Some comments/observations that tie into some of what you are discussing:

(1) The bigger the client, the more likely the client will simultaneously use several of the top firms in a given community, divvying up the work by practice area. This way, if and when litigation time comes, the bigger firms with the most litigation expertise will already represent them and can't represent the other side. A combination of disablement and utilization going on here.

(2) Some practice areas are highly sensitive to political swings. It is always a strength for these practice areas to have several Repub and Dem attorneys on the rolls who are savvy about political connections.

This may sound crass the way I've presented it, but I'm trying to be candid here. Think about these angles, because in one way or another, chances are they will impact you.

-- BarbPitman - 26 Jan 2008

Two thoughts/observations that tie into some of what you are discussing:

(1) It's already the case that the bigger the client, the less likely the client is to consolidate its work in one firm. Companies and governmental entities often find ways to simultaneously hire as many of the prominent firms in a given community as they can, usually divvying the work by area, so that, if and when litigation time comes, all the big firms represent them. Companies basically utilize several firms continuously for different types of work so as to both disable the layer of firms with the most litigation expertise from representing the other side and to utilize that expertise.

(2) The type, nature, and quantity of cient bases in a number of practice areas is highly senstive to state and local election swings. It helps these practice areas to be composed of both Dems and Repubs who are savvy about making political connections.

These points probably sounds crass the way I've laid it out, but I'm being candid here -- take it the way you want, but realize that it exists.

-- BarbPitman - 26 Jan 2008

Cartelization drives up prices a great deal. 5:1 would be unsustainable if firms competing for clients would lower the bill, or firms competing for associates would raise their salaries. But it's in the right ballpark if the firm adds that much value to a lone associate's work.

What drive up the bill:salary at firms are the economies of scale (or is it scope?) that firms create:
(1) legal support (including paralegals, associates, subscriptions and management) --> lower overhead per attorney.
(2) clients (who consolidate legal services into one firm, and stay for the long term) --> a free client base for associates to pass through
(3) reputation (which, to those clients paying for black-box legal services, is the total value a lawyer's work)
(4) larger firm size --> more fertile network to cross-pollinate ideas

(A)Technology and globalization will change the nature of our clients.
(B)These forces, and new political pressures, will change their legal questions (our work).
C) These forces will change the structure of our firms.

RE (1): Legal support will get hardest hit: paralegals, then Wexis, then associates. Associates altogether will add less value to the partners. The pyramid will TAPER. But does that mean firms, with fewer associates, will need to lower associate attrition to replace the same number of partners? Will each associate be paid more?
RE (2): Will clients prefer less to consolidate their work in one firm? I wonder--have firms used requirements contracts? Either way, I think the CLIENTS enjoy an economy of scale (or is it scope?) by unloading all their problems in one place for all time.
RE (3):Will clients have fewer black-box legal problems, lowering the value of lawyers' reputations? (black-box = not of easily measurable value)
RE (4) Will lawyers make their knowledge more freely available, so that other lawyers can benefit without compensating them? I assume this cross-pollination is most implicated by Eben's vision for the future of intellectual property.

-- AndrewGradman - 26 Jan 2008

Carina, thanks for that article. I also found this one in the “related articles” section relevant to our class discussion about legal outsourcing to India. http://www.nytimes.com/2006/10/27/business/27law.html?fta=y

I must admit that I am somewhat skeptical about the extent and speed at which Eben believes legal work will be transferred to India. It’s not that I think his argument doesn’t make sense (employing equally skilled lower wage workers reduces costs and increases profits), it’s just that I don’t think that law firms operate in a very competitive market.

From my relatively uninformed and obviously biased perspective, I think the U.S. law firms basically exhibit cartel-like behavior. The ABA makes becoming a lawyer extremely expensive: an undergraduate degree, 3 years of law school, being admitted to the bar, for instance. By limiting the number of lawyers, the price for their services is artificially inflated. That’s why legal advice is prohibitively expensive for most people.

Firms also bill clients several times the amount they pay out in associate salary. I think someone in class mentioned a 5:1 ratio. Such margins would be unsustainable in a competitive environment. In addition, there is virtually no price competition between firms. That’s why every firm in New York pays $160K for a 1st year associate.

It’s my impression that firms don’t respond to market pressures very aggressively. I would bet they will be slow to outsource, just as they were slow to introduce alternative work arrangements.

-- EdwardNewton - 26 Jan 2008