"Suicide Pricing" & the coming law firm crisis Forum

[sadsituationJD]

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.

[BeenDidThat]

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.

How'd that cut & paste work out for you, brah?

[sadsituationJD]

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.

[glitched]

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.

i'm going to just accept your claim that a small town doctor has more lay prestige of a SCOTUS justice because it actually sounds plausible. but i highly doubt it's because lay people would consider a SCOTUS justice intellectually inferior to a doctor - it's because lay people generally just have more familiarity with medicine and less familiarity with law practice (or their perception of law comes from television, and/or ambulance chaser ads). What lay person has ever even stepped into a law firm that does "sophisticated" (I already put it in quotes for you because I didn't want to waste a reply with just that argument) work? Probably none. Law firm partners are not stupid.

(interestingly enough, if you read my past posts, I'm actually considering making a switch from law to medicine - but it's not because I consider law to be intellectually inferior)

[Anonymous User]

"Law schools set the bar so low that even the "superstars" of the industry are intellectual lightweights compared to Wall Streeters and corporate types."

lolok.

[Anonymous User]

Agreed, but the comparison to medicine is faulty. Medicine requires a true advanced degree. The problem is a JD is essentially a second bachelor's degree. That's what it started out as, and only the name has changed. That's not the same as law being somehow intellectually inferior to medicine. Law is most comparable with a B.S. in Chemistry.

The point about excessive compensation is credited, however. The business model of the big 4 would actually make a lot more sense for law than the current big firm model does. Basically, if you want to go to law school, you should be able to get a JD at 18 and then start working 80 hours/week for $50,000/year. Either you do your time and move on to better paying "exit options," or you stay on and eventually earn $800,000+ compensation as a partner. There's no way in hell that anybody fresh out of law school deserves $160,000/year. It's just absurd.

The absurdity is that in most careers, you get paid more as you gain more responsibility. In law, the vast majority of lawyers who get the top jobs (big law) make more $ their first year out of law school than they ever will again, or ever will for a long time, because in-house--and most exit options--pay much less. In what kind of career is it common to peak at 26? Gymnastics?

[glitched]

Agreed, but the comparison to medicine is faulty. Medicine requires a true advanced degree. The problem is a JD is essentially a second bachelor's degree. That's what it started out as, and only the name has changed. That's not the same as law being somehow intellectually inferior to medicine. Law is most comparable with a B.S. in Chemistry.

The point about excessive compensation is credited, however. The business model of the big 4 would actually make a lot more sense for law than the current big firm model does. Basically, if you want to go to law school, you should be able to get a JD at 18 and then start working 80 hours/week for $50,000/year. Either you do your time and move on to better paying "exit options," or you stay on and eventually earn $800,000+ compensation as a partner. There's no way in hell that anybody fresh out of law school deserves $160,000/year. It's just absurd.

The absurdity is that in most careers, you get paid more as you gain more responsibility. In law, the vast majority of lawyers who get the top jobs (big law) make more $ their first year out of law school than they ever will again, or ever will for a long time, because in-house--and most exit options--pay much less. In what kind of career is it common to peak at 26? Gymnastics?

well i'm sure that partners are well aware that the level of skill of a first year associate does not compute to $160k/year. They don't set those salaries based on valuation, they set it to attract top talent. Assume there is a limited pool of talented individuals and they could have their pick between banking and law (chose just banking to make it simpler but other industries apply), but neither particularly cared about what they wanted to do. If banking and law paid the same salary starting, who would choose law since it takes 3 years to start? And once they start losing the top talent (which will probably be HYS individuals) to other industries, then the entire structure starts to crumble. Once they stop offering those salaries, even the students at HYS won't be composed of the same talent pool as before, the talent which law firms desire. Problem right now is that everyone believes they have the talent to do big law, and they feel that just because they graduated from law school, they somehow deserve it. The reason some people go to law school is because they couldn't cut it in another industry so they take the risk of trying to get the huge job, resulting in a glut of attorneys. I'm pretty sure law firms have considered offering lower salaries many many times but have decided against it. Again, law firm partners are not stupid.

[sadsituationJD]

Law is most comparable with a B.S. in Chemistry.

Um, no. Chemistry, esp. organic chemistry, is among the most difficult subjects in all of academia. Comparing it to legalese nonsense like offer-acceptance and Civ. Pro makework hogwash is patently absurd. The stupidest MD from an offshore school is an intellectual powerhouse compared to ANY lawyer.

[Anonymous User]

Agreed, but the comparison to medicine is faulty. Medicine requires a true advanced degree. The problem is a JD is essentially a second bachelor's degree. That's what it started out as, and only the name has changed. That's not the same as law being somehow intellectually inferior to medicine. Law is most comparable with a B.S. in Chemistry.

The point about excessive compensation is credited, however. The business model of the big 4 would actually make a lot more sense for law than the current big firm model does. Basically, if you want to go to law school, you should be able to get a JD at 18 and then start working 80 hours/week for $50,000/year. Either you do your time and move on to better paying "exit options," or you stay on and eventually earn $800,000+ compensation as a partner. There's no way in hell that anybody fresh out of law school deserves $160,000/year. It's just absurd.

The absurdity is that in most careers, you get paid more as you gain more responsibility. In law, the vast majority of lawyers who get the top jobs (big law) make more $ their first year out of law school than they ever will again, or ever will for a long time, because in-house--and most exit options--pay much less. In what kind of career is it common to peak at 26? Gymnastics?

well i'm sure that partners are well aware that the level of skill of a first year associate does not compute to $160k/year. They don't set those salaries based on valuation, they set it to attract top talent. Assume there is a limited pool of talented individuals and they could have their pick between banking and law (chose just banking to make it simpler but other industries apply), but neither particularly cared about what they wanted to do. If banking and law paid the same salary starting, who would choose law since it takes 3 years to start? And once they start losing the top talent (which will probably be HYS individuals) to other industries, then the entire structure starts to crumble. Once they stop offering those salaries, even the students at HYS won't be composed of the same talent pool as before, the talent which law firms desire. Problem right now is that everyone believes they have the talent to do big law, and they feel that just because they graduated from law school, they somehow deserve it. The reason some people go to law school is because they couldn't cut it in another industry so they take the risk of trying to get the huge job, resulting in a glut of attorneys. I'm pretty sure law firms have considered offering lower salaries many many times but have decided against it. Again, law firm partners are not stupid.

Big law partners are not stupid. But it probably goes without saying that the types of people who normally go into law are the types of people who do not have a very good head for business. Other businesses that don't overpay new associates have no problem with recruiting. For example: the big 4 and some ibanks that pay a "mere" $90,000 starting salary for "analysts." People do it for the exit options and the experience. Businessweek calls "big 4" the best place to begin a career for a reason, even though the pay sucks. And face it, most folks I know in law school either don't want to do banking for moral reasons or don't have the numerical talent most IB's require. One reason why a model like this is not practical, however, is because law school costs way too much, and it is not a first degree (something you do at 18), like it is in most of the world. The whole industry is messed up because student loans allow law schools to avoid internalizing the consequences of criminal tuition prices and over-expansion by passing them off onto the $16 trillion and counting.

The solution clients have devised is to pass on as much as possible to the big 4 and outsource the rest, saving some high-end stuff for high-end shops like Wachtell.

The big law model is not a good business model, which is why it's slowly crumbling. Cravath and S&C will probably always be there. But for the low-margin stuff, there is no reason on earth to pay 23-year-old Spanish majors at [insert V50 firm here] to do what Axiom-model firms, an Indian shop, or the big 4 could do more cheaply.

[bdubs]

Why aren't all professional services subject to the same pressures he mentions? There are more than enough consultants to go around, yet the top tier of consulting firms still have pay structures comparable to biglaw. People are constantly saying that McKinsey et al. don't add real value, but AFAIK no one is suggesting they are going to implode.

I don't doubt that there is pressure on the firms that pay market but don't have the client base to support it. They will eventually have to break from that practice. I have to take issue with it being a structural shift though. Legal services will never be an entirely commoditized business.

[Bigbub75]

Law is most comparable with a B.S. in Chemistry.

Um, no. Chemistry, esp. organic chemistry, is among the most difficult subjects in all of academia. Comparing it to legalese nonsense like offer-acceptance and Civ. Pro makework hogwash is patently absurd. The stupidest MD from an offshore school is an intellectual powerhouse compared to ANY lawyer.

I kinda disagree with the notion that MD = intellectual powerhouse. My two best friends are both physicians (Vascular surgeon & ER Doc). The surgeon is far from an intellectual. He is a very hard worker, and can lock himself in the room and study for hours. He's pretty good at memorization, but not even he would consider himself an intellectual. When he discusses anything outside of medicine this is very apparent.

[Perseus_I]

Why aren't all professional services subject to the same pressures he mentions? There are more than enough consultants to go around, yet the top tier of consulting firms still have pay structures comparable to biglaw. People are constantly saying that McKinsey et al. don't add real value, but AFAIK no one is suggesting they are going to implode.

I don't doubt that there is pressure on the firms that pay market but don't have the client base to support it. They will eventually have to break from that practice. I have to take issue with it being a structural shift though. Legal services will never be an entirely commoditized business.

McKenzie is top-of-the-line. They start out paying $120,000 a year to very smart people. They are the equivalent of Cravath or a COA clerkship. The potential upside is huge. But most of the industry is less prestigious and pays somewhat less. Basically, in consulting, pay follows value. You sure as hell don't start out making six figures at Deloitte.

Law firms, by contrast, have very un-rigorous recruiting policies (a 20 minute interview about college sports) and pay is not even close to comparable with value. Like I said before, the kids at Cravath probably deserve six figures. So Clearly, Cravath, Wachtell, W&C - those will always be around. But just about everything else can be done elsewhere than in big law. Anyone checked out the Axiom model? http://www.forbes.com/forbes/2011/0627/ ... arget.html. That, and outsourcing, are the future. Plus, the big 4 is encroaching on a lot of areas normally occupied by lawyers. PwC has started a massive push to hire top talent right out of law school at half the pay but with the promise of great exit options.

Most non-high-end law firms will probably close up shop within the next two decades.

[ben4847]

doctors be dumb. About the same prestige as mechanics, to me.

[genpres]

Chemistry, esp. organic chemistry, is among the most difficult subjects in all of academia. Comparing it to legalese nonsense like offer-acceptance and Civ. Pro makework hogwash is patently absurd. The stupidest MD from an offshore school is an intellectual powerhouse compared to ANY lawyer.

Former chemist here, and my SO is in med school. I'd agree that chemistry was harder than law in general, but to call it "among the most difficult subjects in all of academia" is ridiculous. The idea that the stupidest MD is smarter than any lawyer is also ridiculous. I tutored med students in biochemistry for awhile, and let me tell you... medicine has its own fair share of idiots. The truth is, you can get through much of the basic science curriculum (e.g. anatomy, physiology, microbiology, biochemistry) with just a halfway decent mind for memorization and an understanding of how to use flashcards. Even in subjects like orgo, it's not like you need a genius IQ to memorize the process for halogenation. The hero worship of doctors on tls is bizarre to me.

[androstan]

Chemistry, esp. organic chemistry, is among the most difficult subjects in all of academia. Comparing it to legalese nonsense like offer-acceptance and Civ. Pro makework hogwash is patently absurd. The stupidest MD from an offshore school is an intellectual powerhouse compared to ANY lawyer.

Former chemist here, and my SO is in med school. I'd agree that chemistry was harder than law in general, but to call it "among the most difficult subjects in all of academia" is ridiculous. The idea that the stupidest MD is smarter than any lawyer is also ridiculous. I tutored med students in biochemistry for awhile, and let me tell you... medicine has its own fair share of idiots. The truth is, you can get through much of the basic science curriculum (e.g. anatomy, physiology, microbiology, biochemistry) with just a halfway decent mind for memorization and an understanding of how to use flashcards. Even in subjects like orgo, it's not like you need a genius IQ to memorize the process for halogenation. The hero worship of doctors on tls is bizarre to me.

+1, former chemist, tutored pre-meds in chemistry, taught some basic chemistry courses. Not every doctor is an intellectual. Medicine is a trade/profession, if you are dedicated to learning the profession you can probably do it. Also my SO is a pharmacist who reviews doctors' treatment regimens, and doctors screw up ALL the time.

[Perseus_I]

Chemistry, esp. organic chemistry, is among the most difficult subjects in all of academia. Comparing it to legalese nonsense like offer-acceptance and Civ. Pro makework hogwash is patently absurd. The stupidest MD from an offshore school is an intellectual powerhouse compared to ANY lawyer.

Former chemist here, and my SO is in med school. I'd agree that chemistry was harder than law in general, but to call it "among the most difficult subjects in all of academia" is ridiculous. The idea that the stupidest MD is smarter than any lawyer is also ridiculous. I tutored med students in biochemistry for awhile, and let me tell you... medicine has its own fair share of idiots. The truth is, you can get through much of the basic science curriculum (e.g. anatomy, physiology, microbiology, biochemistry) with just a halfway decent mind for memorization and an understanding of how to use flashcards. Even in subjects like orgo, it's not like you need a genius IQ to memorize the process for halogenation. The hero worship of doctors on tls is bizarre to me.

Agreed, the only job worth admiring is ibanking. Those people are smart and loaded, and they get away with criminal behavior on a daily basis. I wish lawyers had half the fun and $$.

[kingofdara]

Suicide pricing? How dreadful.

[ehshornet]

Law is most comparable with a B.S. in Chemistry.

Um, no. Chemistry, esp. organic chemistry, is among the most difficult subjects in all of academia. Comparing it to legalese nonsense like offer-acceptance and Civ. Pro makework hogwash is patently absurd. The stupidest MD from an offshore school is an intellectual powerhouse compared to ANY lawyer.

I kinda disagree with the notion that MD = intellectual powerhouse. My two best friends are both physicians (Vascular surgeon & ER Doc). The surgeon is far from an intellectual. He is a very hard worker, and can lock himself in the room and study for hours. He's pretty good at memorization, but not even he would consider himself an intellectual. When he discusses anything outside of medicine this is very apparent.

As a joint degree candidate (J.D./M.S. in chemistry) with a B.S. in chemistry, it is absolutely absured to equate law with a B.S. in chemistry. Law and chemistry require two types of thinking. And, I can assure you, my B.S. in chemistry was much harder than law school. Law school is a joke compared to getting a B.S. in chemistry.

And for those commenting on tutoring the pre-med students, how many of those students actually made it through the pre-med track and committed to applying to med school and becoming a doctor? The population you have selected does not add any significance to the argument unless you can vouch that they all went onto to become doctors. Because trust me...I have tutored a lot of pre-med kids in chem that ended up not following through the pre-med track or ended up not getting in because their grades were too low because of the rigors of the pre-med track. A lot of the people that I knew that went to med school were ones that did not seek out a tutor and worked independtly, in study groups, or sought out the professor.

While I do not agree that MD = intellectual powerhouse, I am much more impressed with someone who has gone through med school as compared to law school. Even though a doctor may not be able to engage in a political debate or discuss a literary work, there is no way that he could have gotten through his/her pre-med requirements, taken the MCAT, and gone through med school through rote memorization. Memorization only gets someone so far. Advanced science undergrad classes, the MCAT, and med school exams require the application of those memorized details.

[IAFG]

Why aren't all professional services subject to the same pressures he mentions? There are more than enough consultants to go around, yet the top tier of consulting firms still have pay structures comparable to biglaw. People are constantly saying that McKinsey et al. don't add real value, but AFAIK no one is suggesting they are going to implode.

I don't doubt that there is pressure on the firms that pay market but don't have the client base to support it. They will eventually have to break from that practice. I have to take issue with it being a structural shift though. Legal services will never be an entirely commoditized business.

I agree with almost all of this. The only thing I would add is that you have to remember, even when things were shitty, PPP was still high. Due to the nature of partnerships and the ability of rain makers to leave, it's not like there are tons of firms limping along not really able to pay market. That is why firms go from healthy to imploded so quickly. And the list of firms that did implode is remarkably short.

[sadsituationJD]

I agree with almost all of this. The only thing I would add is that you have to remember, even when things were shitty, PPP was still high. Due to the nature of partnerships and the ability of rain makers to leave, it's not like there are tons of firms limping along not really able to pay market. That is why firms go from healthy to imploded so quickly. And the list of firms that did implode is remarkably short

Tell that to the unlucky associates who worked at these now-defunct shops, esp. those still carrying 100 K + of lawschool debt.

It's plainly obvious that the "average" biglaw firm is a business model that will likely vanish within the next 5 years. Fortune 500 companies use these firms ONLY because the major partners have the political clout & "juice" to grease thru shady deals that, for the most part, are not in the public interest. That's what corporate clients are interested in, not the squads of makework drone paper-pushers that are called "associates." The work of associates only had value (from a partner's perspective) when clients were foolish enough to pay a rate high enough for the partner to "mark up" that work and essentially "re-sell" it at a huge profit, not because the work itself had any value in its own right. You could replace these "associates" with the anchormen from Cooley and it would make absolutely no difference in terms of the "deal" going thru, since their only role is to push bales of needless makework.

[Anonymous User]

doctors be dumb. About the same prestige as mechanics, to me.

Having worked in a large medical center, I agree. PhD research scientists (at least the ones I have worked closely with) tend to look down on MDs as mere technicians. They merely diagnose an issue, and then follow the textbook instructions on how to fix it, much like an auto mechanic. This is not to say that MDs are not highly intelligent, but to state that the least accomplished MD is vastly intellectually superior to SCOTUS justices is incredibly ignorant.

[homestyle28]

I agree with almost all of this. The only thing I would add is that you have to remember, even when things were shitty, PPP was still high. Due to the nature of partnerships and the ability of rain makers to leave, it's not like there are tons of firms limping along not really able to pay market. That is why firms go from healthy to imploded so quickly. And the list of firms that did implode is remarkably short

Tell that to the unlucky associates who worked at these now-defunct shops, esp. those still carrying 100 K + of lawschool debt.

It's plainly obvious that the "average" biglaw firm is a business model that will likely vanish within the next 5 years. Fortune 500 companies use these firms ONLY because the major partners have the political clout & "juice" to grease thru shady deals that, for the most part, are not in the public interest. That's what corporate clients are interested in, not the squads of makework drone paper-pushers that are called "associates." The work of associates only had value (from a partner's perspective) when clients were foolish enough to pay a rate high enough for the partner to "mark up" that work and essentially "re-sell" it at a huge profit, not because the work itself had any value in its own right. You could replace these "associates" with the anchormen from Cooley and it would make absolutely no difference in terms of the "deal" going thru, since their only role is to push bales of needless makework.

I'm sorry I'm late to this convo, but I missed the part where you explained what firm you were a partner at or fortune 500 you were on the board of? So if you could start from there, I'd be interested in subscribing to your newsletter.

[androstan]

Law is most comparable with a B.S. in Chemistry.

Um, no. Chemistry, esp. organic chemistry, is among the most difficult subjects in all of academia. Comparing it to legalese nonsense like offer-acceptance and Civ. Pro makework hogwash is patently absurd. The stupidest MD from an offshore school is an intellectual powerhouse compared to ANY lawyer.

I kinda disagree with the notion that MD = intellectual powerhouse. My two best friends are both physicians (Vascular surgeon & ER Doc). The surgeon is far from an intellectual. He is a very hard worker, and can lock himself in the room and study for hours. He's pretty good at memorization, but not even he would consider himself an intellectual. When he discusses anything outside of medicine this is very apparent.

As a joint degree candidate (J.D./M.S. in chemistry) with a B.S. in chemistry, it is absolutely absured to equate law with a B.S. in chemistry. Law and chemistry require two types of thinking. And, I can assure you, my B.S. in chemistry was much harder than law school. Law school is a joke compared to getting a B.S. in chemistry.

And for those commenting on tutoring the pre-med students, how many of those students actually made it through the pre-med track and committed to applying to med school and becoming a doctor? The population you have selected does not add any significance to the argument unless you can vouch that they all went onto to become doctors. Because trust me...I have tutored a lot of pre-med kids in chem that ended up not following through the pre-med track or ended up not getting in because their grades were too low because of the rigors of the pre-med track. A lot of the people that I knew that went to med school were ones that did not seek out a tutor and worked independtly, in study groups, or sought out the professor.

While I do not agree that MD = intellectual powerhouse, I am much more impressed with someone who has gone through med school as compared to law school. Even though a doctor may not be able to engage in a political debate or discuss a literary work, there is no way that he could have gotten through his/her pre-med requirements, taken the MCAT, and gone through med school through rote memorization. Memorization only gets someone so far. Advanced science undergrad classes, the MCAT, and med school exams require the application of those memorized details.

I've kept up with a couple, who are in med school now. I tutored primarily at Johns Hopkins. One student I continued to help after her organic classes, as she was prepping for the MCAT, so I saw the chem/phys portions of the MCAT. I think they were all bright enough to go to med school if that's what they wanted. I don't think they were all smarter than me, I aced organic chemistry and was taking graduate courses in statistical thermodynamics and chemical kinetics.

[IAFG]

I agree with almost all of this. The only thing I would add is that you have to remember, even when things were shitty, PPP was still high. Due to the nature of partnerships and the ability of rain makers to leave, it's not like there are tons of firms limping along not really able to pay market. That is why firms go from healthy to imploded so quickly. And the list of firms that did implode is remarkably short

Tell that to the unlucky associates who worked at these now-defunct shops, esp. those still carrying 100 K + of lawschool debt.

It's plainly obvious that the "average" biglaw firm is a business model that will likely vanish within the next 5 years. Fortune 500 companies use these firms ONLY because the major partners have the political clout & "juice" to grease thru shady deals that, for the most part, are not in the public interest. That's what corporate clients are interested in, not the squads of makework drone paper-pushers that are called "associates." The work of associates only had value (from a partner's perspective) when clients were foolish enough to pay a rate high enough for the partner to "mark up" that work and essentially "re-sell" it at a huge profit, not because the work itself had any value in its own right. You could replace these "associates" with the anchormen from Cooley and it would make absolutely no difference in terms of the "deal" going thru, since their only role is to push bales of needless makework.

As BDubs pointed out, most of the "flaws" you have spotted in the biglaw model exist in every other profession as well. There are a lot of reasons why clients continue to pay more for legal services than they could get away with, and that hasn't changed and won't change, no matter how cathartic it would be for you personally and all the associates from those now defunct shops (or rather, those who didn't land somewhere else).

[androstan]

I think that, if the biglaw model survived (survives?) the recent crash, it's safe to say it's not going anywhere anytime soon. If there was going to be a massive restructuring, it would have happened already. There have been some structural shifts, but not a total tear-down-and-rebuild. Market SA's are harder and more competitive, not nonexistent.