"Suicide Pricing" & the coming law firm crisis Forum

[EvilClinton]

Here's a nice summary of the clip:

http://www.abajournal.com/news/article/ ... tant_says/

It's not surprising in the least that large-firm partners aren't terribly business-savvy, and seriously lack common sense and basic reasoning ability. Law schools set the bar so low that even the "superstars" of the industry are intellectual lightweights compared to Wall Streeters and corporate types. It's why a small town doctor who got his medical degree offshore has 10,000X the lay prestige of a SCOTUS justice. Medicine requires brains, law requires only bale upon bale of silly paper churning.

Your comment is so stupid it gave me cancer.

[dingbat]

I mean, it's a shtick at multiple levels, really. Small firms that represent business clients aren't that dramatically cheaper in the grand scheme of things. E.g. the average billing rate of an associate in Buffalo, NY is $200/hour.

How much does your plumber charge?

[09042014]

Great clip:

https://www.youtube.com/watch?v=Un9yg_u ... e=youtu.be

Bottom line is that is never has (and currently doesn't) make any sense for law to compensate people at even half what they currently receive. A JD is easier to acquire than just about ANY degree, and the work is mostly cut n' pasted makework slop.

Maybe your TTT degree is worthless but people at real schools are fairly rare. You aren't fungible with me. HTH

[androstan]

Great clip:

https://www.youtube.com/watch?v=Un9yg_u ... e=youtu.be

Bottom line is that is never has (and currently doesn't) make any sense for law to compensate people at even half what they currently receive. A JD is easier to acquire than just about ANY degree, and the work is mostly cut n' pasted makework slop.

Maybe your TTT degree is worthless but people at real schools are fairly rare. You aren't fungible with me. HTH

Law School Winners Unite

[rayiner]

I wish there was less TTT/doc reviewer bashing on here. No other profession cuts itself down so much.

[dingbat]

I wish there was less TTT/doc reviewer bashing on here. No other profession cuts itself down so much.

you ever deal with finance? BB's attitude to everyone else is retarded.
One of my favorites was when a 24 year old associate tried explaining why our general counsel (former biglaw partner, but he didn't know that) was wrong about a (rather basic) legal issue.
Not to mention when I once had to explain to an MD why the portfolio they were trying to offload was worth about 1/3 less than they valued it at, because they didn't understand the investments.

[mr.undroppable]

In this thread naive law school students don't realize bonus season is looming....time to blame associate pay for all the woes of the legal industry (as PPP are at all time highs). Complete joke.

[Bronte]

In this thread naive law school students don't realize bonus season is looming....time to blame associate pay for all the woes of the legal industry (as PPP are at all time highs). Complete joke.

You'll have to explain why the fact that bonus season is coming (which is readily available information) is more than tangentially relevant to what's being discussed in this thread. As far as I can tell, what's mostly being discussed in this thread is whether big law is about to collapse and the entire profession consists of people shoveling bales of makework shitpaper.

[ruski]

I wish there was less TTT/doc reviewer bashing on here. No other profession cuts itself down so much.

you ever deal with finance? BB's attitude to everyone else is retarded.
One of my favorites was when a 24 year old associate tried explaining why our general counsel (former biglaw partner, but he didn't know that) was wrong about a (rather basic) legal issue.
Not to mention when I once had to explain to an MD why the portfolio they were trying to offload was worth about 1/3 less than they valued it at, because they didn't understand the investments.

yea not surprsing. i've had to deal with several MDs and they literally know almost nothing about finance in the analytical sense. many of them are just great salespeople and can bring deals in. its a lot of the young guys coming in from physics/engineering/math backgrounds that really understand all the nuts and bolts. this has been my personal experience

[dingbat]

yea not surprsing. i've had to deal with several MDs and they literally know almost nothing about finance in the analytical sense. many of them are just great salespeople and can bring deals in. its a lot of the young guys coming in from physics/engineering/math backgrounds that really understand all the nuts and bolts. this has been my personal experience

A lot of those young guys think they know more than they do.
I once tried enquiring how something was calculated and was more or less told they had a black box and they just put the numbers in and the results came out.

A big problem with the young guys coming in is that they often can't see the forest for the trees (I was guilty of this early on), where you're so focussed on the nuts and bolts of one particular area that you miss the big picture

These two issues (which go hand-in-hand) are the best explanation as to why the collateralized mortgage meltdown happend - Collateralization is a great tool, but it ran amuck; you need a thorough understanding of the concepts to do it properly, but the people doing it were only trained on the mechanics. (for a similar case, see LTCM)

[erico]

yea not surprsing. i've had to deal with several MDs and they literally know almost nothing about finance in the analytical sense. many of them are just great salespeople and can bring deals in. its a lot of the young guys coming in from physics/engineering/math backgrounds that really understand all the nuts and bolts. this has been my personal experience

A lot of those young guys think they know more than they do.
I once tried enquiring how something was calculated and was more or less told they had a black box and they just put the numbers in and the results came out.

A big problem with the young guys coming in is that they often can't see the forest for the trees (I was guilty of this early on), where you're so focussed on the nuts and bolts of one particular area that you miss the big picture

These two issues (which go hand-in-hand) are the best explanation as to why the collateralized mortgage meltdown happend - Collateralization is a great tool, but it ran amuck; you need a thorough understanding of the concepts to do it properly, but the people doing it were only trained on the mechanics. (for a similar case, see LTCM)

boooriiing.

[imchuckbass58]

Interesting video from Citibank's Law Firm Group noting similar trends (slack demand, firms pricing below cost to maintain utilization):

--LinkRemoved--

[JCougar]

It will probably take years for the big law model to unravel. A lot crashed in 2008, and some took a few years to crash. Most survived the acute stresses. In spite of the fact that we've been in "recovery" for three years, lot of firms are financially stressed right now, but we just haven't reached a tipping point yet. Maybe the next recession, or two recessions down, will provide that tipping point after the next period of growth lays the foundation for even more outsourcing and gives some of the more entrepreneurial losers the opportunity to find a cheaper way of doing the same thing (like the Axiom model). Big law just ain't what it used to be, and it's much easier to see it slowly getting worse, as opposed to better, since it's a business model that isn't completely rational. Business models based on tradition, rather than on the efficiency advice of management consultants, are usually forced to change or die. So far, law has proven to be pretty inflexible. I like to think of the way the legal profession does things today as comparable to the Samurai in Japan during the late 1800's. Law Review, I have found, is a classic example of the inefficient, anachronistic, senselessness based on tradition that stubbornly prevails in the legal profession. The emphasis on this--and other--meaningless proxies for "prestige"--grades, clerkships, etc.--seem more rooted in the traditions of the French nobility than they do in sound business practices.

In Singapore, most court transactions take place via email and software, so there is much less need for lawyers, and law pays about as well as journalism. That's the future of law everywhere.

I agree with some of this and disagree with some.

I don't think Biglaw will go away. There will always be elite defense-side firms where partners make boatloads of money, as long as, like Desert Fox said, the American justice system maintains its ability to hand out enormous settlements. There will always be clients willing to compensate highly successful firms.

I do think, however, that the legal industry will be facing a large "Moneyball-ization" in that clients will be reassessing the way they value the legal services they pay for. I can see Biglaw shifting more to the accounting model, where it will still be hard to get Biglaw positions, but the entry level compensation will eventually decline and the starting salary distribution will become more unimodal, and value will be placed on demonstrated competence through production of a superior work product--rather that the mostly empty "prestige" the law school process places on certain graduates.

As a result, I see Biglaw also surviving more off lateral hiring of attorneys who have demonstrated in practice that 1) they are competent (measured in may ways, such as writing, reasoning, networking, conscientious project management, interpersonal skills, etc.), 2) hardworking, and 3) interested in law for the long-haul. From the client's perspective, it doesn't make sense to pay elite rates for associates with zero experience who only want to stick around for 2 years to slap the firm's name on their resume to get a job elsewhere. It additionally doesn't make much sense to pay first year associates that much money at all, based solely on two numbers: their law school's US News rank, and their law school GPA. While those two numbers may crudely sort graduates into groups of potential higher and lower performers, the entire process as a whole is fairly unsophisticated and sloppy, from law school admissions to they way legal "competence" is evaluated by issue-spotter exams--especially in regards to the latter, for which there is literally zero quality control regarding their assessment value.

The fact that this process is so sloppy is evidenced by the high dropout rates of associates at Biglaw firms. Part of that is the firm's business model, but part of that is that the current mechanism forces itself to recruit people who are simply not good fits for that type of work.

One common justification of compensating first-year associates so highly is that the client is "paying for their training so they can serve the client in the future." However, when nearly two-thirds of these associates drop out before providing the client much real value, it's pointless to pay to train them.

The thing with Moneyball is that it didn't make baseball players' salaries go down (in fact, player salaries went up during the period where teams started implementing its valuation mechanisms). It just made more realistic and scientific the way those salaries were apportioned. It revealed certain market inefficiencies that smart teams could take advantage of while the more archaic, tradition-based teams kept themselves in the dark.

The reason this hasn't happened sooner is that clients have not really been in the driver's seat until now. Biglaw acted as a middle-man and profited greatly off of economic inefficiencies it created. Clients had little leverage to demand value, as competent legal services were far more scarce in the past than they are now. Now that they have that leverage, they will be able to demand economically efficient legal services--ones supported by prudent economics and realistic views about the value of human capital and labor.

Just like they do not like paying an "empty prestige" premium to have JD's do rudimentary document review that your average associate's degree graduate could do for $12/hour, they won't like paying an "empty prestige" premium for associates who, although they have attended a top school and gotten good grades, have not demonstrated in practice that they are great attorneys.

But the money will still largely be there for lawyers who have demonstrated the kind of competence they demand in managing high-stakes cases. It's just that assessment of that competence will become more realistic instead of based solely on prestige.

[JCougar]

This will, in turn, break the stranglehold the top schools have on job "placement," which will, in turn, disincentivize the tuition and US News arms race. As soon as clients realize that a school's name is only a fairly rudimentary method of sorting out the good from the bad, their recruiting will reflect such. And then prospective students will realize that paying an "empty prestige premium" for a better-named school is also worthless when they can go somewhere else for cheaper. Because the bottom line is that all law schools teach using the same methods from the same books. You don't learn any more about the law whether you go to Yale or Cardozo. Without the lure of the "empty prestige premium" to jack up tuition, law schools themselves will then compete for students by offering a more efficient and practical education, rather than an impractical and costly one justified only by empty notions of elite prestige labeling.

[Anonymous User]

ITT: None of the things being discussed will actually happen.

[JCougar]

ITT: None of the things being discussed will actually happen.

They're already happening to some extent. It's an open question of how far they will go.

I expect to see more firms like Axiom popping up and succeeding--firms run from a business-minded perspective rather than ones run by a "bill as many hours as you can" perspective. Eventually, firms like this are going to put price pressure on other, more traditional firms.

I'd love to work for Axiom someday, but, of course, they don't hire straight out of school.

[HeavenWood]

ITT: None of the things being discussed will actually happen.

Y u abuse anon feetur?

[09042014]

This will, in turn, break the stranglehold the top schools have on job "placement," which will, in turn, disincentivize the tuition and US News arms race. As soon as clients realize that a school's name is only a fairly rudimentary method of sorting out the good from the bad, their recruiting will reflect such. And then prospective students will realize that paying an "empty prestige premium" for a better-named school is also worthless when they can go somewhere else for cheaper. Because the bottom line is that all law schools teach using the same methods from the same books. You don't learn any more about the law whether you go to Yale or Cardozo. Without the lure of the "empty prestige premium" to jack up tuition, law schools themselves will then compete for students by offering a more efficient and practical education, rather than an impractical and costly one justified only by empty notions of elite prestige labeling.

The Clients aren't buying your education bro. They are buying your talent. You are right, you don't learn more at Yale than at Cardozo, hell, I could make the case they actually learn less at Yale. Yale is better than Cardozo because it's more selective. The selection process is far from perfect, but it's good enough. It's why firms skim the cream of the crop off the TTTs.

High stakes litigation and high stakes transactions require high stakes talent.

The DUI lawyer isn't competing with the ERISA lawyer.

[keg411]

Some guy from Axiom spoke here last year and their presentation made me extremely skeptical. There was just something that felt "off"; there was just something too slick and marketing-ish about it that made my BS meter ding.

ETA: Also, LOL at the idea that the "new legal profession" won't care about prestige. It always has and it always will.

[JCougar]

Some guy from Axiom spoke here last year and their presentation made me extremely skeptical. There was just something that felt "off"; there was just something too slick and marketing-ish about it that made my BS meter ding.

It's actually probably the reverse. Traditional firms are selling BS if they're marking up stuff to $250/hour that a paralegal could do for about $18/hour.

ETA: Also, LOL at the idea that the "new legal profession" won't care about prestige. It always has and it always will.

Reading comprehension. I said "empty prestige," not "prestige." Of course they will care about prestige...it's just that prestige will be measured in a more realistic way.

[HeavenWood]

Some guy from Axiom spoke here last year and their presentation made me extremely skeptical. There was just something that felt "off"; there was just something too slick and marketing-ish about it that made my BS meter ding.

It's actually probably the reverse. Traditional firms are selling BS if they're marking up stuff to $250/hour that a paralegal could do for about $18/hour.

ETA: Also, LOL at the idea that the "new legal profession" won't care about prestige. It always has and it always will.

Reading comprehension. I said "empty prestige," not "prestige." Of course they will care about prestige...it's just that prestige will be measured in a more realistic way.

Is the cougar in your avatar going to land safely on the rock or will it breach it at an odd angle and then fall to a very painful death?

Also, is it John Cougar, Johnny Cougar, John Cougar Mellencamp, John Mellencamp, or that pseudo-populist asshole from that flyover state who thinks his opinions mean something just because he's sold a few records?

[rouser]

In this thread naive law school students don't realize bonus season is looming....time to blame associate pay for all the woes of the legal industry (as PPP are at all time highs). Complete joke.

You'll have to explain why the fact that bonus season is coming (which is readily available information) is more than tangentially relevant to what's being discussed in this thread. As far as I can tell, what's mostly being discussed in this thread is whether big law is about to collapse and the entire profession consists of people shoveling bales of makework shitpaper.

he's saying partners are not going to cut their own salaries before they cut new associate salaries. idea is to blame new associates for everything, offer reduced bonuses because of failed "team goals" for billable hours, continue to give them 90-100 hrs/wk, and continue to maintain a $2.5m salary yourself.

[JCougar]

The Clients aren't buying your education bro. They are buying your talent. You are right, you don't learn more at Yale than at Cardozo, hell, I could make the case they actually learn less at Yale. Yale is better than Cardozo because it's more selective. The selection process is far from perfect, but it's good enough. It's why firms skim the cream of the crop off the TTTs.

High stakes litigation and high stakes transactions require high stakes talent.

The DUI lawyer isn't competing with the ERISA lawyer.

This is exactly my point, though. The Yale "prestige" really doesn't have any value in and of itself. It has value because of the students it attracts. If these same students went elsewhere--if they really were future elite attorneys--they would graduate and (if the credentials that got them into Yale in the first place actually had any value, which they obviously do to some extent) prove themselves with their work product anyway. So if getting the Biglaw job was tied to work product rather than the school's name, there's no reason to pay an atrocious price for an elite school.

[JCougar]

Is the cougar in your avatar going to land safely on the rock or will it breach it at an odd angle and then fall to a very painful death?

Also, is it John Cougar, Johnny Cougar, John Cougar Mellencamp, John Mellencamp, or that pseudo-populist asshole from that flyover state who thinks his opinions mean something just because he's sold a few records?

The cougar in the avatar is a sure-footed feline. But the name not a reference to the singer.

[jawsthegreat]

ITT: None of the things being discussed will actually happen.

Y u abuse anon feetur?

Oops. Was me. Still stand by this statement.