Thursday, October 19, 2006
Navigate your way over to Gordon Smith's post (Gordon, on the left), on this subject over at Conglomerate, and let him know if you are interested in helping organize one.
I organized a two-credit class at IU-Indianapolis entitled "Technology Start-Ups and Venture Capital," and Gordon's case book not yet being published, there was a dearth of materials directed at this kind of transactional lawyering. You could go to Josh Lerner's business school text on venture capital, but the only place you really saw law qua law was in the discussion of the so-called "down round" in which the venture is no longer worth was it was before, and somebody (either the entrepreneur or the venture capitalist or both) has to take the brunt of the dilution that occurs when the next round of stock sells for less than the previous round. (Gordon, by the way, has an excellent article on one of the leading cases on that topic, involving Benchmark Capital.)
The trick is aiming the course at something more academic or theoretical than a CLE talking head seminar, but not leaving it so theoretical that it has no particular value to the practice. Gordon cites Ron Gilson's classic article on the transactional lawyer's value proposition, that of "transaction cost engineer," but it's the line about trying to teaching a theory of private ordering that has me intrigued. The law and behavioral economics school, I think, aspires to a unified theory of behavior on the subject of ordering, but will understanding the availability heuristic, or commitment bias, or asymmetric information makes lawyers more effective in transactions? It may, but it's a leap from the description of the theory to ex ante predictions based on the theory to actual use of the theory in live transactions.
Last evening, I was a judge in the Tulane Moot Court Board's ADR competition. One of the participants was, I think, in the minds of the three judges a standout, but very little of what was exceptional was cognitive or rational. Her effectiveness had more to do with personal force, charisma, or something like that, than argument. The other thing I noticed (albeit from the standpoint of thirty years' more experience in the negotiating trenches) was negotiation by argument as opposed to negotiation by creativity. (There was negotiation by empathy, but it consisted primarily of "our client likes your client" as a preamble to the argument of a position.)
All of this to say that transactional lawyering as an academic field needs to look not just at economics, but at social psychology, strategy, decision theory, philosophy, conceptual blockbusting, and drama, just to name a few other areas.
As I said over at Conglomerate, here's an enthusiastic "count me in."