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DeathofGiantFirms 5 - 20 Jan 2008 - Main.AndrewGradman
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the death of the giant firm? (Work in progress) Started this on the plane to Chicago.
Since our grade is partly based on whether we’re ethical, I must credit Sandor for arguing that the legal product includes trust, and Justin Colannino for predicting that Wexis will be assimilated into Googles and Wikipedias.
Now that I'm going online to upload this, I just discovered i got a b minus in torts, so take my arguments with a heavy dose of skepticism. | |
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< | Eben believes that law firms will be extinct by the time we look to inherit them. I’ll entertain his theory. What made giant firms so successful, and what is making them obsolete?
The richest corporations want their legal work mass-produced and custom-fit. Larger firms grab richer clients by exploiting economies of scale. The vertical deep bench supplies young apprentices to do the tedious bidding of their mentors, who shed scales of wisdom for them to grow into. And horizontal cross-pollination stimulates creativity, so giant law firms pack specialists under one roof, like the interdisciplinary research university or think tank —only this network is proprietary, and for profit.
The centrifugal force of cheap information lowers the cost of brokering and networking creativity. Music brokerages (recording companies) are as obsolete as telephone switchboard operators. Corporate management hierarchies have flattened, crushing out the “switchboard operators” in Middle Management. Blogs broke the newspapers’ monopoly on distributing news. The continental investment banks lost mastery of the sea to an archipelago of hedge funds, run by irreverent geniuses like my three college classmates who started trading currencies as second semester seniors. When these friends opened their hedge fund, they sold short the giant law firm's long-term prospects. | >
> | Eben believes that law firms will be extinct by the time we inherit them. Let’s entertain this theory. What made giant firms so successful, and what could make them obsolete?
The richest corporations want their legal work mass-produced and custom-fit. Big firms accommodate these clients by exploiting economies of scale. The deep bench supplies hands to do the tedious bidding of their mentors, who shed scales of wisdom for their young apprentices to grow into. And specialists packed under one roof cross-pollinate their ideas, as at the interdisciplinary research university or think tank—only this network is proprietary, and for profit.
I believe that Eben believes that the efficient trade in symbols abolished the ownership of symbolic representations, materially if not yet legally. In that case the brokers and networkers of creative thought will become obsolete. Recording companies will go the way of switchboard operators. Blogs broke the media conglomerate’s monopoly on distributing news. Middle Management is being crushed by flattening corporate hierarchies. The continental investment banks lost mastery of the sea to an archipelago of hedge funds, run by irreverent geniuses like my three college classmates who started trading currencies together as second semester seniors.
The same centrifugal forces are disintegrating facets of our industry. By gambling on their own hedge fund over a hierarchical bank, perhaps these friends were selling short our giant law firms too. Certainly, raw jurisprudential data will be free one day. Some Robin Hood will scan in the entire written Westlaw and Nexis registers, then write a Google-like algorithm to organize it into Wikipedia-like linked pages. Perhaps a third-year Spartacus will expose his firm’s proprietary written memoranda, revealing by his crucifixion the wisdom of the legal elite to the lone practitioner. Davids will keep pace with Goliaths by outsourcing drudgework to India or a clever cell phone.
But creativity will never be fully socialized until someone invents mind-reading. Therefore the small chunks that break off from large corporate structures will bear their pattern. Cutting-edge hedge funds inherited the financial sector’s historic mission—predicting capital flow from commercial data. Modern management methods survive because they are the fittest way to fulfill tasks that Peter Drucker described in the ‘XXs—marketing and innovation. Blogs that spread news still rely on reporters to harvest it, by formulating questions, anticipating the scene of the crime, and researching non-symbolic facts. Better music will always be written by people who smoked pot and dropped acid.
So what is the essential legal service, and what structure and scale generates it most efficiently?
may reduce the law firm’s comparative advantage over the law market in brokering and networking legal ideas. | | | | |
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< | with these trends in mind. But aren’t we lawyers special? Those other innovations were in distribution channels—_ _ . The lawyer’s “distribution channel” is the neurons in judges’ and jurors’ brains. Those other innovations could be objectively measured: compare _ to the market __. But every legal case is unique
Sandor: PROBLEM:Reputation / black box SOLUTIONS: break open black box Justin Colannino—Competitors to Westlaw and Nexis will be cheaper and searcheable like google and wikipedia Scan it in, automate the piracy | >
> | Those other innovations were in distribution channels—_ _ . The lawyer’s “distribution channel” is the neurons in judges’ and jurors’ brains. Those other innovations could be objectively measured: compare _ to the market __. But every legal case is unique | | | | |
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> | Sandor: PROBLEM:Reputation / black box SOLUTIONS: break open black box | | | How much of our profession will be “opened up” in this way?
cf. Coase: market or firm? An innovation (here, internet) doesn’t just lower cost of market—it lowers cost of firm. And so firm may become consolidated (e.g. internal Wikis ...) |
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