A Tale of Three Cities

Saturday, February 16, 2013

Regular readers may know, or have intuited, that I was born in Manhattan and have spent essentially my entire adult life on the island (save for a childhood detour to a close-in suburb, and four-year and three-year sojourns to college and law school) and may have therefore assumed various things about me premised on that unalterable birthplace and residence.  I view the clear benefit as being that it lends one intimate local knowledge, and no matter how powerful technology becomes, there’s no substitute for face to face, but the issue I’m addressing today is the opposite, namely the risk of parochialism.

Now, as much as I love New York, what I really love are Big Important Global Cosmopolitan cities. In that category I’d place at least six or ten serious contenders, most decidedly starting with London and Hong Kong (making up the three cities, with NYC, of the title), and including a rather diverse array of others depending on your relative weighting of sheer size and financial/geopolitical importance. (For a parlor game, you get to rank your own inner circle: To get you started, I suggest that nominees would include Tokyo, Seoul, Mexico City, Sao Paulo, Shanghai, Beijing, Los Angeles, Moscow, Paris, and Berlin.)

Today I’m asking you to set aside any assumptions you may have about the breadth, or conversely the limitations, of my geographic orientation, if you harbor them.

In fact, you might not do much better than to take to heart the final paragraph of the “About Us” page on this site, which reads: “Based in New York City, we operate globally.”

Regular readers will also know that in general I’m loathe to talk about myself, but I thought it suitable to step out of character for a moment because today’s column is about a quintessentially Manhattan-centric firm, in what has been for some time now an indisputably global industry.  For me to write the piece fairly, and for you to read it assuming the scale is level and not tilted towards the home town, I wanted to set out my perspective first.

So with that uncommon prefatory throat-clearing, the topic for today is Davis Polk, and our text is a piece in The Lawyer, “Friends and Relationships.”

I rarely (save for interviews with managing partners, this may be a first) write pieces on specific firms, but this aims to be more than that, although it takes Davis Polk as emblematic of a phenomenon I hope to describe. The phenomenon is how firms with incredibly strong franchises here in Manhattan are, or are not, dealing with the 21st Century.

If you look back on the last 75 years’ sweep of the geographic distribution of economic power, it’s a commonplace, and a true one, to observe that the US will never again be as globally dominant as it was in the immediate aftermath of WWII. This matters to law land for the obvious reason: At a gross level, economic activity drives demand for deal-making, structuring, litigation, and other legal services, and its flip side, that we can’t do better in the long run than our clients.

Here are two charts portraying, from slightly different perspectives, how global GDP shares have evolved:

saupload_worldgdp

Market-Share-of-Global-GDP

The US market share of GDP looks surprisingly stable, going from 26.3% in 1969 to 26.7% in 2009, 40 years later. The rise of Asia has come largely at the expense of the EU. But this doesn’t necessarily reflect the locus of deal-making activity, capital formation, project finance, banking, and other activities BigLaw thrives on.

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2 Comments


  1. marilyn cochran, 1 year ago Reply

    I’m a huge fan of your blog but, as a born and bred Scot who grew up on a farm a mile from Kirkcaldy and was educated in both Kirkcaldy and Edinburgh, I feel compelled to take issue with your statement that Adam Smith was born in Edinburgh. Kirkcaldy has always claimed Adam Smith as its own and to my knowledge that’s never been in dispute. And, while I’m being nitpicky, Kirkcaldy isn’t “near” Fife. It’s in Fife, sometimes referred to as the Kingdom of Fife, but in reality Fife is the equivalent of the American “county.” Small stuff, I know, especially given how informative, thought-provoking and entertaining your blogs have been over the years I’ve been reading them, but native pride just got the better of me.

    Marilyn Cochran


    • Bruce, 1 year ago Reply

      Marilyn:

      The misimpression was entirely due to a prepositional phrase being perversely misplaced in the last paragraph of the original piece, which led to understandable ambiguity about Adam Smith’s birthplace.

      Of course I know the place to have been Kirkcaldy (I’ve even been there) and the article is duly corrected to eliminate the unfortunate wandering off of the prepositional phrase from its properly assigned place in the sentence structure.

      Thanks!


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