What About Paris?™

forces rippling through the global markets may mean this: more and more, talent--not size--matters.

How silly, silly, silly

There are three distinct sets of economic rules that operate on the practice of law.

First, because of the prohibition on fee splitting, lawyers face extreme competition with only limited capital. Large law firms have access to far more capital and can employ such far more efficiently. It's why they can recruit at Harvard and I will never recruit to my solo firm. I could go on and on but any open minded reader should get the idea.

Second, there are laws on network effects. Metcalf's law applies to the practice of law, perhaps more than any other economic law.

Robert Metcalf's law states that the "value" or "power" of a network increases in proportion to the square of the number of nodes on the network.

In other words, if you have four nodes, or computers, on a network, say, an office intranet, its "value" would be four squared (4^2), or 16.

If you added on addition node, or PC, then the value would increase to 25 (5^2).

This is why large law firms are so powerful, they have more nodes (lawyers).

Here is an illustration, a networking event reported on a VC blog

http://www.beyondvc.com/2005/12/thoughts_from_a.html

"One of our advisors for our fund hosted a New York CIO dinner last night. It was a gathering of 30-40 of some of New York's leading technology buyers, mostly from the financial services industry. As a VC, it was quite interesting to hear about the state of technology spending and what is top of mind for many of these players. Repeatedly I heard about grid computing, security, and service oriented architectures. It seems to me that all of the Gartner hype put into these technologies years ago are slowly becoming a reality. As for startups, not many were mentioned, and most of the technology buyers said your best bet was coming in through a larger partner whether it be a Sun, Cisco, HP, or IBM. In addition, it was quite clear that this was a small community, and like any small community, they all talk with each other and want to know what technologies their peers are using. So lesson #1 is while it is always hard to land your first financial services customer, remember not to screw it up because if you do everyone will know. On the other hand if you deliver on your promises and have a great base of early reference customers, it will pay huge dividends. that simply cannot be disregarded"

Now, I am one hell of a banking lawyer, but not in a million sunday's could I have ever come up with th telephone numbers of 40 CIO's, let alone to have gotten them in one place, etc. etc. This event was driven by capital (VC money) and Metcalf's law.

Third, there is the entire issue of growth. It is well demostrated in the academic literature that healthy businesses must grow above 5% a year. That is impossible for a solo firm or actually for any law firm with less than 19 lawyers. If you have 19 lawyers, you grow by 5%+ by hiring one lawyer. Because of compounding. A 20 lawyer firm must have 40 lawyers within a decade. A --forty lawyer firm, 80 lawyers ----, with ten more years.

If you want to add something on the net of use to the profession, start taking on its real problems. We have, because of the CPR, pretty much a fixed business model. Few lawyers are in a 5%+ growth mode, per year. As Gary Hamel established so well in Leading the Revolution, until the industry rules are changed permitting lawyers to offer unique business models we are just going to tread water.

Moe, thanks for your comments. I'll make you a deal: you develop some manners, and I'll keep publishing your stuff.

Dan,

Whether you publish any or all of my comments is up to you. I just said my piece trying to do is to get you to start thinking; I have had some success with GAL and I suspect so to with you.

First, when asked, I tell any lawyer that all they can do is "Hustle" and network. I mean this in the very best sense as explained by Bhide in his Harvard Business Review piece Hustle as Strategy or by Beckwith in this three books (Selling the Invisible, etc.).

Good client service is Hustle as Strategy; good client service is not a business model, for the only barrier to any lawyer providing good client service is economics. If a rich lawyer doesn't want to return call, he can hire an associate to do such. A poor lawyer can't.

To those of us who understand "business models" a business model is something that others cannot duplicate. Sometimes such is created by regulation. Howard Stern's move to satellite radio is a regulatory business model change; HBO can do more adult oriented programing, because it is not network TV.

Panera Bread is an excellent business model examle--no other fast food company has such a model.

If one thinks in these terms, its seems to me, that one quickly comes to understand that American law is "broken" because its business model is broken. American business is global but we are licensed in only one jurisdiction and the recent direction has been to curb out-of-jurisdiction work.

The entire thrust behind MDP was to let lawyers change their business model. Until that happens, we are a trapped profession, unable to grow at the rates necessary to employ all the talent already in the profession, to say nothing about the thousands each year by way too many graduates.

Moe

I didn't know you had an energy background; I do too. I've been solo for 12 years now and energy work has always been a staple of my practice.
Oddly, though energy work is always associated with bigfirm practice, it's the solos and small firms in the field who are most stable. I attended the 35 anniversary/alumni party of the energy boutique where I worked before I went solo and in one of the speeches, the managing partner pointed out that the firm had survived even where many other biglaw firms whom they previously opposed had failed.