Sunday, November 15, 2015
Several years ago an Indiana Law alum told me about a video on the Internet that I needed to watch. It was a 1997 Q&A session with Steve Jobs at a conference of Apple developers. Jobs had been fired by the Apple board 12 years earlier but at the time of the video had just been rehired to help turn the company around.
"It's amazing because Jobs essentially describes cloud computing and smartphones nearly a decade before they had entered the market," the alum, who was very successful in business, told me. "To turn them into actual products, Jobs talks about the power of focus and the necessity of always working backwards from the customer. This video is important because it reveals the Jobs playbook before anyone knew it was actually going to work."
Back in my home office, I watched the video several times. And every six months or so I have watched it again (like this morning) to help me evaluate the extent to which I have internalize the core insights. As it turns out, focus and working backwards from students and clients is not my natural mode of thinking. Fortunately, as the video suggests, Jobs developed this mindset through the gradual process of trial and error. In short, it was learned.
The November issue of The American Lawyer contains an essay where I review the Jobs video and apply its core insights to the struggle over market share that is enveloping the large law firm sector. I think my essay is good, but the video itself is timeless. Hence, I am posting the video on The Legal Whiteboard. If you are interested in why most things fail, but a handful of things succeed in a really big way, I encourage you to watch it.
(H/T Pete Yonkman, Indiana Law '98).
Wednesday, September 16, 2015
Lawyers may have a monopoly over the practice of law, but what exactly does the practice of law encompass? In most common law jurisdictions, the term is not even defined. And there's likely a self-interested reason why. Ambiguity produces uncertainty, and uncertainty is a major source of business risk.
In the face of significant uncertainty, why would investors fund a business that encroaches on lawyers' most lucrative work when they'll have to hire a battalion of lawyers to defeat the entire universe of lawyers in front of a judge who used to be a practicing lawyer (and may be one again)? Many lawyers would get rich losing this case for you.
Well, ambiguity may not be enough to permanently fend off the invasion. There is a controversy taking shape in India that may foreshadow the end of the lawyer guild. Under India's Advocates Act, only lawyers can own a law firm. Likewise, only chartered accountants can audit companies. But what about advisory services related to business? That's a area of tremendous potential overlap between these two professions.
Globally, the Big 4 have been making inroads on lucrative cross-border deal work -- not enough to mortally threaten the major law firms, but enough to get their attention. Yet, according to this story in the The Economics Times (the leading business paper in India), it's the elite law firms putting the hurt on the Big 4, poaching talent in some of the Big 4's most lucrative practice areas. Here's how the Indian journalists tell it:
MUMBAI: Two months after the Delhi Bar Council sent a legal notice to top professional services firms EY, KPMG, PwC and Deloitte, the simmering hostility between the Big 4 and the legal fraternity is increasingly coming out in the open.
Earlier this month, Zia Mody's AZB & Partners [the Wachtell Lipton of India] scooped up six forensic experts from EY, a move that has been seen by industry players as part of growing competition between leading law firms and consultancies for business, encroaching into each other's traditional bastions. ...
[Zia Mody, the managing partner of AZB, commented,] "The compliance and investigation practice that we have formalised would help us in due diligence, Indian anti-corruption law investigations, asset-recovery cases, private equity-related post investment investigations and in some anti-trust investigation cases."
Top legal firms in the country are diversifying into forensic operations and undertaking commercial diligence and investigations for their clients.
This comes at a time when consultancies like EY and KPMG are bulking up their teams beyond the traditional forte of audit and tax practices to expand into advisory services. ...
"What law firms are doing is part of their evolution into full service providers," said Lalit Bhasin, president of the Society of Indian Law Firms, which in July filed a complaint against the Big 4 with the Bar Association of India, saying that they were practicing law without authorisation.
Side note on Lalit Bhasin -- he is the most prominent spokesperson for keeping in place the longstanding prohibition against foreign law firms operating inside India. He is obviously not too keen on Big 4 accounting firms getting into his business. The Times quotes a senior partner of a Big 4 firm, speaking on a condition of anonymity,
"The genesis of the problem is: lawyers are a close-knit community and if you don't belong to that club, you don't get lucrative work. ... Now, the consultancies are increasingly getting their foot in the door, and doing the work at much lower price for which the lawyers would charge a bomb."
The story notes that the law firms and accounting firm are now competing to their mutual detriment, albeit the clients are unlikely complaining:
Consultancies and law firms are competing with each other in several other areas as well, and this is hurting the bottom lines of both sides as undercutting of fees has become rampant. "They (consultants) do an investment banking deal for a mere Rs 5 lakh [~$8000 US], for which a good law firm would charge around Rs 60 lakh [$90,000 US]," said the managing partner of a New Delhi-based big law firm.
Forensic is one of the most profitable business verticals for the Big 4. The total pie for forensics in India is estimated to be around .`850 crore [~$160 million] and is growing at 15-20 per cent year on year, industry experts said. Competition from lawyers, therefore, hurts the big auditors who among themselves control about 80 per cent of the market in India. Smaller rivals such as Alvarez & Marsal, FTI and Kroll [two US-based companies] control the rest.
Suffice it to say, the Big 4 aren't afraid to fight the elite bar in virtually any jurisdiction, as they have deep pockets and a large number of lawyers on their payroll, all of whom, we can be quite sure, are not engaged in the practice of law, whatever that term means.
This is the beginning of the end of an era, and that's a good thing. We lawyers/legal professionals will reinvent ourselves by finding new ways to add value. In fact, that is already happening. In the long run, we'll feel richer for it. Below is an infographic from The Times story that summarizes the Indian lawyer-accountant standoff.
Sunday, July 19, 2015
The Economist reports a very interesting analysis from Payscale. The questions being asked are pretty simple: If you want to generate earnings that justify the time and cost of an undergraduate education, what should you study and where should you enroll?
Lots of people have strong opinions on this set of questions, but Payscale has the data to answer them empirically. It turns out that at the undergraduates level, course of study is much more important than the prestige of the college or university you attend. The hard evidence is shown below.
For those working in law or thinking about attending law school, a natural question to ask is whether the legal industry is closer to the blue dot (art & humanities) or red dot pattern (engineering/CS/math). A second, related question whether the future of law is more blue or more red.
This a two-part blog post. Part I tries to answer the first question, starting with a careful analysis of the undergraduate chart, which provides a valuable frame of reference that can be discussed more dispassionately (at least among lawyers and law students) than an analysis that questions the value of law school prestige and hierarchy.
Part II, which I will post on Wednesday, explores the second, future-oriented question. I will tip my hand now and say that the future of law will be less blue (arts & humanity) and more red (math/CS/engineering). Within the legal industry, there will be winners and losers; but from the perspective of broader society, this change is a very good thing.
In the Payscale chart above, the y-axis (vertical) is 20-year annualized returns from college fees paid. The x-axis is selectivity, running from under 10 percent to near open admissions.
The Payscale chart is a very good example of how data visualization can be used to communicate both core facts and useful nuance. Here, the lede is unmistakable: the red dots (engineering/CS/math) are overwhelming higher on the ROI scale than the blue dots (arts & humanities). Sure, there are exceptions to this rule, but they don't occur very often. (Observe how rarely a blue dot is above the red fit-line.) This suggests it would be very foolish to get a blue degree and expect a red paycheck unless you have very good information (or skills or talent) that others lack.
The chart conveys another important piece of information -- the red fit-line is flat. This means that for engineering/CS/math majors, prestige has not been very relevant to their eventual earnings. I'll add a nuance here that some empirically savvy readers are bound to point out: It is possible (indeed likely) that fees are higher at more selective schools. So if MIT costs twice as much as a public polytech, and both yield 12% over 20 years, one might wish they had gone to MIT. Still, the flat trendline is surprising. As a general matter, lower ranked schools are not dramatically cheaper than higher ranked schools, and many public schools are highly selective. The flat red trendline suggests that there are (or were, remember these are historical data) many bargains out there. If one is trying to maximize financial returns, the goal is to find a school that will, in the future, be well above the red fit-line (and avoid those below).
The flat red fit-line is also surprising because college selectivity is almost certainly highly correlated with ACT or SAT scores, which our society often views as measures of general intelligence. Yet, there we have it -- a flat trendline. Four years of education seem to be more relevant than a standardized test score taken during high school. That is heartening at many levels.
A third interesting trend -- the blue fit-line is sloped downward. This suggests that in the arts & humanities, selectivity/prestige does have a financial payoff. I don't think this will surprise many readers, albeit the prestige payoff is not very large. To use a simple metaphor, if you attend a more selective college or university to get your arts or humanity degree, you are likely to have a better house in the arts & humanities neighborhood. But on average, you won't be able to afford the same neighborhood as the engineers, computer scientists, and math majors.
What about Law?
Moving on to law, if we want to examine the relationship between earnings and law school attended, the best available evidence is probably the After the JD Study (AJD), which is large, representative sample of law graduates who took and passed the bar in 2000.
Data from AJD Wave 3 suggests that the financial returns are relatively strong for all law school graduates -- ten years out and graduates of Tier 4 schools have median earnings of $100,000 per year. As shown in chart below, this is akin to shifting the blue dots up into the red territory.
The downward sloping fit-line remains, but that doesn't seem to matter very much to happiness. Other AJD data shows that regardless of tier of graduating school, AJD respondents show relatively high and uniform satisfaction with (a) the decision to become a lawyer, and (b) the value of the law degree as an investment. By 2010, 48% of respondents had no debt; only 5.1% had more than $100K in educational debt remaining.
This is all good news. But is it reasonable to extrapolate forward and assume the past is a fairly accurate barometer of the present and the future?
One way to address that question is to ascertain what has changed since 2000. As noted earlier, the AJD sample was composed of law graduates who passed the bar in the year 2000. Figures published by NALP and the ABA show that the percentage of full-time bar passage required jobs has dropped significantly over the last 13+ years -- from 77.3% for the class of 2000 to 57% for the class of 2013. That is a huge delta.
One of the reasons why law school applicants have plummeted is that the career path from JD graduates has become murky. And that is a good place to start Part II.
Sunday, April 12, 2015
Back in February, I wrote a post on The The Early Days of Legal Analytics. It discussed some of the innovations at Lex Machina, a legal start-up that uses Big Data to value contested patents and develop a litigation strategy designed to maximize value / minimize risk. I recently came across another company, Premonition, that claims to use artificial intelligence to select lawyers with the best odds of achieving a favorable result. See Premonition Infographic at bottom of this post.
I spend a lot of time on the road talking to law firm lawyers and legal innovators, including legal start-ups. Many large firm lawyers tend to dismiss new innovations without stopping to listen to, much less gather, relevant facts. Likewise, there is a lot of puffery among legal start-ups as they try to land their first few customers. Thus, I tend to apply a windage factor to accurately interpret what I am being told.
The image below contains Premonition's simple, one-sentence pitch. I don't know about the product, but the concept is pretty clear.
The core benefit Premonition appears to offer is a list of lawyers with winning track records in front of specific judges. We don't need artificial intelligence (AI) to make that calculation. A win-rate is a simple descriptive statistic, even if it has been filtered for a variety of matching criteria.
That said, AI could come in handy in building the requisite data sets. As explained on Premonition's website, courts don't construct their case management systems so they can be vacuumed out by data mining companies. Indeed, local court officials would likely to be hostile to such requests because any resulting statistical model is unlikely to make them look good. Indeed, the purpose of the model is, at least in part, to identify and exploit imperfections in the judicial process.
Because the courts have no incentive to make life easy for Big Data vendors, Premonition's Chief Innovation Officer, Toby Unwin, claims to have tackled the data assembly problem by building a technology that scrapes and buckets the necessary data from the jumbled chaos of web portals for state and local courts. Such a task, in theory, can be performed by fairly standard machine learning, which qualifies as AI, at least in some circles.
Assuming Premonition has built a machine that can calculate win-rate of lawyers, is that information valuable to clients trying to maximize the likelihood of a favorable result? I don't know, but its plausible enough to test with data.
Some data skeptics will argue that win-rates, whether high or low, are just artifacts of any normally distributed outcome. The reasoning runs, "Two, three, and four sigma events occur in the ordinary course of life, but regression to the mean is pulling them back to the center. Thus, they are poor predictors of the future." This reasoning is why many people buy indexed funds rather than shares in actively managed mutual funds. Cutting the other way, the hedge fund industry is premised on the belief that some money managers are a lot better than others. Five-year return rates are aggregated and published in the industry trade press. Some of the returns may be due to random luck, but some could be attributed to superior skill. It is absurdly unlikely, for example, that Warren Buffet's success in buying and selling stocks is just a 60-year lucky streak.
In the case of win-rates in court, I can think of at least two plausible non-random factors that could affect outcomes:
- Judicial bias or favoritism. Judges, either consciously or unconsciously, may react differently to the case depending upon the advocate. One does not have to wade too far into the political science literature to find peer-reviewed empirical studies that reveal that judges are influenced by more than just facts and law.
- The gap between credentials and bona fide skill. Law has historically been a credence good. This means the market relies on elite credentials and firm reputation as a proxy for skill. Yet, it is plausible that some lawyers may lack the pedigree to get hired by large, elite law firms, yet they go on to develop outstanding legal skills, perhaps because of superior drive, intellectual curiosity, or "early at-bats" as a prosecutor or public defender. If these folks exist, Big Data can likely find them.
I can't vouch for Premontion's technology beyond two statements: (1) it sounds plausible, and (2) it is a waste of time to debate its usefulness because it's an empirical question that the market will answer in the relatively near term.
Below is one of Premonition's infographics.
Saturday, February 7, 2015
There is an interesting story in Forbes on Lex Machina, a legal start-up that provides analytics for use in patent litigation. See Dan Fisher, Stanford-Bred Startup Uses Moneyball Stats to Handicap Judges, Forbes, Feb. 2, 2015. The company was created by faculty at Stanford Computer Science and Stanford Law. As the company emerged from the University, the reigns were handed to Josh Becker, a Stanford JD-MBA. To date, the company has raised $8 million in start-up funding. According to the Forbes article, the company's clients include some of the nation's large technology companies plus one-third of the AmLaw 100.
What makes Lex Machina so interesting is that the company is not a NewLaw service provider that trying to take marketshare. Instead, Lex Machina is a toolmaker. It is a true Big Data company that provides analytics to (a) value contested patents and (b) protect/maximize that value through a litigation strategy that is informed by data.
The impact of Lex Machina is hard to decipher, primarily because if it does provide an edge, the customers are unlikely to be too vocal. Just like a hedge fund with an effective trading strategy, why advertise the ingredients of your secret sauce? Indeed, compared to other toolmakers (e.g., predictive coding, expert systems) Lex Machina's benefits are less about efficiency and more about affecting the outcomes of cases -- who wins and by how much. If Lex Machina is truly delivering, it will eventually touch-off a Big Data legal analytics arms race akin to the quant revolution on Wall Street. Dan Katz frequently makes this point, and I think he is right. The Forbes article makes the point that Lex Machina is already moving into adjacent areas of IP law and general commercial litigation.
The broader legal industry is unlikely to notice Lex Machina until it has a substantial liquidity event -- i.e., it's acquired or goes public, making if founders far richer than the BigLaw partners and in-house lawyers they currently serve.
If we are looking for early signs of a tipping point for legal analytics, one marker may be the number of Stanford Law grads who are turning down entry-level opportunities in BigLaw to pursue legal start-ups. In recent years, Stanford Law grads fresh out of law school have gone on to found other venture-backed legal start-ups like Ravel Law, Judicata, and Law Gives. Back in 2013, The Stanford Lawyer (SLS alumni magazine) had an extensive write-up with several examples. See Sharon, Driscoll, A Positive Disruption, June 4, 2013. In 2014, Stanford's CSO offered a program titled, An Alternative to BigLaw -- Startups.
The legal world isn't going away; it's just changing.
Monday, October 20, 2014
What Law Schools Can Learn from Dental Schools in the 1980s Regarding the Consequences of a Decline in Applicants
For four consecutive years we have seen a decline in the number of applicants to law school and a corresponding decline in the number of matriculating first-year students. Over the last year or two, some have suggested that as a result of this “market adjustment” some law schools would end up closing. Most recently, the former AALS President, Michael Olivas, in response to the financial challenges facing the Thomas Jefferson Law School, was quoted as stating that he expects several law schools to close.
To date, however, no law schools have closed (although the Western Michigan University Thomas M. Cooley Law School recently announced the closure of its Ann Arbor branch).
Have law schools found ways to cut costs and manage expenses in the face of declining revenues such that all will remain financially viable and remain in operation? Is it realistic to think that no law schools will close?
Although there may be a number of people in the legal academy who continue to believe that somehow legal education is “exceptional” – that market forces may impose financial challenges for law schools in the near term, but will not result in the closing of any law schools -- this strikes me as an unduly optimistic assessment of the situation.
To understand why, I think those in legal education can learn from the experience of those in dental education in the 1980s.
The Dental School Experience from 1975-1990
In the 1980s, dental school deans, along with provosts and presidents at their host universities, had to deal with the challenge of a significant decline in applicants to dental school.
At least partially in response to federal funding to support dental education, first-year enrollment at the country’s dental schools grew throughout the 1970s to a peak in 1979 of roughly 6,300 across roughly 60 dental schools. Even at that point, however, for a number of reasons -- improved dental health from fluoridation, reductions in federal funding, high tuition costs and debt loads -- the number of applicants had already started to decline from the mid-1970s peak of over 15,000.
By the mid-1980s, applicants had fallen to 6,300 and matriculants had fallen to 5,000. As of 1985, no dental schools had closed. But by the late 1980s and early 1990s there were fewer than 5000 applicants and barely 4000 first-year students – applicants had declined by more than two-thirds and first-year enrollment had declined by more than one-third from their earlier peaks. (Source – American Dental Association – Trends in Dental Education – U.S. Dental School Applicant and First-Year Enrollment Trends 1955-2009 (copy on file with author).)
How did dental schools and their associated universities respond to this changing market? Between 1986 and 1993, six private universities closed their dental schools: Oral Roberts University, Tulsa, Oklahoma (1986); Emory University, Atlanta, Georgia (1988); Georgetown University, Washington, D.C. (1990); Fairleigh Dickinson University, Rutherford, New Jersey (1990); Washington University, St. Louis, Missouri (1991); and Loyola University, Chicago, Illinois (1993). (Source: Dental Education at the Crossroads: Challenges and Change, Table 1.1 (Institute of Medicine 1995)). According to a New York Times article from October 29, 1987, “Georgetown, formerly the nation's largest private dental school, decided to close after a Price Waterhouse study found that the school would have a $3.6 million deficit by 1992.” (Source: Tamar Lewin, Plagued by Falling Enrollment, Dental Schools Close or Cut Back, New York Times, Oct. 29, 1987).
Some of the primary factors contributing to the closing of dental schools were described as follows:
Financial issues were repeatedly described as critical. Dental education was cited as an expensive enterprise that is or may become a drain on university resources. On average, current-year expenditures for the average dental school are about $1 million more than current revenues. … The declining size and quality of the applicant pool during the 1980s played a role in some closures by threatening the tuition base and prestige on which private schools rely. Faculty and alumni resistance to change may feed impatience among university administrators. In some institutions, the comparative isolation of dental schools within the university has provided them with few allies or at least informed colleagues and has left them ill-prepared to counter proposals for "downsizing." (Source: Dental Education at the Crossroads: Challenges and Change, at 202-203 (Institute of Medicine 1995)).
The Law School Experience from 2004-2014
In terms of applicants and enrollment over the last decade, the trends law schools have experienced look remarkably comparable to the experience of dental schools in the 1970s and 1980s. According to the LSAC Volume Summary, applicants to law schools peaked in 2004 with 100,600 applicants (and roughly 48,200 first-year students). By 2010, applicants had fallen to roughly 87,600, but first-year enrollment peaked at 52,500. Over the last four years, applicants have fallen steadily to roughly 54,700 for fall 2014, with a projected 37,000 first-years matriculating this fall, the smallest number since 1973-74, when there were 40 fewer law schools and over one thousand fewer law professors. (Source - ABA Statistics)(For the analysis supporting this projection of 37,000 first-years, see my blog post on The Legal Whiteboard from March 18, 2014.)
The two charts below compare the dental school experience from 1975 to 1990 with the law school experience in the last decade. One chart compares dental school applicants with law school applicants and one chart compares dental school first-years with law school first-years. (Note that for purposes of easy comparison, the law school numbers are presented as one-tenth of the actual numbers.)
(Sources – American Dental Association – Trends in Dental Education – U.S. Dental School Applicant and First-Year Enrollment Trends 1955-2009 (copy on file with author) and the LSAC’s Volume Summary (with my own estimates for 2014 based on the LSAC’s Current Volume Summary)).
The Law School Experience 2014-2019
Notably, these charts do not bode well for law schools. The law school experience tracks pretty closely the dental school experience over the first ten years reflected in the charts. For law schools, 2014 looks a lot like 1985 did for dental schools.
There might be any number of reasons why the law school experience over the next several years might be different from the dental school experience in the late 1980s and early 1990s, such that the next several years do not continue as a downward trend in applicants and matriculants. The market forces associated with changes in the dental profession and dental education in the 1980s are not the same as the market forces associated with changes in the legal profession and legal education in the 2010s and the cost structures for dental education and legal education are not exactly the same.
The problem for law schools, however, is that without an upward trend law schools will continue to face significant financial pressures for the next few years just as dental schools did in the late 1980s. There might be some encouraging news on the employment front over the next few years as the decreasing number of matriculants will mean a decreasing number of graduates in 2015, 2016 and 2017. Even without any meaningful growth in the employment market for law graduates, this decline in the number of graduates should mean significant increases in the percentage of graduates finding full-time, long-term employment in bar passage required jobs. Over time, this market signal may begin to gain traction among those considering law school such that the number of applicants to law school stops declining and perhaps starts increasing modestly.
But the near term remains discouraging. The number of people taking the June 2014 LSAT was down roughly 9% compared to June 2013 and the anticipation is that the number of test-takers in the most recent administration in late September was down as well compared to October 2013. Thus, applicants well might be down another 5-8% in the 2014-15 admissions cycle, resulting in perhaps as few as 51,000 applicants and perhaps as few as 35,000 matriculants in fall 2015. Even if things flatten out and begin to rebound modestly in the next few years, it would appear to be unlikely that the number of matriculants will climb back near or above 40,000 before the fall of 2017 or 2018.
Moreover, if current trends continue, the matriculants in 2015 also are going to have a significantly less robust LSAT/GPA profile than the matriculants in fall 2010. As I noted in a blog posting on March 2, 2014, between 2010 and 2013, the number of law schools with a median LSAT less than 150 grew from 9 to 32, and the number with a median LSAT of 145 or below grew from 1 to 9.
What Does this Mean for the Average Law School?
Assume you are the Dean at a hypothetical private law school that had 600 students (200 in each class) and a budget based on $18 million in JD tuition revenue in 2010-11. (This reflects a net tuition of $30,000 from each student – with nominal tuition set at $40,000 but with a discount rate of 25%.) Further assume that with this budget, your law school was providing $2.0 million annually to the university with which it is affiliated. As of 2010-11, your entering class profile reflected a median LSAT of 155 and a median GPA of 3.4.
Assume first-year enrollment declined to 170 in 2011, to 145 in 2012, and to 125 in 2013, a cumulative decrease in first-year enrollment since 2010 of 37%. As you tried to balance enrollment and profile, the law school managed to maintain its median LSAT and GPA in 2011, but saw its LSAT and GPA medians decline to 153 and 3.35 in 2012 and to 152 and 3.30 in 2013.
This means that for the 2013-14 academic year, the law school had only 440 students, a decrease of roughly 27% from its total enrollment of 600 in 2010, with a much less robust entering class profile in comparison with the entering class profile in 2010. (Note that this assumes no attrition and no transfers in or out, so if anything, it likely overstates total enrollment). (For comparison purposes, the National Jurist recently listed 25 law schools with enrollment declines of 28% or more between 2010-11 and 2013-14.)
Assume further that the law school had to increase its scholarships to attract even this smaller pool of students with less robust LSAT/GPA profiles, such that the net tuition from each first-year student beginning in fall 2012 has been only $25,500 (with nominal tuition now set at $42,500, but with a discount rate of 40%).
For the 2013-14 academic year, therefore, you were operating with a budget based on $12,411,000 in JD tuition revenue, a decrease in JD tuition revenue of over $5.5 million since the 2010-11 academic year, over 30%. (170 x $32,500 for third years ($5.525 million), 145 x $25,500 for second years ($3.698 million), and 125 x $25,500 for first-years ($3.188 million)).
What does this mean? This means you have been in budget-cutting mode for over three years. Of course, this has been a challenge for the law school, given that a significant percentage of its costs are for faculty and staff salaries and associated fringe benefits. Through the 2013-14 academic year, however, assume you cut costs by paring the library budget, eliminating summer research stipends for faculty, finding several other places to cut expenditures, cutting six staff positions and using the retirement or early retirement of ten of your 38 faculty members as a de facto “reduction in force,” resulting in net savings of $3.59 million. In addition, assume you have gotten the university to agree to waive any “draw” saving another $2 million (based on the “draw” in 2010-2011). Thus, albeit in a significantly leaner state, you managed to generate a “balanced” budget for the 2013-14 year while generating no revenue for your host university.
The problem is that the worst is yet to come, as the law school welcomes a class of first-year students much smaller than the class of third-years that graduated in May. With the continued decline in the number of applicants, the law school has lower first-year enrollment again for 2014-15, with only 120 first-year students with a median LSAT and GPA that has declined again to 151 and 3.2. Projections for 2015-16 (based on the decline in June and October 2014 LSAT takers) suggest that the school should expect no more than 115 matriculants and may see a further decline in profile. That means that the law school has only 390 students in 2014-15 and may have only 360 students in 2015-16 (an enrollment decline of 40% since 2010-11). Assuming net tuition for first-year students also remains at $25,500 due to the competition on scholarships to attract students (and this may be a generous assumption) – the JD tuition revenue for 2014-15 and 2015-16 is estimated to be $9,945,000, and $9,180,000, respectively (a decline in revenue of nearly 50% from the 2010-11 academic year).
In reality, then, the “balanced” budget for the 2013-2014 academic year based on revenues of $12,411,000, now looks like a $2,500,000 budget shortfall in 2014-15 and a $3,200,000 budget shortfall for the 2015-16 academic year, absent significant additional budget cuts or new revenue streams (with most of the “low hanging fruit” in terms of budget cuts already “picked”).
While you may be able to make some extraordinary draws on unrestricted endowment reserves to cover some of the shortfall (assuming the law school has some endowment of its own), and may be creative in pursuing new sources of revenue (a certificate program or a Master of Laws), even if you come up with an extra $400,000 annually in extraordinary draws on endowment and an extra $400,000 annually in terms of non-JD revenue you still are looking at losses of at least $1,700,000 in 2014-15 and at least $2,400,000 in 2015-16 absent further budget cuts. Even with another round of early retirement offers to some tenured faculty and/or to staff (assuming there are still some that might qualify for early retirement), or the termination of untenured faculty and/or of staff, the budget shortfall well might remain in the $1,000,000 to $1,700,000 range for this year and next year (with similar projections for the ensuing years). This means the law school may need subsidies from the university with which it is affiliated, or may need to make even more draconian cuts than it has contemplated to date. (For indications that these estimates have some relation to reality, please see the recent stories about budget issues at Albany, Minnesota and UNLV.)
Difficult Conversations -- Difficult Decisions
This situation will make for some interesting conversations between you as the Dean of the law school and the Provost and President of the university. As noted above in the discussion of dental schools, the provost and president of a university with a law school likely will be asking: How “mission critical” is the law school to the university when the law school has transformed from a “cash cow” into a “money pit” and when reasonable projections suggest it may continue to be a money pit for the next few years? How "mission critical" is the law school when its entering class profile is significantly weaker than it was just a few years ago, particularly if that weaker profile begins to translate into lower bar passage rates and even less robust employment outcomes? How “mission critical” is the law school to the university if its faculty and alumni seem resistant to change and if the law school faculty and administration are somewhat disconnected from their colleagues in other schools and departments on campus?
Some universities are going to have difficult decisions to make (as may the Boards of Trustees of some of the independent law schools). As of 1985, no dental schools had closed, but by the late 1980s and early 1990s, roughly ten percent of the dental schools were closed in response to significant declines in the number and quality of applicants and the corresponding financial pressures. When faced with having to invest significantly to keep dental schools open, several universities decided that dental schools no longer were “mission critical” aspects of the university.
I do not believe law schools should view themselves as so exceptional that they will have more immunity to these market forces than dental schools did in the 1980s. I do not know whether ten percent of law schools will close, but just as some universities decided dental schools were no longer “mission critical” to the university, it is not only very possible, but perhaps even likely, that some universities now will decide that law schools that may require subsidies of $1 million or $2 million or more for a number of years are no longer “mission critical” to the university.
(I am grateful to Bernie Burk and Derek Muller for their helpful comments on earlier drafts of this blog posting.)
Sunday, June 1, 2014
Jordan Furlong is one of the first-rate commentators on the legal industry. He is an excellent observer, a deep thinker, and skilled and stylish communicator.
Over at Law 21, Jordan has written a set of companion essays that explain the ferment that is now taking hold in the legal industry. Check them out if you need or want the seemingly complex made simple.
The first essay is a highly useful reference guide to NewLaw (#NewLaw), a category coined by the Australian consultant George Beaton. Jordan modestly titled the essay "An Incomplete Inventory of NewLaw," but its alleged incompleteness does not distract from its usefulness. Complicated things like new business models need to be organized and simplified before we can get our heads around them. Here, Jordan creates a elegant typology and fills it out with example after example. Before Jordan's essay, few of us could be sure we were discussing the same ideas or concepts.
One of Jordan's most noteworthy observation is that the talent side of NewLaw is appears to be growing faster in the UK (new models of organizing and delivering legal services and content) while the US seems to be getting the most traction in legal tech. The former is likely due to liberalization of regulations that flow from the UK's Legal Services Act of 2007 and the latter from the proximity to venture funding. To have similar legal ecosystems developing in different ways is bound to trigger consequences and interactions that we cannot fully anticipate.
Jordan's second post is on the failure of legal innovation, which he points out is nothing more than the precursor long-term success. See "The Failure of Legal Innovation," Law 21, May 29, 2014. I definitely agree. When I look at the legal innovation space in 2014 -- and my frame for reference is LegalTech, LexRedux, ReInvent Law, some of the ABA Legal Rebels, and a lot of shoe-leather research on my part -- I think of Detroit in 1905. There were roughly 125 car manufacturers and hundreds more in other parts of the country, as Detroit was not yet car capital of the world. All of those business owners were right about one thing: The car is the future. But they wistful optimists about something else -- their car company is the future.
A start-up is like a sapling in the woods -- the odds are against it ever growing to the treeline. Fortunately, in the start-up ecosystem good ideas and talented entrepreneurs never really lose. Instead, they are rolled up into competitors to form the types of companies that can truly shape an entire new industry. Along these lines, if I were working in investment banking these days, I would be trying to specialize in the legal sector, as the roll-ups in this space are going to be fast and furious in the years to come.
Let's fasten our seatbelts. The next several years are going to be time of great tranformation.
Tuesday, May 27, 2014
In my inbox this morning was the HBS Daily Stat with the title, "You'll Absorb More if You Take Notes Longhand." Here is the accompanying explanation:
College students who take notes on laptop computers are more likely to record lecturers’ words verbatim and are thus less likely to mentally absorb what’s being said, according to a series of experiments by Pam A. Mueller of Princeton and Daniel M. Oppenheimer of UCLA. In one study, laptop-using students recorded 65% more of lectures verbatim than did those who used longhand; a half-hour later, the laptop users performed significantly worse on conceptual questions such as “How do Japan and Sweden differ in their approaches to equality within their societies?” Longhand note takers learn by reframing lecturers’ ideas in their own words, the researchers say.
SOURCE: The Pen Is Mightier Than the Keyboard: Advantages of Longhand Over Laptop Note Taking (emphasis in the original)
Wouldn't the same analysis almost surely apply to law students? Experience tells me that many law students would argue that they are in the minority who learn better through computer transcription. But what if, given a choice, over half decide to use laptops? It would be likely that many, if not most, would be making the wrong tradeoff.
Data rarely changes hearts and minds. As a result, there is likely a gap between maximum learning/knowledge worker productivity and what we are able to accomplish in an education or workplace setting. Why? People like what they are used to and rationalize why data does not apply to them. There is a solution to dilemma, I suspect. We just have not found it yet.
Monday, April 28, 2014
Every few months, whether I like it or not, I get served a slice of humble pie. I thought those tiring of the steady stream of law school critiques might find this slice particularly tasty, as someone else (me) is ingesting it.
Over the last few years, I have begun reading books on management and leadership. My interest in this topic is driven partly by my belief that law schools will be tooling up in this area in the years to come; and partly by a desire to learn about, and acquire, what I hope to teach.
The finest resource I have found on this topic is Management and Leadership: A Group of Letters to an Industrial Organization. This book was originally published in 1948 by Carl Braun, a prominent industrialist of the early and mid-20th century. Braun wrote this book, and several others, for the benefit of his managers at C.F. Braun & Co., which was an engineering company that designed and built many of the nation's oil refineries. I was drawn to Braun because his company was such a spectacular and enduring success.
The success, however, not not merely financial. What made C.F. Braun so successful for so long was Braun's relentless drive to maximize the potential of every person in his organization.
Now let's think about that -- reaping large profits by putting your people first. For Braun, this was not a abstraction. It was, in fact, the company's track record over a period of several decades. In 1989, 35 years after Carl Braun's death, C.F. Braun & Co. was sold to what is now Kellogg Brown & Root (KBR). And today, people who worked there are still reminiscing over the positive impact the company had on their lives and the lives of their families. If you think I am exaggerating, check out the C.F. Braun Alumni Group on LinkedIn.
I have read Management and Leadership several times. Without exception, each time I put the book down I feel both challenged and inspired. Well, this last time, I read the following passages in one sitting -- and suffice to say, the contrast hit be pretty hard. You be the judge.
Below in a section titled "The Doers Must Teach," Braun implores his managers to accept their role as teachers, as our nation's schools, including colleges and universities, lack the practical orientation of modern industry.
Our field of endeavor, industry, unlike medicine for instance, is one of those fields in which the teachers are not the doers. Our teachers, whether in grade-school, high school, or college, seldom have had industrial experience. Few have had even slight contact with industry. And fewer still have current contacts. Not understanding industry, they too often judge it by its worst members, and so develop for it an active disrespect.
The result is that, with rare exceptions, teachers do not find out from industry what industry needs from them. Nor do they seek from industry the teaching-methods that the better industrialists have developed. The gap is enormous between the abstract teachings of our schools and the concrete needs of industrial man. It is this gap that we industrial leaders must fill. We must fill in what's missing. And we must make the whole a living growing thing.
Well, as I am reading the above passage, my mind is quickly drawing a parallel between Braun and numerous incisive and trenchant critiques of legal education. See, e.g., Legal Education's Ninety-Five Theses, Legal Whiteboard, Feb 1, 2012; Harry Edwards, The Growing Disjunction Between Legal Education and the Legal Profession, 91 Mich L Rev 34 (1992). Yes, I thought to myself, these authors, like Braun, really know what they are talking about.
But that was not what Braun had in mind. About 20 pages later, Braun focuses on legal education and the case system as a beacon that will lead us to a better way.
The law schools have the right idea. They used to bore law students by droning at them from Blackstone - that encyclopedic treatise on law theory. But now they teach from concrete cases - and they've done it for eighty years. The student studies adjudicated cases - cases that are real, typical, modern. From these cases, with the help of his teacher, the student builds up the guiding rules.
This is the right method. Let it be our method. Let's shake ourselves free of the horrible methods we have been brought up on in our schools. Let's have no dogmatic rules in our teaching. Let's have no silly and artificial examples that nobody ever uses. Let's be sure that in all our teaching we start with concrete cases -- cases that are real, that are applicable to our purposes, and that preferably are within the practical experience of our learner.
Of course, in 1947, the year before Braun would extol law schools to his audience of engineers, the influential legal realist, Jerome Frank, published an incisive critique that called for the near complete overthrow of the 80-year tradition. See Frank, A Plea for Lawyer-Schools, 56 Yale L J 1301 (1947).
Alas, we humans often find the deepest faults with what is close and intimate, and greatest virtue with what is mythical and far away. How often a sense of accurate proportion eludes us. After several years traveling the country discussing legal education reform, I have gradually concluded that if I want to maximize my influence on change, I need to build and encourage, not criticize and debate.
Friday, November 8, 2013
Clayton Christensen is the Harvard Business School professor who wrote The Innovator's Dilemma, the seminal book on why successful businesses so rarely stay on top over the long term. Although focused on the tech industry -- where product cycles are very short -- Christensen's framework has a much wider application, including legacy industrial enterprises and countries. In 2011, Christensen published a book called The Innovative University, which applied the Innovator's Dilemma framework to higher education.
Below is a YouTube video of Christensen explaining his thesis to a conference in Dallas organized around the future of public universities. His talk is very long by online video standards (80 minutes) but worth the time of anyone who wants to understand the Christensen framework and its application to higher ed. At approximately minute 45, Christensen specifically mentions law schools. Below the video is some additional context on Christensen.
Remember that near presidential coup at University of Virginia, which was reported in the New York Times Magazine last fall (link)? Well, Christensen's ideas had begun to propagate within the university trustee community, thanks in part to a letter than Christensen and Henry Eyring had recently written to the American Council of Trustees and Alumni (ACTA).
As discussed in the New York Times article, the coalition that was animated by Christensen's ideas was ultimately defeated by the palace guards. But that was the first attempted coup at a major research university, not the last. As Christensen points out in the video, universities are feeling pressure from innovative models that "compete against nonconsumption." In other words, lots of people would like the knowledge taught in the great universities, but that demand goes unsatisfied because of selective admissions requirements, tuition, and geography.
MOACs are the first volley in figuring out this untapped market. Those that dismiss MOACs as irrelevant are missing the bigger picture of what early stage disruption looks like.
Specifically, according to Christensen, here is the recurring dynamic: the new entrants siphon off work from the bottom-end -- work that the high-end says it does not want anyway. The cycle repeats itself a few times until, much to the incumbents' surprise, the bottom-end becomes more economically relevant and powerful. Why does top-end let this happen? Because the incumbents have come to view success as elite status and high margins, which is an unrealistically high long-term bar unless you are continuously innovating. Eventually, the so-called high-margin niche becomes insufficient to sustain the enterprise, and giants fall -- see the automotive industry, steel, computer hardware, televisions, consumer electronics, etc.
That said, does the university model of education have a life cycle, or is it above these coarse market considerations? I think it probably does.
In the year 2013, lots of knowledge is free or incredibly cheap. Next year, even more, and so on for the foreseeable future. As a result, many people are able to become astonishingly knowledgable and skilled because of the sheer joy of learning and becoming more competent. It turns out that university credentials are a pretty noisy signal for knowledge and competence -- a small positive correlation, yes, but not much more. This is an information gap problem.
In terms of sheer productitivity, most employers would prefer the folks who are driven to learn and continuously improve. Google has already figured this out, as a substantial portion of their high-end workforce has never completed college. Google employs them for their abilities, not their degrees.
When opportunity is unbundled from university credentials -- i.e., the information gap problem described above becomes cost-effective to solve -- the demand for university education as it currently exists (expensive and in limited supply) will go down. From a social perspective, this is a good thing. But it means that universities will have to innovate in the years to come in order to justify our tuition and fees.
Tuesday, October 22, 2013
My colleague and collaborator, Chris Zorn, is teaching a course at Penn State called "Big Data & the the Law." It draws upon several disciplines, including the law. See BDSS. He has been telling me about the crazy creative projects that are taking root in this class, which includes aspiring statisticians, geographers, political scientists, sociologists, public health professionals, and information science folks (alas, no law students, though the course was open to them).
Data visualization is one of the lynchpins of big data interpretation. Below is a very good example. It was generated by Josh Stevens, a grad student at Penn State who is enrolled in the class. I am told this specific work flowed out of the GDELT hackathon hosted by BDSS a few weeks ago. Kind of useful for allocating scarce resources to reduce violent conflict. Uses both time and space. For the full context, see this post.
Sunday, October 20, 2013
I would. The best example of ODR I have come across is Modria, who's tagline is "Any issue, resolved."
Before dismissing Modria as a trivial Internet parlor game, consider this: The technology and process at work here got its start at Paypal and Ebay. Why did Paypal and Ebay become so good at dispute resolution? Because their goal of becoming mega-volume businesses depended on it. If you have millions of transactions daily, a huge volume of low-stakes complaints is inevitable. If dissatisfied customers stay dissatisfied, they don't come back. Worse, they'll talk to their friends.
Now watch is video. Note that the target audience is businesses who (a) feel disputes are a drain on their time and energy, and (b) want happy, loyal customers who vouch for them to friends and family. A prompt, fair resolution to a dispute actually deepens the trust relationship. That's not speculation. That's science. And Modria, and it investors, know that.
In this book, Tommorrow's Lawyers, Richard Susskind talks about ODR as a highly disruptive innovation that will fundamentally alter the legal landscape. It is hard to fully appreciate that claim without seeing concrete example, like the Modria business model, up and running. Many businesses could be drawn to Modria, but so could/would many smaller governmental units. Indeed, several (progressive) county governments have become clients (e.g., on property assessment appeals).
Modria is disruptive because so many forums for resolving disputes, such as courts, repeat-player arbitrations, and various government boards, are not perceived as prompt, fair, and/or just, often times because costs of dispute resolution are so high. So even if the dispute is resolved correctly on the merits--for the subset who can pay the cost--there remains a large residue of dissatisfaction.
This is fundamentally a problem of institutional design. (The ReInvent Law folks understanding this.) The goal, or ought to be, a speedy, low-cost, resolution that is maximizes on the uumber of user who perceived the outcome as fair. Does any state or federal court think this way? In Tomorrow's Lawyers, Susskind asks whether "court is a service or a place" (p. 99). Alas, this is a staggeringly very large market.
Check out the management team of Modia. These folks come primarily from the dispute resolution programs in business and public policy schools. It is worth noting, however, that Modria's Board and its big-time investors include several lawyers, including Jason Mendelsohn, a former lawyer at Cooley who now works as a venture capitalist. Jason has invested in other businesses in the emerging legal vendor space.
Times are changing. And the pace of that change is picking up.
October 20, 2013 in Cross industry comparisons, Current events, Data on the profession, Important research, Innovations in law, New and Noteworthy, Structural change, Video interviews | Permalink | Comments (4)
Sunday, October 13, 2013
General counsel from large legal departments are becoming increasingly skeptical of the value provided by leading brand-name law firms, such as the AmLaw 20 or the Magic Circle. That is the conclusion of some compelling research just posted on the HBR Blog Network, the online idea forum run by Harvard Business Review.
The research was conducted by AdvanceLaw, which is a company that vets law firms and lawyers on an as-requested basis on behalf of legal departments. Some of AdvanceLaw's clients include Google, Nike, Sherwin-Williams, Lenovo, Towers Watson, Mastercard, Panasonic, eBay, Mastercard, Deutsche Bank, McDonald's, Molson Coors, Nestle, Heinz, Clorox, Unilever, CSS, Starwood Hotels, etc.
AdvanceLaw is a good example of what Richard Susskind calls a "closed legal community." See Tomorrow's Lawyers, chapter 5. Some essential background on AdvanceLaw is discussed below. But I am sure readers want to see the data first. The reported research was based on responses from 88 general counsel, who answered two questions:
- How does law firm pedigree affect their buy decision for a high-stakes matter?
- Is law firm pedigree associated with more or less client responsiveness?
Below are the results posted on the HBR Blog Network:
Readers are probably wondering, "Who is AdvanceLaw and why are they asking these types of questions?" I have some intel on this topic.
AdvanceLaw was formed four years ago by Firoz Dattu, a Harvard-trained lawyer who spent time in BigLaw (Paul Weiss). Firoz eventually found his way to the Corporate Executive Board, which a publicly traded company (NYSE: CEB) that specializes in subscription-based research organized by industry and function. CEB uses the aggregated research for value-add services such as benchmarking and best practices.
Because they specialize in factgathering for strategy and management, CEB has a long history of employees leaving to start niche businesses. That is what happened here. Firoz helped launch, and ultimately ran, the General Counsel Roundtable (GCR), which is a CEB functional group that cuts across industries. I have been to a GCR meeting (it is invitation-only for outsiders). Suffice to say that a persistent theme of conversation was controlling legal costs without compromising quality. A seemingly tall order, right?
Firoz started AdvanceLaw because of perceptions by general counsel that they were being overcharged and underserved by large firms in the major markets. Any GC who has reviewed data from TyMetrix would quickly draw the same conclusion, as a large firm lawyer with 20-years experience in, say, Minneapolis often has a lower billing rate than a second-year at a mega-firm in NYC. AdvanceLaw has positioned itself as a trusted advisor that can provide reliable guidance in shopping for value outside the big brand-name firms.
So how does this service work? As noted earlier, AdvanceLaw is an example of a closed legal community. To get into the AdvanceLaw network, prospective law firms are run through a rigorous RFP process that evaluates things like expertise, innovation, quality, compensation systems, and track record on diversity.
If a firm makes the AdvanceLaw cut, they start getting assignments from participating legal departments. But here is the enormous differientator. Feedback is collected by AdvanceLaw and shared with the law firm and other AdvanceLaw legal departments. What is the effect?
- For law firms, changing their behavior to (a) protect their reputations, and (b) get more work.
- For legal departments, to the extent they are getting value, migration of their legal work out of pedigreed law firms in the major markets to lower cost yet high quality regional and super-regional firms. The savings are roughly 30-40% with no loss in quality and better responsiveness. Some of the winners in the AdvanceLaw tournament are listed here.
AdvanceLaw also has a globalization overlay, which has been created with GC assistance. For instance, in Argentina and India, AdvanceLaw works with quite prominent firms who also exhibit efficiency. In the UK and Canada, the firms are substantial players, but are slightly less pedigreed than the Magic Circle and Seven Sisters, respectively.
So let's boil down AdvanceLaw's business model into its simplest terms: It gathers information so they legal departments don't pay excessive prices for the CYA (cover-your-ass) benefits of hiring high-prestige Big Law.
CYA still matters, of course. But through AdvanceLaw, pedigree is being given a more accurate valuation. A likely large second-order effect of AdvanceLaw is the acceleration of AFAs through AdvanceLaw firms, as feedback (on quality) and publicity (to drive volume) is what is needed to make that transition.
Susskind is right. Closed legal communities are going to be major disruptors in the legal marketplace.
Wednesday, September 25, 2013
Somehow I missed this interesting Bloomberg Law interview of Mark Harris, CEO of Axiom Law. Anyone interested in the future of the legal industry ought to be watching and listening to Mark. Why? Because his company -- which now grosses north of $150 million per year -- has the ear and the pocketbook attention of the general counsel of the world's largest companies.
In the 15 minute video interview below, Mark answers several hard questions:
- Is Axiom Law a law firm? No. That is why it can take outside non-lawyer investment.
- Is Axiom Law competing with BigLaw? In some contexts, the answer is clearly yes.
- Is Axiom Law considering an IPO? Not now, but perhaps someday in the future. "There would be some advantages to being a public company."
All of this adds up to a lot of potential disruption. Mark uses that very word. For additional background on Axiom Law, see American Lawyer story, "Disruptive Innovation."
Monday, September 23, 2013
Perhaps the key insight is that "data by itself is useless. To extract value from it, you need the ‘three Ts’: talent, technique and transformation.
- Talent. "When you start out, you don’t need the top experts to start making sense of your data. You may just need people with curiosity, good statistical skills and a desire to learn. These are the kind of people who will quickly see how data can be managed and packaged to solve problems. And once they do, they will want to get better at it."
- Technique. "Big Data needn’t mean Big Complexity. ... [A]nalytical techniques can be sophisticated, but it’s also possible to keep it simple – especially at the start of the journey. Get the basics right first, and then you can become more advanced as you get better at it."
- Transformation. "Becoming a data-driven legal team – law firm or corporate – is a journey. Change is slow, so don’t expect an overnight transformation. The best approach is to bring the whole organisation with you - if everyone from the partners and CEOs to the interns buy into your data strategy, it will start delivering returns faster."
So who will be the big winners when it comes to Big Data? Definitely some start-ups become they they don't have to transform -- it's a clean sheet operation from the very beginning; they also have more patience and tolerance for trial and error. Yet, BigLaw is sitting on top of a lot of the essential data, so there will be some winners there too. To my mind, it will turn on the ability of some BigLaw shops to leverage talent and technique into some early victories that will aid the tranformation project. If it works, it will be a case study in strategic leadership and effective change management.
By the way, Wolters Kluwer Corporate Legal Services is a sophisticated place. They own TyMetrix, which is the perhaps the best current example of BigData operating in the BigLaw ecosystem. TyMetrix's Real Rate Report is being used to agressively control lawyer billing rates.
Sunday, September 22, 2013
Disruption in the legal industry appears to be crossing an important milestone -- the emergence of the revolving door among the first generation innovators. Evidence comes from this press release published on the Wall Street Journal website.
In 2010, a BigLaw partner leaves BigLaw (DLA Piper) to take a high-level job at Axiom, the most well-known disruptor in the legal industry. Then, 2.5 years later, he leaves to run the Discovery Services practice at Huron Consulting Group. Huron Consulting, by the way, is a publicly traded company (NASDAQ: HURN) with $626 million in revenues in 2012. Legal is one of Huron's core industries. It currently has 1,500 "seats" for conducting 24/7 document review services in the U.S., Europe, and India.
Let's summarize: BigLaw to legal start-up to publicly held company trying to expand its wedge in the legal industry. Granted, career moves are motivated by a wide range of factors, not just a string of successes that create better oppportunities. Outsiders can only speculate why someone changes jobs. That said, in a start-up environment where the market opportunity is large but the know-how to tap into it has to be developed through trial and error, false starts are just part of the learning curve -- the building block of future success. Indeed, there are books and articles on this topic.
What is revealed by the emergence of the revolving door among legal innovators is that there is tremendous opportunity to make traditional legal services better, faster, and cheaper. Talented people are persisting and betting their careers on it. The biggest unknown is timing -- it is risky to get there too early, and disastrous to get there too late. Alas, it is better to wrestle directly with the issue of timing than to deny that the change is real.
Tuesday, September 17, 2013
Friday, May 31, 2013
That's right, law students now have an opportunity to add hands-on e-discovery training to their skill set. Surely, a first-of-its-kind program is being offered by one of the 200 ABA-accredited law schools struggling to adapt to a changing legal market, right?
Well, actually, no. It is being offered by Bryan University, which began life in 1940 in Los Angeles as a stenography school for court reporters. It subsequently evolved into Bryan College, which offered associates degrees in various vocational tracks. More recently, it has received accreditation as a university, with a masters degree in applied medical informatics and a cetificate program in e-discovery. Both are offered exclusively online.
The e-discovey certificate program has some interesting features (press release here).
- It's an actual graduate program. Enrollment is limited to law students who have completed a course in civil procedure (so, functionally, 2Ls and 3Ls) or, at most, completed their JD studies in 2013.
- It's real-world relevant. The program is organized around the Electronic Discovery Reference Model (EDRM), which is a detailed yet evolving set of industry standards that flow from nearly a decade of meetings involving literally hundreds of major and minor players in the litigation industry -- law firms, tech start-ups, Fortune 500 companies, consultants, etc. I have been at an EDRM meeting. Just learning the arcane, technology language of this massive subfield could itself a big value-add for students.
- Students learn how to use tools. The program is an immersion experience in which students will learn how to use high-end software related to predictive coding and machine learning; after that, they move to human review using another industry software suite. This event is supported by several legal vendors, mostly software providers, because they want their tools to become industry standards. Lexis and Westlaw used this same playbook 30 years ago.
- It's compact and efficient. The program meets online in real-time two hours a day, four days per week, for four weeks.
The faculty is comprised of practitioners and technicians in the e-discovery business, not full-time law professors. The tuition is $1,495 (very cheap if measured by contact hours), which can be paid online via credit card. Alas, May 30th was the last day of registration!
Signficance of the Bryan University program
Is the Bryan University e-discovery certificate program evidence of law's slide into vocationalism, or are 200+ ABA-accredited law schools missing the boat on the future of law? This may frame a provocative debate among academics, but it gets us quickly onto the wrong track.
Let's separate changes in the legal economy from debates over academic identity, which tend to arouse our emotions. In other words, let's respond to these circumstances like level-headed lawyers and acknowledge the substantial evidence that the world of lawyering is changing in dramatic ways. If this is true, by extension significant changes to legal education are likely on their way.
If we focus on facts, Exhibit #1 has to be access to justice. Resolution of disputes through state and federal courts --the paradigmatic work of lawyers -- has become prohibitively expensive for the vast majority of U.S. citizens. Further, it is now getting a too rich even for major corporations. Part of the problem is proliferation of electronically stored information (ESI). Finding and analyzing the law, it turns out, is the easy part. We teach that in law school. But in this permanently digital world, facts never get lost. Rather, they accumulate. This creates large problems for litigants.
Instead of redesigning our judical system to deal with this challenge -- something a conservative legal profession is loath to do without a decade or two of deliberation -- we are now witnessing the rise of a massive industry of legal vendors trying to make electronic discovery more efficient.
Exhibit #2 in our factfinding journey is that a huge proportion of these new legal vendors are owned and controlled by nonlawyers. See Henderson, Losing the Law Business. It turns out that the MR 5.4 ban on fee-splitting is, to a large extent, not much of a barrier at all. Virtually everything up until the courthouse door or the client-counseling moment can be disaggregated and turned into a process or product delivered by a nonlawyer vendor adept at technology and systems engineering. Because there is so much money to be made by the application of technology and process to legal problems, the nonlawyer genie is not going back into the bottle. It is time to accept that fact.
Below is a chart I use in a lot of presentations to law schools and bar associations.
The point of this chart is very simple. A legal services industry has arisen around the traditional legal profession. Now, increasingly, the word "service" is falling out because products and mechanized processes are taking their place, driving up quality, and driving down cost and cycle time. Society wins. Lawyers adapt.
So, at a practical level, what does all of this mean?
Let's start with the good news. Law is not going away. In a highly interconnected, complex globalized world, law is actually becoming more important.
But here is the realistic inner lining. Law is also suffering from a productivity imperative. The average citizen -- including the typical lawyer -- can't afford to engage the services of an artisan lawyer. And large firms filled with high-priced artisan lawyers are becoming a less attractive option for even large corporations. They want better, faster, and cheaper legal solutions.
So, for law professors anyway, here is the bad news: Training artisan lawyers -- what U.S. law schools do -- is indeed a mature industry. The U.S. economy can't fully absorp 45,000 law graduates per year, at least not doing traditional artisan-type legal work. So, if we want reliable employer demand for our graduates, some retooling needs to take place. Is the retooling process hard and complicated? Absolutely. Does this type of change occur in other industries? Yes, as reliably as the sun rising in the east. Now is our turn.
How do we retool?
The most difficult hurdle is just accepting the need to change. It's purely an emotional obstacle. The cheese has been moved. It's gone. It will not reappear. We need to find new cheese. Not familar with the reference? See Who Moved my Cheese.
The next step is just showing up to industry events and accepting the fact that we are not the smartest person in the room, at least when it comes to intersection of technology, process design, project management, knowledge management, big data analytics, machine learning, and modern law practice, etc. Instead, it is time to just soak and poke. Practically speaking, this means listening to others and trying to decipher patterns that simplify and unify what we are observing.
Third, with the help of some adjuncts we deputize along the way (both lawyers and nonlawyers), we design and offer some new courses that capture these new realities. Fumbling through a very crude version of this methodology, I taught project management back in 2010. Not only was it a lot of fun, I learned new skills, both as a problem solver and as a teacher, made dozens of industry connections that opened doors for my students, and obtained a more realistic view of the legal profession. In short, it changed my life -- for the better.
Fourth, a subset of the legal academy needs to really dive into the topic of institutional design. The rise of the e-discovery business is entirely a artifact of how our legal system is structured. Perhaps it is time to think about better ways to resolve disputes and facilitate transactions. See, e.g., Disputes in the credit care industry. To me, law schools are the exact right places to think about, and wrestle with, these critically important issues. These are mountains just waiting to be climbed by the next iteration of law schools and law professors.
Fifth, with some smaller victories under our belts, we need to collaborate with colleagues to begin the messy process of organizing our new insights into a coherent curriculum that produces graduates with the most valuable skills sets in the shortest supply. With a world ramping up in complexity, I doubt these will be vocational skills. That said, we are probably a decade or two away from a more settled law school curriculum. But we will get there, and when we do, we will be incredibly proud of what we have accomplished.
[posted by Bill Henderson]
Tuesday, April 2, 2013
by William Henderson
A good friend of mine, Ed Reeser, who is a lawyer, sent along this video on the "Wireless Medicine" movement, which is apparently led by Dr. Eric Topol, one of the nation's leading cardiologists, author of the book, The Creative Destruction of Medicine. Its subtitle is, "How the Digital Revolution Will Create Better Health Care."
Seeing a connection to the burgeoning intersection of law and technology, Ed wrote:
"I don't send videos like this around, especially to busy people like yourselves. But this is a much better way to make a point on how technology is totally changing the landscape, and why it is so critically important to understand where it is going and why. .... The prospect for massively improved capabilities for quality service at lower cost are just beginning to emerge, and this is where the early adopters of the right approaches will have advantage. Understanding which will be right......is just the beginning of the game. If you think law is being impacted by technology.....watch this. Then, go back to your reflections on law and rethink the possibilities of where technology is going to impact law and how to become a positive driver of change with it, rather than roadkill in resisting it. "
Sunday, February 10, 2013
We were born with a fast brain, but we need a slow one to advance civilization, among other things. I am talking about insights of behavioral economics being applied to lawyer decisonmaking and judgment, and I think the answer to my question is "yes". Indeed, I think the insights of behavior econonomics put a whole new and important gloss on the tired adage, "Thinking like a lawyer."
We cover the basics of this topic in my 1L Legal Professions class. Apparently, it resonated with one of my many attentive students, as he/she sent me this amazing science video. It boils down all of Dan Kahneman's brilliant Thinking, Fast and Slow treatise into four very engaging minutes. This is a vegetable that tastes like chocolate. (H/T to a wise anonymous 1L at Indiana Law.)
[posted by Bill Henderson]