Wednesday, November 22, 2006

Heteronomy and Autonomy in Small Business Practice

Posted by Jeff Lipshaw

The USA Today delivered to my hotel room on November 20 had a special Money section devoted to the topic of small business.  The cover story is about Aaron Wolfson, who took five years to open The Savvy Gourmet, a cooking school, catering house, and kitchenware store in New Orleans, just in time to see it washed away by Hurricane Katrina.  And yet he came back with "a newHack business plan to suit the needs of a largely abandoned city."  (For more on the subject of urban entrepreneurship in New Orleans, visit Idea Village's website.  Or buy a CD from street artist and jazz musician, Hack Bartholomew, right, after sipping your cafe au lait and nibbling on your beignet at the Cafe du Monde.)

My students would accuse me here of being "emo," but I can't help but wax philosophic about it.  If heteronomy is the philosophical term for the world of physical cause-and-effect, of the inexorable tide of economic, demographic, and social forces, then autonomy, at least in small business, is the 180px1schumpeter spirit of the entrepreneur, who decides, as a autonomous agent, to intervene, as a matter of free will, in the face of those forces.  (It's fair here to accuse me of being a trumpeter of Schumpeter, left.  For a Schumpeterian view of legal education in general, see Jim Chen's post over at Money Law.)

I want to make the argument that neither the profession nor the academy has yet figured out how lawyers best assist this unusual creature.  Take the article by Rhonda Abrams entitled "9 Problems to Avoid by Planning Ahead:"  the categories are cash flow problems, partner break-ups, natural disasters, loss of a major customer, new competition, industry change, loss of key personnel, theft and embezzlement, and family problems.  Who more equipped than a well-trained lawyer to assist a client in planning ahead?  But how many of these contingencies are addressable in advance by the tools we teach lawyers?  I have argued before (in the DePaul Law Review, a publication I am gratified to find has achieved "top fifty status") that the prime means by which business lawyers attempt to impose order on the contingency of the heteronomous world is the institution of contract, which notwithstanding rational actor and behavioral economic theory to the contrary, is feeble at best.  If we fly-speck the specific recommendations in "Planning Ahead," only a few are expressly legal:  draw up a partnership agreement with a buy-sell mechanism, have adequate insurance policies against natural disaster, fraud, and theft, develop an estate plan for the owner-operator.

A lawyer's lawyer sees the world, I think, in simple models by which contracts are supposed to inhibit opportunism - the futures contract for the purchase and sale of wheat that gives the buyer a remedy against the seller's opportunism when the contract price was $100, and the market price on the date of sale is $120.  Indeed, the law is an element of the heteronomous world; it controls, restricts, limits the choices of the free agent.  The entrepreneur, on the other hand, sees the world as a moveable feast of phenomena, posing danger and opportunity to be seized and exploited, and choices to be made, over and over again.  "There is no rule for the application of a rule" teach the philosophers, and it might be the entrepreneurs' creed, because what the philosophers are really telling us is that what we think are rules for the application of a rule are not inherent in the rule, but in our social constructs around it.  Most of us believe the rule of 2-4-6-8 means that the answer is 10; the entrepreneur sees it as 12 or 19 or 1-5-6.

Does that mean there is no place for the traditional tools of the lawyer in representing the small business person or entrepreneur?  Of course not.  Those tools are part of the planning ahead.  But in my dream curriculum, the entrepreneur's lawyer has also honed her skills in "lawyer as conceptual blockbuster," in "lawyer as friend," in lawyer as counselor, in lawyer as ethicist (not just a legal ethicist, but deontological and consequential ethicist as well).  That lawyer is one who understands the process of judgment looking forward is far more complex and mysterious than the application of the legal algorithm embodied in a contract.

Economics, Law & Society, Lipshaw, The Practice | Permalink

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