them aside, jostle into their seats, force them to go do something else. And that percentage is going to grow. I can’t tell you at what rate, or how quickly. It will be different for different markets and different types of work.

But the fact is that a great deal of what most lawyers do is not that complicated. At least some of it can be done by non-lawyers — and in some firms, it already is, by secretaries, paralegals and clerks; in future, it will be done by machines, processes and systems. But in many law firms today, it’s being done by lawyers. It’s what many of the hours billed in the legal profession today consist of — and that is not sustainable. That’s a hard truth. But we need to hear it said.

2. Non-lawyers will have proliferated throughout the market.

I dislike that term intensely, by the way: “non-lawyers.” We are the only profession I know that divides the world into “us” and “not us.” We use that term all the time, and we rarely appreciate how insulting it is to the people thus described.

But non-lawyers are coming. We are going to share this market with them. The sooner we accept that and start working to accommodate its impact, the better. They’re coming because they are proving their abilities and reliability every day. They’re coming because lawyers have claimed too much territory under the all-powerful description “the practice of law,” too many activities that do not require a lawyer’s rare and valuable skill and judgment.

And they are coming because we have done a lousy job of serving the entire legal market. Clients, both individual and corporate, are spending more and more and waiting longer and longer for outcomes that leave them less and less satisfied. And that’s just the people who can afford lawyers and the legal system in the first place. Many people are not even in the game at all.

And that is on us. These problems developed on our watch, under our administration and stewardship of the legal system. They are our responsibility. We have had ample opportunity to rectify them, and as everyone here knows, we have not moved fast enough or far enough. So governments and citizens are going to start saying, “Time to let someone else try.” Time to start putting the “Unauthorized Practice of Law” in the history books. Look at what’s happening in England and Wales, and recognize that eventually, inevitably, it will happen here.

3. The legal profession will be smaller, but also more specialized and successful, than it is today.

I don’t really see a way around a smaller bar. Gradually, year by year, innovations will continue to disrupt the legal profession. The capabilities of providers outside our profession will expand, from lawyers in India to para-professionals in North America to software packages in the cloud. Lawyers simply will not be necessary to accomplish things that required our services in the past.

It’s possible that we may still need more than 1.1 million lawyers in the United States ten years from now. But I don’t see it as probable. What I see as probable is an endgame for a legal education system that is already producing more law graduates than the market can employ and far more than it will need in future. And I don’t see any likelier outcome than that dozens of law schools will find themselves superfluous to the new legal market.

I do think we will need fewer lawyers. But I also think that the tasks those lawyers end up doing will, on average, be more valuable, more sophisticated, more demanding, and more remunerative than they are today. I think that a market will emerge for more sophisticated legal needs, a robust market that needs lawyers to provide counsel, wisdom, advocacy and preventive law services — the fence at the top of the cliff, as Richard Susskind says, rather than the ambulance at the bottom.

This is where I think the modern law firm has made its greatest mistake. It keeps trying to force more and more low-value, hourly-billed work out of a resource — real, live, human lawyers — that is intrinsically intended to provide high-value work. We’re not meant to spend our days filling out documents and conducting basic transactions and providing “commodity” services. That’s not why we went to law school. We’re supposed to be put to a higher, better use. Call me a cockeyed optimist — not many people do — but I believe that in the future legal market, that’s what will emerge.

It’s not just our clients that would benefit from this, nor just the latent legal market that would finally be tapped by a wider, deeper range of fully accessible legal service providers at affordable prices. We would benefit from this. We are professionals, and if you trace that word back to its Latin roots, you’ll find that it comes from the Latin profiteri, “to serve.”

We are a serving profession. We are fiduciaries to our clients, ambassadors of the rule of law, foundation stones for a civil society. Or at least, we’re meant to be, although I think we’ve lost our way a little over the past few decades. But I believe, in future, that’s what we can become again. And we should be a happier, more fulfilled profession as a result, because we’ll be better aligned with our best use and our best purpose.

In the words of IAALS’s mission statement, we need “continuous improvement” in the legal system — constant development, ongoing innovation, relentless efforts to make tomorrow’s reality better than today’s. We need to challenge assumptions, break down walls, illuminate the landscape.

My advice to you, in this ongoing effort, is to look beyond the walls of the legal profession, beyond the boundaries of what we have always taken for granted, always assumed is the normal state of affairs in legal services. It’s not normal; it never really was. As a profession, we need to be prepared to let go of our defenses and preconceptions, to lower the walls we’ve built around ourselves and our clients.

We need to recognize that we’re not the only ones who can help. There are other people, other solutions out there that want to help improve the legal system too. Yes, they’re a little unsteady on their feet. Yes, they’re still getting the hang of it. But they want to help, and they can help — and whether we like it or not, eventually, they will help. If and when they displace us, then it’s up to us to find a new, better place and a new, better purpose.

The only real question is whether we’ll extend our hand, and how long it will take for us to do that, to build the future legal marketplace and reforge our profession at the same time. If we do, then I’m hopeful and confident that that future will arrive a lot sooner than we think.

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.

The limited-profit law firm

What if your law firm were legally prohibited from making too much money? What if there were a fixed profit ceiling for equity partners, and any profit exceeding that amount had to be distributed to others? What if your firm explicitly placed social goals ahead of revenue goals — what would change about your firm’s culture, structure and position in the marketplace?

This is, perhaps needless to say, mostly a thought experiment, since the number of law firms clamouring for this kind of setup are vanishingly few. But a recent article in The Economist about an emerging corporate form called a “benefit corporation,” or B Corp, got me thinking. B Corps, the article explains, “must have an explicit social or environmental mission and a legally binding fiduciary responsibility to take into account the interests of workers, the community and the environment as well as its shareholders. It must also publish independently verified reports on its social and environmental impact alongside its financial results.”

Companies seeking to establish themselves as B Corps are those wishing to place social or environmental goals above profit and revenue objectives, but which find it difficult to do that under the traditional corporate form. These aren’t non-profit organizations, but you might call them limited-profit, qualified-profit, or “yes,but” companies: yes, they want to make money, but they want to accomplish other things more. The Economist cites other corporate vehicles in this vein like flexible purpose companies (FlexCs), low-profit limited-liability companies (LC3s) and in the UK, community interest companies.

Could a law firm become a B Corp? Several small firms in the US have already done so, but there are complications. Carolyn Elefant explores the problems with B Corp law firms in a detailed post that points out a fundamental conflict: lawyers are required to place their clients’ interests ahead of all others, so a firm whose founding documents placed the highest priority on, say, the environment, would be breaking the profession’s ethical rules.

For example, consider a situation where a client receives a generous settlement offer in a contingency matter against the Sierra Club or some other environmentally conscious company popular in the community, but the client, reasonably, does not want to accept the offer because of certain conditions attached to the offer. However, pursuing the case to trial will be upsetting to the community and further, force the lawyer to lay off several employees to conserve cash flow for remaining discovery and trial and could potentially limit the Sierra Club’s conservation efforts due to lack of funding.

Ethically, so long as the client’s rejection of the offer is reasonable (which it is here), the lawyer must abide by the client’s decision. But under the b-certification framework, equal consideration of the interests of firm employees, the community and the client would militate in favor of the lawyer either strong-arming the client to accept the settlement or withdrawing from the case.

This is a strong objection to the use of B-Corp status for law firms, and if push came to shove, I could see a regulatory body ordering a law firm to abandon a corporate form that explicitly placed someone other than the client at the top of the priority pyramid.

Nonetheless, I wonder if there might not be other solutions. Slater & Gordon, for instance, the Australian personal injury firm that floated on the stock market several years ago and is now an international behemoth, makes for an interesting case study. As my Edge colleague Gerry Riskin pointed out at the time, Slater & Gordon’s initial prospectus was very clear with potential shareholders where its priorities lay:

“Lawyers have a primary duty to the courts and a secondary duty to their clients. These duties are paramount given the nature of the Company’s business as an Incorporated Legal Practice. There could be circumstances in which the lawyers of Slater & Gordon are required to act in accordance with these duties and contrary to other corporate responsibilities and against the interests of Shareholders or the short-term profitability of the Company.”

This seems to me a good way of making clear to shareholders that their profits are a tertiary concern for the firm: the firm believes (correctly) that its first duty is to the courts and its second is to clients. A modified form of B Corp or other limited-profit corporate form could be envisioned that would similarly arrange the peculiar priorities of a fixed-profit law firm. Might this kind of qualification address the ethical concerns that Carolyn raises? I’m not certain, but it’s worth thinking about.

For myself, I keep coming back to ponder the strengths and weaknesses of a limited-profit or fixed-profit law firm. Disadvantages? Legion: rainmakers and high earners would desert a firm like that immediately, knowing that their hard work would quickly strike an immovable low ceiling of financial returns. The firm would be unable to recruit ambitious lawyers or high-potential law students for the same reason. Clients who want the very best lawyers would turn away from a firm of anti-capitalist do-gooders. As a vehicle for anything more than a modest mid-sized firm, it’s almost certainly a non-starter.

But there’s upside, too. A law firm that was precluded from chasing ever-higher profits would have to find some other guiding business purpose. Maybe, as with many B Corps, it’s an environmental target, a quest to reduce its ecological footprint and those of its clients. Maybe, more likely for a law firm, it’s a social purpose: serving only clients in low- or middle-income brackets, making access to justice its higher calling.

Alternatively, maybe the firm simply rearranges how its profits are spread. Partner profits would be fixed at the start of the year on a percentage basis (lockstep or otherwise), so that beyond a certain dollar figure or percentage of total revenue, the partners couldn’t make any more money. Accordingly, the excess would be divided equally among associates or staff — everyone gets a bonus when the firm succeeds, driving everyone to make the firm’s success the top priority. And if you want to really go around the bend, make clients the beneficiary of success: every extra dollar at the end of the year is returned to clients per capita, like a co-operative. How’s that for a marketing tactic? Hire our firm and you might get a refund on your fees.

Yes, I know I’m dreaming in technicolour. And anyway, law firms don’t need a special corporate structure to do many of these things. But what these new vehicles really do is allow us to re-envision the purpose of the corporate entity, enabling reasons for existence other than the generation of wealth for ownership. The great majority of problems afflicting modern law firms, it seems to me, come down to money: competition for revenue, fights over profit, arguments about who makes more. Imagine a law firm that was structurally relieved from any of those concerns. You think we could live with a few of those in the legal market today?

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.

Frugal innovation and the law

Lawyers need to learn a very important lesson from a salad spinner.  Specifically, we need to understand the implications of the Sally Centrifuge, developed by students at Rice University in Texas:

The necessary parts: one salad spinner, some hair combs, a yogurt container, plastic lids, and a glue gun. The finished product: a manual, push-pump centrifuge that could be a lifesaver in developing world medical clinics. … A team of college students invented this low-cost centrifuge, which can be built for about $30, as a project for a global health class at Rice University. The teacher challenged them to build an inexpensive, portable tool that could diagnose anemia without access to electricity, and the tinkerers got to work.

The students, Lila Kerr and Lauren Theis, found that spinning tiny tubes of blood in the device for 10 minutes was enough to separate the blood into heavier red blood cells and lighter plasma. Then they used a gauge to measure the hematocrit, the ratio of red blood cells to the total volume. That information tells a doctor whether a patient is anemic, which can in turn help to diagnose conditions like malnutrition, tuberculosis, HIV/AIDS, and malaria. … “We’ve pumped it for 20 minutes with no problem,” Theis said. “Ten minutes is a breeze.” It has proven to be fairly robust. “It’s all plastic and pretty durable,” Kerr said.

If you think the multinational makers of expensive medical devices would fight a cheap innovation like this, then let me also introduce you to the Mac 400, a hand-held electrocardiogram developed by General Electric’s health-care laboratory in Bangalore, as reported in The Economist:

The device is a masterpiece of simplification. The multiple buttons on conventional ECGs have been reduced to just four. The bulky printer has been replaced by one of those tiny gadgets used in portable ticket machines. The whole thing is small enough to fit into a small backpack and can run on batteries as well as on the mains. This miracle of compression sells for $800, instead of $2,000 for a conventional ECG, and has reduced the cost of an ECG test to just $1 per patient.

The Economist goes on to explain, in a special report on innovation in emerging markets, what these developments represent: a reinvention of the product development cycle for markets with very limited resources. Like Japan before them, which developed lean production systems to compensate for a lack of physical space and material, India and China (and a few other smart entities) are developing production systems for buyers without much money, mobility or infrastructure:

[Companies] are taking the needs of poor consumers as a starting point and working backwards. Instead of adding ever more bells and whistles, they strip the products down to their bare essentials. Jeff Immelt, GE’s boss, and Vijay Govindarajan, of the Tuck Business School, have dubbed this “reverse innovation”. Others call it “frugal” or “constraint-based” innovation.

Chances are that you, like me, live in an affluent society and are familiar with unnecessary options. Most of us have more consumer choices than we need or could hope to sample, choices that don’t make our lives that much better or happier. Most of us have never used 80% of the buttons on a standard remote control or could even identify what they do. Most of us with elderly parents wish someone would invent a computer with only four functions: “Read email,” “Write email,” “Send email,” and “Check the weather forecast.” Most of us can, for a few cents, supersize the meal we just ordered, even though what we ordered was enough to satisfy us just a few moments earlier. Collectively, we’re hooked on the idea that more is better — and in our low-cost, resource-rich world, that’s an idea both easy to indulge and profitable to sell. Continue Reading

The trusted advisor

My collection of prized possessions is extremely small — the feature item is probably a ticket stub from Game 6 of the 1993 World Series (Joe Carter’s home run off Mitch Williams). Among that narrow collection, you’ll find a personally inscribed copy of David Maister’s last book, Strategy and the Fat Smoker, and if your passion is making the legal services marketplace better for both lawyers and clients (as mine is), you’ll understand why. A remarkable number of very successful lawyers and law firm leaders have a copy of one of David’s groundbreaking books, such as True Professionalism or Managing the Professional Services Firm or The Trusted Advisor (co-authored with Charles H. Green and Robert M. Galford), on their bookshelves. His status in law practice management circles can fairly be called institutional, and unfortunately for us, the new year has brought word of the institution’s closure: David is retiring from consulting, speaking and writing on professional service delivery.

My own interactions with David Maister have been only glancing — he contributed a fine article to a College of Law Practice Management e-zine on innovation that I edited in 2006, and he generously gave me a credit in his last book for some very slight suggestions I contributed. But his influence on me and his impact on a generation of legal professionals have been profound — not only through his practical guidance and his contributions to a rational law practice business model, but for the principles he constantly advanced as essential to excellent professional service. David exhorted lawyers and accountants to stay true to the highest standards of trustworthiness and ethics and to focus relentlessly on serving the client’s best interests. Continue Reading

All good things…

My newest column is up and running at Slaw, where I’m always honoured it has a place. You can also find it directly below:

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“Eighty percent of the poor in the United States are unable to afford a lawyer or find pro bono help for their civil legal problems, according to the American Bar Association.” That sentence, from an American Lawyer article last month, is not only embarrassing. It’s also an omen.

The article in question, titled “Unmet Needs,” was part of a special series on pro bono in the United States, including AmLaw’s list of the top 100 pro bono-friendly law firms and a powerful critique of big-firm pro bono by Deborah Rhode. The latter piece highlighted how pro bono at many firms is less an exercise in professional and public responsibility than it is an opportunity to enhance associate recruitment and retention and score some easy PR points. The result, Rhode points out, is that the clients most in need — the “sob stories” and “difficult clients” referenced in the article — are the least likely to get pro bono help from these firms.

It reminded me of a conversation I had last year with two senior local practitioners. Both lawyers were partners in national firms; both were also extensively involved in volunteer and community activities. They were lamenting the pro bono culture that had taken hold in law firms, especially among newer lawyers. Young associates were constantly clamouring to do pro bono work for one socially aware organization or another. “What I’d like to see,” one lawyer said, “is a lot more of them go down to family court and help out some of the unrepresented litigants there. That’s where we need pro bono help right now.”

Pro bono assistance of that kind is just the sort of “unmet need” that the American Lawyer article was talking about. The writers spoke with legal aid and pro bono lawyers across the US and identified five “needs baskets” where the demand for pro bono work is great and the supply from big firms is limited:

  1. Representing military personnel
  2. Helping the unemployed
  3. Easing the load in family court
  4. The cracking pro bono infrastructure
  5. Serving the rural poor

The first category might be uniquely demanding in the US (and perhaps also Great Britain) right now, but the other four needs baskets are present in virtually every common-law jurisdiction. AmLaw was focusing on pro bono and large law firms, but it seems to me that this is part of a larger pattern of areas systematically under-served by lawyers.

It’s almost received wisdom in our profession that many practitioners couldn’t afford to hire themselves if they needed a lawyer, a statement that I suspect is at least a little exaggerated. But for many people, especially those in the categories above, it’s no joke: they flatly cannot afford to hire a lawyer for anything more than the most basic tasks. Legal assistance is a service that middle-class people, with help from family members and savings accounts, can just about manage. It’s something that working-class people struggle terribly to afford. But for the poor and unemployed, it’s legal aid, pro bono, or nothing. And thanks to the recession, legal aid systems are being cut back in the US, the UK and Canada, while the number of people applying for legal aid is growing.

If you’re a lawyer with a conscience, that should bother you a great deal. But even if you’re without a conscience, you should still be worried by this trend, because it’s about to dovetail with another trend and lead to some serious consequences: lawyer shortages outside urban centers are starting to become endemic in some countries.

Canada: “43 percent of lawyers practising in [B.C.] are now over the age of 50 … in the last 10 years, the numbers of lawyers aged 51 to 60 has doubled, with an average age across the province of 47 years old. In small communities, the aging of the profession is even more pronounced, with an average age of over 50 years old.”

Australia: “[M]any rural and regional practices do not have enough lawyers to service community needs, with 43 per cent of principals indicating that their practice currently does not have enough lawyers to service its client base. The problem looks set to escalate, with a large number of lawyers – many of whom are sole practitioners – looking to retire from practice in the next five years.”

Japan: “The dateline is Yakumo, a small city of almost 20,000 within a legal district of about 50,000. Journalist Norimitsu Onishi reports that it is not unusual for cities five times that size to have not a single lawyer.”

The root causes of most lawyer shortages are the same: aging practitioners ready to wind down their practices, not enough young lawyers willing to move to smaller communities to replace them. It’s not surprising that the US, a country with more than one million lawyers, doesn’t have many lawyer shortages, but less heavily populated states like Maine and Idaho are reporting such shortages already. Many industrialized countries are facing the prospect of communities without enough lawyers to serve the local population.

So from one direction, we have growing numbers of people in dire circumstances needing but not getting lawyers’ help. And from the other direction comes a growing number of non-urban centers without enough lawyers to meet residents’ legal needs. Without question, the demand for legal services is growing — but the supply of these services, how much they cost, and where and to whom they’ll be delivered all lie within the control of lawyers. And as we’ve seen, we can’t always count on lawyers to put the public interest ahead of their own interest when deciding how their supply will meet that demand.

So how do you think this is going to end? Faced with a legal profession unable or unwilling to provide affordable legal services to clients whom and in communities where they have little economic interest, do you suppose governments will stand idly by? Do you think they won’t wonder why it is that lawyers and only lawyers are licensed to provide the great majority of legal services? Do you think they’ll continue to believe that the Unauthorized Practice of Law is a legitimate restraint on the delivery of legal services? Do you think they’ll ever consider that lawyers are anything other than facilitators of legal services delivery?

If you think all these things will come to pass, that the status quo will roll along unchecked, then more power to you. But if not, then you might yet come to believe that the era when lawyers were in control of the legal services marketplace is drawing rapidly to a close.

Spend wisely

One of the reasons — maybe the main reason — why lawyers are so risk-averse is that averting risk is kind of the whole point of having lawyers. People hire us for two reasons: (a) to fix a problem that’s already occurred, or (b) to arrange things so as to minimize or eliminate the risk that problems will occur. In Susskindian terms, these are the ambulance at the bottom of the cliff and the fence at the top, respectively.

The idea that we’d be better off with fewer ambulances and more fences is starting to catch on within the profession. But there’s an important question in there: how many fences do you really need? Is it possible you’re installing more fences than can be justified by the reduced risk of accidents? And as sellers of both fences and ambulances, are lawyers sufficiently objective to be the ones making that call?

Ron Friedmann got me thinking about all this with two insightful and provocative posts about reducing corporate legal spend. He argues that institutional clients “need to do a better job assessing risk and deciding what warrants legal attention,” and draws an analogy to the US health care system which, by many accounts, costs so much in part because of rampant unnecessary treatment. If clients took the time to review all their legal spending and figure out what percentage could be eliminated with an acceptably small increase in risk, they could lower their legal spend without dramatically increasing the company’s exposure.

The idea that companies are over-protecting themselves against risk and therefore overspending on lawyers is compelling. Obviously, there are legal costs that can’t be eliminated — if the government tells you to comply with a given regulation or face prosecution, you’re going to comply. But if you separated corporate legal spend into two piles — one for “we need to do this or we’ll go out of business” and “we’d better do this to make sure we’ve covered all our bases” — you might find the second pile a lot higher than you expected. And if you weighed the savings of not covering a given base against its reasonably foreseeable consequences — not the possibility, but the probability of trouble — you might decide you’re buying too much legal risk aversion.

I can see more companies doing just that — figuring out what they can live without in terms of legal coverage and proceeding to live without it. The lawyer’s argument against that, of course, is that even the smallest detail overlooked can lead to devastating liability consequences in court. But as the rise of “good enough” continues, especially in what figures to be an economically difficult period of time to come, I can see rules and regulations being interpreted in similarly “good enough” fashion — threshold standards being lowered slightly, breaches looked upon more leniently, etc. In the aggregate, it could add up to a collective consensus that not every stone needs to be unturned and not every potential risk needs to be run by the lawyers. If that came to pass, the impact on lawyers would be profound.

In his posts, Ron specifically notes he’s excluding consumer legal spending from the discussion. But if anything, I think the reverse applies to the way individuals buy legal services: I think they underestimate risks and under-purchase legal protection. How many people buy and sell a house without using a lawyer, bypassing expertise and institutional protection in order to save a few hundred bucks on a transaction worth hundreds of thousands of dollars? How many people die intestate every year, even with children and extensive assets, because they just never got around to making a will? How many litigants choose to make their own way through our labyrinthine court system?

Individuals’ failure to avail themselves of lawyers isn’t entirely, or even mainly, their own fault, of course. Too often, lawyers have either failed to adequately market the value and importance of their services, or allowed their prices to balloon past the point where many people can afford to hire a lawyer without help from family members or government programs. In my ideal world, you couldn’t get a  driver’s license until you’d filled out even a basic will, and you couldn’t get a marriage license without having to take a basic course in family breakdown, support, custody and access — both at low costs.

Unless and until that comes to pass, lawyers have an obligation — not just for business reasons but also for social ones — to let people know how important these sorts of fundamental legal instruments are and to ensure they’re accessible to the majority of potential buyers. And at the other end of the spectrum, lawyers also have a responsibility to help their institutional clients tell the difference between “need-to-haves” and “nice-to-haves,” and to place the focus of their services firmly on the former. A trusted contractor won’t replace your garage if a repair will do just as well; trusted lawyers do the same.

Over the years, legal spending patterns have become habit-forming: institutions have gotten used to buying ever more risk-avoidance services, while individuals have gotten used to buying only those services that circumstances require them to buy. It would be reasonable, in an extended period of economic malaise, to expect those habits to change. Lawyers who want to stay ahead of dangerous curves like that should spend time thinking about what their clients absolutely require, and changing what they sell — more of some things, less of others — to match.