Recently in Globalization Category

The final agenda for the "Business of Law" program, this coming Monday, February 1st, at LegalTech/New York has just been released.

Please take a look here, and sign up here.

Hope to see you there!

Speaking of interesting conferences in New York, on Monday, February 1st, from 1:00--5:00 pm, LexisNexis is hosting a "Business of Law" Symposium at the New York Hilton, Sixth Avenue @ 53rd Street, home of the annual LegalTech confab, which this flies under the flag of.

Why do I mention it?

Because I'm giving the keynote, called Economic & Strategic Perspectives on the Current Environment, and I'll also be moderating the three subsequent hour-long panels, on:

• Knowledge Management:  How technology can drive competitive differentiation.
  
  
• New Structures for the New World?:  Addressing what components of the conventional law firm business model might need to change, including:
  • Associate career paths
  • Alternative fee and billing models
  • Revenue and profitability models
  • Lateral recruitment, and improving the batting average, and
  • Law student recruiting--taking on the NALP menace
    
    
• Future Strategies:  If growth for growth's sake is no longer the universal solvent we once perceived it to be, what new strategies are plausible, effective, and needed in the marketplace? 

If I may say so, we've also recruited some top-drawer talent for the panels, including Harry Trueheart, Chairman of Nixon Peabody, Bill Bachman, Chief Operating Officer of Bingham McCutchen, Sally King, Regional Chief Operating Officer of Clifford Change, Aric Press of The American Lawyer, David Lat of Above the Law, Oz Benamram, Chief Knowledge Officer at White & Case,and Saul Rosenberg, Director, Knowledge Operations, McKinsey & Company--as well as many talented others.

Bonus for attendees:  Audience members will be given wireless polling devices allowing you to vote anonymously and see the results displayed in charts at the front screen in real time.    Accordingly, each session will feature several questions for the audience designed to enlighten, or perhaps uncover latent inconsistencies in attitudes.

There's no special charge for the event:  More info here. 

Hope to see you there!

As we embark on a brave new year, I thought it condign treatment of 2009 and what lies beyond to spend a few moments on the broader view, and, more specifically, what industries may and may not survive the post-Internet, and more broadly the post-digitalization of life, future.

One could write books about this--several folks already have--so I will perforce be very abbreviated in my treatment of this, but I would hope a theme emerges. And of course this comes with the customary and obligatory caveat that it's all my surmise at this moment in time, lacking the foresight to imagine what the creative genius of our entrepreneurial classes will bring forth.

Won't survive

• Newspapers
• General interest magazines lacking extraordinary quality (yes, this excepts The New Yorker, The Atlantic, and a handful of others)
• Landline phones
• Fax machines
• Hard copies of all forms of entertainment--music, TV, movies (everything will be rented or streamed, although purists may hang onto printed books between covers for the incredible and still unsurpassed utility of their form factor, not to mention the symbolism of bookshelves [I probably count myself a purist])
• The following, as we know them today:
  • Realtors
  • Stock brokers
• Network TV
• Virtually any single-purpose piece of hardware:  GPS devices, calculators, and, I predict, Kindles and e-book readers.  It's simply way too cheap and appealing to add functions once one has the basic slab with a screen, a processor, and some memory.

I doubt any of these is terribly surprising.

Will survive, but in drastically changed form

• Car dealers
• Many point-of-sale services
  • We shall see the drastic integration of online and store sales
  • Ticket takers at cultural and sports events have seen their ranks cut by 90% as hand-held bar code scanners replace ripping and returning; while we're at it, when was the last time you actually bought a ticket--any ticket--from a human being at a box office?
  • Airline kiosks have supplanted counter attendants
• Banking and financial services
  • Including insurance and mortgage brokering.

I also think these are also relatively commonplace observations.

Will be oblivious

• Healthcare (digitalization of patient records will come, eventually, to be sure, but it won't fundamentally transform, much less threaten, the industry or anyone employed in it)
• Travel (not travel agents--the travel industry itself)
• Construction (hard to outsource or do "virtually")
• Utilities (same)
• Agriculture and mining (same)
• Oil and natural gas (same)
• Manufacturing of durable goods, including most importantly cars, trucks, and industrial equipment: Sometimes metal needs to be bent and people and goods need to move, and we don't yet have Star Trek teleportation in place
• Education (imagine making your Contracts 1st-year course a Webinar? I didn't think so)
• Essentially all of government:
  • Local (police, fire, traffic, zoning, water and sewer)
  • State (regulatory, welfare, Medicaid)
  • Federal (Defense, State, Treasury, etc.--run down the Cabinet list in historic chronological order)
• Personal care: Barbers, salons, manicurists, health clubs, personal trainers, spas
• Home and office maintenance: Cleaning services and maids, nannies, doormen, and all contractors and handymen--plumbers, electricians, carpenters, painters, etc.
• Sports
• And lastly, one of my favorites, the performing and visual arts.

What's most noteworthy about this last list to me is what an enormous slice of the economy it represents. And what a relatively trivial portion is represented by the first and even the second lists.

Which brings me to the point: The repercussions of the digitalization of the world may have been overblown.

I'm not a social psychologist and have less than zero desire to become one, so I won't attempt to hypothesize why so much ink has been spilled on the supposed topsy-turvy world we're plunging into, like it or not, but I would suggest you take another look at the people who work for industries in my first "won't survive" list, and I'll suggest what they have in common: They own the printing presses and buy those barrels of ink. (I buy gigabytes of server storage, but that's a separate matter.)

So what has this to do with Law Land?

I look at the lists presented above and ask what industries we are most like. Before I give you my thoughts, you might want to glance up and take another look.

I think we're some continually evolving combination of education, financial/medical adviser, and hands-on personal care.

How so?

Education, as a role for us, should I hope be obvious. We educate our clients, we are or at least want to be known as a "learned profession," and we have, actually, access to knowledge that the proverbial man on the street does not. We don't just rent this knowledge out to our clients, we should impart it so it becomes their own.

Financial/medical advisers are people to whom we entrust (one hopes) our every secret, hope, and fear. We should serve the same function. Too often, of course, we fall short, accepting superficial explanations from clients about what they want to achieve without delving deeper to truly understand their business objectives in the larger contextual scheme of things. We should be able to provide them with various roadmap's, decision trees, alternative ways of pursuing their objectives, with lesser and greater ratios of return and reward.

Hands-on personal care? Yes, because there is no substitute for being there. The more amazing technology and collaboration-at-a-distance becomes (what the Web, ultimately, is all about), the more important face to face personal meetings are. (This, incidentally, is why I'm long-term bullish on such global cities as New York, London, and Hong Kong.) The more people you know "virtually," the more you want to meet them in person.

Which should be something we do well.

Often, the value of hands-on care is underestimated when it comes to so-called commodity practices such as real estate transactions, employment law, and background-noise litigation. You underestimate the value of this at your risk.

Think that divorce or employment law are "commodity" practices that don't require sensitive and nuanced practitioners?  Try telling that to the wronged spouse who suddenly finds themself living in a trailer, or the 55-year-old assembly line worker laid off in Detroit. 

Clients still want to meet you, get to know you, feel you're in command and know your stuff; this can to this day only be done one on one.  No one in Bangalore can help.

Finally, a word on outsourcing: It's here to stay. Foreign or domestic, owned or rented by your firm, it is a wave (not the wave, but a wave) of the future. Get used to it. Baseline document review, legal research, perhaps even generic witness prep will be conducted by people who are not junior associates on your firm's payroll. This is simply reality. But is it a fundamental change in your business model? I hope your business model wasn't entirely premised on the role of junior associates.

Again, is the digitalization of everything an existential threat to us? I leave you to draw your own conclusions, but I think not.

Thoughts for 2010 and beyond.

Hasn't the last year and a half been a horrible nightmare? Aren't you sick and tired of our fallacious infatuation with the "free market"? Maybe we should bring back Glass-Steagall, reinforce Sarbanes-Oxley, create an uber-regulator for the financial services industry. Aren't we all well and thoroughly sick of deregulation and privatization? Most of all, hasn't capitalism shown us to a fare-thee-well that, left uncontrolled, it can all too easily run off the rails? What have we been thinking for the past couple of decades?

I mark this time because it was just over 30 years ago--May 4, 1979--that Margaret Thacher become Prime Minister of the UK, to be followed shortly thereafter as President of the US by Ronald Reagan, seen rightly in retrospect as cross-Atlantic twins as far as promoting the virtues of the free market and dragging down the curtain on the sad, sclerotic decade of the 1970's (stagflation, depressing cardigan sweaters, and "malaise," anyone?)

I'm reminded of this anniversary by Martin Wolf, writing in the Financial Times, who sums up what she did:

Mrs (now Lady) Thatcher entered office determined to reverse a national decline marked by high inflation, slow growth and trade union militancy. Her government emphasised monetary control, deregulation, particularly of the financial sector, flexible labour markets, and privatisation. The post-1997 Labour government did not overthrow these policies but built upon them. Labour increased public spending but not hugely: in 2007-08, expenditure was below where it had been under Mrs Thatcher until 1988-89. Labour also abandoned active fiscal policy, adopted inflation targeting, introduced central bank independence and welcomed the vigour of the financial sector.

Note the emphasis on "revers[ing] a national decline, ... monetary control, deregulation particularly of the financial sector, ... and privatisation."

We also can choose to celebrate the anniversary of another systemic earthquake, the 20th Anniversary (last month) of the fall of the Berlin Wall.

Why are you reading about these momentous--but exhaustively analyzed--events on Adam Smith, Esq.?

Simply this: To provide a moment's worth of perspective.

Since it has been 20 years since the Fall of the Wall, memory has clouded over what it represented: Very simply, the end of a 40-year experiment in which Germany, a First World Country by any measure, was divided in two economically, one region a market economy and the other centrally planned. Once the gap in living standards became so egregious, the experiment self-destructed.

John Kay, writing in the FT, reminds us of this, and reminds us, more importantly, of exactly in what the genius of the market economy consists. He cites three primary components, to which I would add a fourth:

• Prices act as signals for resource allocation.
• Markets promote innovation by adapting to change "through a chaotic process of experimention." And
• Markets diffuse political and economic power. "This is the most effective way to protect society from rent-seeking - a culture in which the principal route to wealth is not creating wealth, but attaching oneself to wealth created by others."

And the fourth, mine:

• Markets permit, enable, encourage, and all but insist upon individuals finding their own highest uses in society (the real meaning of the Invisible Hand, as I construe it). Few things contribute more highly to human happiness.

Scarred as we all are by the events of last September (2008, that is), we may be tempted to retreat to the faux security of command and control by the best and brightest. Don't go there; don't even be tempted to go there.

The market excels not just at creating and spreading new ideas, but at getting rid of failed ones. As John Kay puts it:

Disruptive innovations most often come to market through new entrants [and] from unpredicted sources. If you had been planning the future of the computer industry in the 1970s, would you have asked Bill Gates and Paul Allen? If you had been planning the future of retailing in the 1990s would you have asked Jeff Bezos? Of course not: members of the politburo, cabinet or large company board would have consulted grey men in suits like themselves.

Markets are not a well-oiled machine: they are a constantly changing, adaptive biological system. Pluralism is their motive force, their essence chaotic, their development inherently uncertain. If we could predict the evolution of markets, we would not need markets in the first place.

To tie this to reality, this week the always-worthwhile Economic Principals, concidentally, has a tour de force recap of the nascent venture capital industry, starting in Boston immediately after World War II, which begins:

"It is hard to describe how quickly attitudes changed in Great Britain in the wake of the Thacher Revolution. It was as if a oppressive shroud had been removed."

After noting that Deng Xiaoping did more or less the same for China, only perhaps on a greater scale, he hits his stride:

Of course New England businessmen were scrambling up "the value chain" for three centuries before the term would be invented. None knew where it led. But from cod to candy, from slaves and opium to ice and stone, from railroads and telephones to electricity and radio, merchant traders and manufacturers in Boston understood that the essence of competitive advantage was that it didn't last.

Now we're getting to the heart of how markets work.

Out of the shockingly tiny world of Boston-centric venture capitalists came, in the space of a short career:

• American Research and Development Corp., which merely sired Digital Equipment Corp.;
• Greylock Partners;
• TA Associates;
• Arthur Rock (West Coast, but who went to school on the Boston gang, with Fairchild Semiconductor and Intel to his credit);
• And just a few other Boston-funded startups including FedEx, Cablevision, Wang, and Biogen.

What about Silicon Valley?

Following is more commentary from the same Economic Principals piece upon the recently published A Vision for Venture Capital: Realizing the Promise of Global Venture Capital and Private Equity, by Peter Brooke:

But Brooke's book is equally interesting, about, for instance, about the difference between Boston and California. East Coast lenders didn't know much about technology, at least in the early days; they were generalists, not technologists. They took a portfolio approach, emphasizing diversification and limited appetite for risk, preferred companies that had a revenue base and were moving towards profitability.

The West Coast guys were not averse to supplying seed capital and early stage financing, all part of the pioneer spirit. "They were good at what they did, and gained an edge that they have never relinquished." That said, Brooke continues, technological savvy will take an investor only so far. It's still essential to know how to identify market opportunities, size up entrepreneurs and develop relationships "in which information and ideas flow freely."

These skills are not easy to acquire, he says, but those who possess them can add substantial value, "even without knowing everything there is to know about a particular product or technology." Harvard and MIT: it was ever thus.

The whole second part of Brooke's book is an extended meditation on changing styles of venture finance, meaning mostly startups, usually high tech firms, and private equity, meaning restructuring large public companies through buyouts. The same skills are required at either end of the spectrum, he says, but emphases differ.

On the manner in which today's financiers have insulated themselves from risk at the expense of their investors, he quotes [Tony] Perkins [co-founder of the legendary Kleiner Perkins] approvingly: "Today I stand in awe of the way the managing partners of some of the huge buyout funds reward themselves; fees for raising the fund, fees for managing the fund, fees for doing the deals within the fund, and profit participation for individual investment, whether or not the overall profits are achieved."

Why do I focus on what may now seem like old news? I mean, Fairchild Semiconductor and Wang, for heaven's sake?

Again, perspective: These firms were enormous drivers of economic growth in their day, and even though both ultimately failed (news flash--most firms do), the way we work today and our overall economy would be fundamentally poorer without them and their kind.

What, then, has this to do with Thacher and Reagan and the free market?

Simply this: Let us not lose faith.

All things considered, I believe that free market capitalism has done more to promote the quality of life of more human beings than any non-theological belief system in the history of mankind.

And even after all the Sturm und Drang we've been through since September, 2008, here's a telling graph comparing the growth, from the start of 1991 through the third quarter of 2009, of the US and other major world economies:

So if you think the Thacher/Reagan era of deregulation and its aftermath was a misguided detour, think again.  To recap:

• US up 63%
• Canada 60%
• UK 48%
• France 35%
• Germany 22%
• Italy 19%
• Japan 16%

Finally, if you think the Asian tigers are overtaking the US, here, courtesy of David Brooks in today's NYT, is an incontrovertible rebuttal: In 1975, US GDP amounted to 26.3% of world G.D.P. The US share today? 26.7%.

The genius of the free market, present and potent since before (yes, even before) Adam Smith, is not to be gainsaid.

My recent column, What Makes Laterals Run?, has generated a most rewarding level of reader feedback, worthy of an update to the original column.

Reactions have literally come from around the world, and, with the permission of my correspondents (all of whom expect anonymity, an expectation I most willingly grant), I wanted to share a sampling with you and then elaborate on what further thoughts of mine they prompt. 

First, from a former partner in a couple of name-brand firms, with 30+years of experience under his belt in roles such as executive committee member, founding partner of various offices, and co-chair of his firm:

"Bruce, you definitely have this right. When I set up our new London office in 1999, I was able to recruit top laterals not based on our money offer (strong and fair but not the ridiculous offers of firms like [name removed to protect the firm so charged--Bruce]) but rather based on our business plan and specific suggestions as to how they could cross sell to our existing client base and strong practices in new emerging markets. You are seeing the same thing here."

So what I'm suggesting has been going on for more than a decade--at least among the more discerning firms and lateral partner candidates.

Second, from another globe-trotting and astute observer of our wondrous profession:

Long time since I've emailed, but I was struck by something amusing, maybe even ironic, in your post today on lateral partner moves.  Basically, it seems like lateral partner moves have now "caught up" with lateral associate moves. 

Clearly, there were associates who used to move upstream (think bankruptcy associates during the last wave), who used to move downstream (the classic, maybe now defunct, "work/life" balance move), and who "serially divorced" (as in an associate I knew who was at 3 or 4 different firms in five years).  But for a long time, there were also strategic associate moves -- the associates who could not fully "read" how the firm planned for their future and moved to a firm where they believed their odds for making partner would be clearer and more transparent.  If a 40-50 year old partner moves because they cannot discern their firms' plans for the future and, indirectly, their future chances for increased fame, glory and compensation, is it really that different from those associates who used to move due to uncertainty over their own future?

Regards,
[xxxxxx]

P.S.  Yes, my use of the past tense for lateral associate moves was intentional.  Depending on how long this Great Reset lasts (great name for it, by the way), I wonder when discussion of lateral partner moves will also move in to the past tense?

Interesting perspective comparing lateral partners' strategies with lateral associates' strategies.  All I can add is that, yes, "work/life balance" is "so last August," and that the insight that one thing both associates and partners may be seeking in a lateral move is greater clarity vis-a-vis where they stand with their firm.  In my original column, I stressed partners motivated to look around because they perceived a lack of clarity in their firm's strategic vision, but an equally strong motivation could certainly be lack of clarity from the firm about the partner's own long-run prospects.

And as for using the past tense?  Given that voluntary associate attrition has fallen to barely above 0%, I agree that the past tense is justified, at least until a technical-but-jobless recovery from the Great Reset becomes robust enough to reach the stage of actually creating net new jobs.  (Don't hold your breath on this one, folks; my own armchair guess is 2012.)

Third, a partner with a Magic Circle firm in Asia writes:

Great piece on laterals - and, I think your hypothesis is spot on !!! [...]  It is also very relevant to a major shift going on in the [local] market at the moment.

Finally, a periodic correspondent offers extensive, and very thoughtful, observations:

Bruce --

        In response to your recent post on lateral recruiting, I drafted below a couple thoughts.    My general view is that extensive lateral recruiting is the sign of real trouble at a firm.  It typically is a sign that a firm has been unable to develop talent internally, and/or that a firm is trying to build a practice in an area that is not a core strength of the firm.  Only where firms use lateral hiring very selectively -- where they are able to specify the precise characteristics of the ideal candidate, and have targeted that person based on a unique firm strategy (rather than blind desire to replicate more profitable, NY-based firms), can lateral hiring have success.

I agree with your basic premise -- that strategy matters in attracting and keeping talent.  I also agree that we are seeing like firms and like partners starting to come together (e.g., securities specialists going to firms with substantial NY practices that earn higher PPP). 

I have two questions:

(1) When will firms stop chasing laterals and start building talent from within.  Most successful organizations develop talent internally, rather than through lateral acquisitions.  For example, GE historically grew all its management talent within GE.  Good professional football teams obtain most of their best talent from the draft, rather than frequent trades. In the legal world, certain firms (such as Latham) develop most of their talent internally, and rarely look for lateral acquisitions.  Conversely, growth through acquisitions is often the sign of a weak company without any compelling strategy or vision (e.g., WorldCom).  Talent grown from within is more loyal, and is often cheaper and less trouble than the lateral who is frequently bought and sold (think Terrell Owens).   Today's managing partners appear to believe either that there is some "silver bullet" to be had through lateral hiring, or that they do not have time to develop sufficient talent internally to meet their profit goals. 

(2) When will firms start matching their lateral recruiting strategy to a firm strategy that is based on the firm's (and the market's) reality, rather than a desire to replicate the successful strategies of the top-20 AmLaw firms (who are mostly all in NY).  If your hypothesis is  true(that there is a migration of partners to firms that better "fit" their practice), one would expect to see a fairly quick rationalization of the law firm industry structure.  Instead, that conversion is happening fairly slowly (though I agree it is happening).  It seems to me that this is because firms refuse to accept their position in the market, and believe (as all firms do) that they are a "premier firm" able to attract top rates and to generate the most sophisticated legal work. 

As a result, most firms still shop for the same, or similar, lateral candidates (such as high-end securities, white collar, IP, and M&A practices).  Even if mid-tier  firms are successful at attracting the lateral candidate, those firms often cannot create any "synergies" with that lateral candidate, because they don't have the clients that might need the service, or because the firm's reputation does not support such a high-end practice.  And, the mid-tier firm will often pay at least as much in compensation as the lateral generates in profits.  Thus, there is no net benefit to the firm of bringing in the lateral partner.  Eventually, either the firm becomes disillusioned with the partner, or the lateral partner becomes disillusioned with the firm and concludes that he can be more successful at a different platform.  The upshot for the firm is that it invested in talent that did not stay with the firm -- a lost investment to the firm.  Now, if the firm's lateral recruiting were targeted to those areas where the firm was distinctive, and different from others in the market, the firm might be better able to hold onto the talent, and create potential "synergies." 

In other words, firms need to stop recruiting just for the sake of "growth," or to increase profitability, and instead invest in lateral growth only in those areas that the firm has identified as being necessary for its unique strategy (and only when that strategy is rationally tied to the market reality of who the firm is, and not who the firm would like to become).  Now, if firms were sufficiently well-run that they identified their strategy several years in advance, and identified the areas in which they needed expertise, they might even be able to help senior associates and partners gain the experience and develop the skills needed, and thereby avoid lateral recruiting in the first place.  But, most firms do not appear to have reached that point. 

So, what more have we learned?

---

I'm tempted to reiterate where I began the original column, by pointing out (confessing?) that "perhaps I don't write as much as I should about lateral partners."  Certainly this piece seems to have unleashed some extremely thoughtful reaction.

The reason you rarely see me writing about laterals is blisteringly simple:  I have long believed that the vast majority of activity on the lateral-pursuit-seduction-&-wooing front is fundamentally misbegotten.  Yet, every day of the week you encounter firms and their managing partners (well, at least you did....) who act as if the single most valuable activity they can engage in to lift their firm's fortunes is to pound the pavement for desirable laterals.  And Lord knows the headhunting industry has made a living off it; never let me be the first to assume that entire sectors of the economy are premised on systemic, enduring, and irrational market failures.  Yet I continue to believe that all but the most assiduously and astutely targeted lateral recruitment is a fool's game.  (Here I invoke the widely recognized folk philosopher Bob Dylan to explain my reticence to write about this topic:  "And don't criticize what you can't understand....")

But now that the genie is out of the bottle, I'm compelled to offer, or elaborate upon, a few observations:

• I continue to believe that on an industry-wide, macro basis, we are seeing a systematic sorting-out of talent as lawyers seek to match their skills to the most appropriate firm platforms.  $1,000/hour rates are not for everyone, or for every firm, but they most assuredly are for some chosen elect and a similarly selective handful of firms.  Economically speaking, the logic is compelling that those blessed souls and those firms on whom fate has showered its beneficence should get together.
  
  
• Conversely, as I wrote in the original piece, there's room in this world for lower-margin, more routine work:  This is a respectable, indeed admirable, sector of any rationally organized marketplace, and firms and individuals who know themselves should rush to satisfy this demand.  And no, I'm not being condescending; au contraire. 
  
  I would tell you in all honesty that I think two of the finest cars for sale today are the Toyota Camry and the Honda Accord.  Neither one remotely breaks the bank and while, admittedly, neither will pin your ears back with acceleration or stun your date into a state of befuddled worship, they are very gentle on the wallet, they start, stop, and go as promised, and you can ignore and abuse them for tens of thousands of miles without complaint.  Try that with a BMW and see how long it takes you to cry uncle tow truck.  Toyota and Honda have achieved something truly outstanding here.
  
  
• There are other reasons to cast a jaundiced eye on excessive reliance on lateral recruitment as a core "strategy," some of which I alluded to in my first piece and some of which our enlightened commenters have pointed out:
  
  
  • There will never be a substitute for home-grown talent:  Not at GE, not for the Yankees, and not for your firm.  To cite a home-town (NYC) firm that has a long but not rigid tradition of emphasizing up-from-the-ranks talent, Paul Weiss seems to be thriving even in these currently challenging times.  Pure coincidence?
    
    
  • In MBA Land, professors delight in teaching about and management gurus delight in writing about "KPI's," or "key performance indicators."  What is a KPI?  Well, it depends on what your company does, but if you're a retailer (think Amazon, or Dell), a KPI might be the number of inventory "turns" you can generate annually.  Another might be how fast you can collect cash from your customers before you have to pay your suppliers (both those firms, amazingly, have that metric in negative territory, meaning they collect their customers' revenues well before they pay their suppliers--you might want to think of that trick next time you're tempted to indulge a client who's 90 days late and wants to be 150 days late).
    
    But my secret suspicion is that, for every KPI, there has to be an evil twin:  Call them "KRI's," or key risk indicators, which are dials on the dashboard indicating you might be headed for the guardrail, or over it.  For law firms, one big KRI, in my book, is excessive and promiscuous lateral recruitment.  Yes, "excessive" and "promiscuous" are both fudge phrases, but I think you know where I'm going and I think you know it when you see it.  As I said originally, the best predictor of getting divorced is having been divorced.  This is nothing, really, other than the flip side of home-grown talent's loyalty.
    
    
  • Finally, vast is the economic literature demonstrating and recounting the phenomenon of the "winner's curse," a/k/a "buyer's remorse."  It's quite simple:  The winner of an auction (a bidding war for lateral partner talent, for Alex Rodriguez, or for Madonna) will be the firm that is closest to paying The Talent every last red cent The Talent can expect to marginally contribute to the firm.  Which leaves the firm with....you guessed it:  Nothing.

Do I suspect our fascination with lateral hiring and recruitment will go away any time soon?  No, no more than corporate America's fascination with the search for CEO-as-Saviour will end and no more, for that matter, than the all too well-chronicled proclivity of the ambitious and the striving for seeking out mates other than those individuals to whom they're married.

But as a long-term strategy, I can't really bring myself to endorse either tactic.

Now, what exactly is your firm going to do about it?

Permit me to suggest you start with the intellectually challenging and culturally slippery project of defining precisely your strategic advantages and what distinguishes your firm from your competitive set in the eyes of clients.

And a last word.  If you intend to go about defining the Unique Value Proposition your firm offers clients, it has to meet each of these criteria:

• It must be credible.  We are not all Skadden, Wachtell, or Slaughters.
• It must be ownable.  It must connect, in other words, to a visceral understanding of who your firm is and where you fit in the great Value Chain of Law Land.
• And finally, it must offer a benefit to the client.  Without this final component, I invite you to beat your breastplates all you'd like; it will matter not.

Then again, if all this sounds too hard, why don't you just make a reservation at an elegant restaurant for dinner with a potential lateral?

Clients coming to me--and they're coming to me as never before--seeking clarity on what this will all look like "on the other side" are usually, for starters, really asking "How worried should I be?"

Sometimes of late, to reduce the general anxiety level, I quip that "we're not the newspaper industry." I fear that this is occasionally taken as gallows humor, although I intend it as anything but.  What I intend it as is quite simple:  Perspective.

But what if we were the newspaper industry, or more broadly, the print periodical industry?  What then?

Actually, Booz Allen's Strategy & Business has just written about this very thing, in Reinventing Print Media.  Granted, much of it doesn't remotely apply to us (or even, being parochial, to Adam Smith, Esq., which never has been and never will be a print publication), but some useful learning nevertheless emerges.

Two trends have intersected to deeply corrode revenue for mainstream print media, the second of which is the familiar rise of digital media.  Essentially the only traditional publications that have been able to charge more than $0 for their online content are The Economist, The Financial Times, and The Wall Street Journal--all, of course, addressing a professional business audience with one-of-a-kind brand names.  Consumer oriented publications that can charge are as rare as hen's teeth.  They mention Consumer Reports and Zagat's,but I can't think of a single additional example, and even the mighty New York Times has had to reverse field on this score.  Whether the taking of a different set of decisions at the outset of the mass-market digital age would have made any difference is, at this point, academic in the most devastating sense.

The first trend, which many non-industry insiders are unaware of, is the accelerating migration of marketing spending towards so-called "below the line" activities.  "Above the line" spending represents classic paid media advertising; below-the-line is everything else, and everything else is now the bulk of spending, and growing.  (Like what?  Like in-store promotions, manufacturers' own web sites, loyalty programs, "viral" and word-of-mouth efforts, YouTube videos, corporate Facebook pages, etc.)

So what do the august gurus prescribe for our friends in the dead tree world?

First, the full menu, and then, what we might adapt to our purposes:

The first strategy is to develop deeper relationships with readers around targeted interest areas. This builds on a strength that has always been at the heart of publishing: Strong print brands enjoy a trusted relationship with their audience; readers are loyal to print publications because they provide high-quality content about specific interest areas. [...]

The second strategy is to tap into revenue streams beyond advertising and circulation.  [...]

The third strategy is to reinvent the content delivery model (with a particular focus on lowering costs) and to emphasize a "profitable core" of unique and brand-defining material  [...]

The fourth success strategy for the media company of the future is to innovate with new products and pricing models.

Permit me to suggest that all of ##1--3, if conceived broadly enough, can be useful to us, and only #4 lands at our doorstep with a resounding thud (largely, but not solely, because of the terminally vacuous jargon in which it's expressed).

One at a time:

#1, "develop deeper relationships with [clients] around targeted interest areas."  That sounds like something a lot of us already know to do quite well, thank you very much.  Consider:

• focused client seminars on new developments in areas critical to their industry;
• free "health checks" where you and a fellow partner or two might spend half a day discussing ways you've seen similarly situated companies get in trouble, and what could have been done to head things off;
• brief "secondments" of some of your junior team members to the client's offices for cross-pollination and insight into what drives day-to-day decision-making in their lines of business;
• and more, I'm sure, which you are creative enough to dream up.

Examples from ConsumerLand may help spur your thinking:

Procter & Gamble has built its own digital media assets in the home and beauty category, Nike targets runners and other athletes, and Diageo helps young adults find bars and nightlife. [...]

Hearst -- another leading magazine player serving a broad set of women's interests with titles such as Cosmopolitan, Good Housekeeping, Marie Claire, and Redbook -- produces Real Age, a Web site that provides health information and offers a test that evaluates more than 125 factors to determine a person's "real age." To date, Hearst has grown its database of women by more than 8 million registered users who have taken the Real Age test.

How about #2, exploring new "revenue streams" beyond the traditional sources?  Again, I think we know how to do this.  Instead of just defending your clients when they're in a dispute or advising them how to navigate a corporate transaction, how about offering training in compliance so as to help ward off some disputes to begin with?  (Ideally, start with disputes, such as employment litigation, which are fairly low on the food chain and only once you've demonstrated a track record there might you consider moving up the ladder.) 

Or, what is perhaps a more timely suggestion, given the inevitability of clients' sending massive e-discovery projects to vendors specializing in handling intensive document review projects in ways more cost-effective than throwing recent Ivy League law school grads at them, how about offering some creative suggestions about how you could help manage, supervise, and strategically guide those enormous "boots on the ground" efforts?  (You won't be hiring and paying the infantry anyway.)

#3 may be my own personal favorite.

Isn't this another way of expressing the mantra every firm purporting to have a strategic rationale would have offered you until very recently?  To do the "high value," "price insensitive" work?  This simply states it a bit more subtly and stresses the perspective of the client rather than that the firm:  "to emphasize a 'profitable core' of unique and [firm]-defining material."

From our friends, with my interpolations as to what it could mean for us:

"Print media companies need to employ a range of efforts, but first and foremost, they must focus resources on their "profitable core"  [of clients] and build from that base. The profitable core is the set of print and digital content [your firm's intellectual property, expertise, and know-how] that most drives audience [client] engagement around well-defined interest [practice] areas. It is only on those distinctive content assets that a media company can build a "right to win," competing for attention against marketers [non-law-firm competitors such as Thomson West or LexisNexis], user-generated content [in-house resources, including lawyers], and other media companies [law firms you compete against]. Identifying the profitable core requires thinking freshly about the zones or editions of a newspaper or magazine and eliminating sections that do not drive significant readership or advertising revenue [a/k/a rethinking your geographic footprint and practice area mix]."

---

The most important message of all, of course, is to abstract from the specific tactical or battlefield suggestions outlined in the Booz Allen piece or humbly suggested by yours truly, and to adopt the mindset of competing in a world where settled conventions about such things as associate career paths and the billable hour model are suddenly being called into question. 

A fellow named Aaron Shapiro, a partner in digital advertising agency Huge (which has clients including Ikea, JetBlue, NBC Universal, Thomson Reuters, Time Warner, and Walt Disney), puts it best:  He says this environment will require you to think as both startup and incumbent simultaneously.  "It will take aggressively fresh thinking," as he expresses it.

So no, we are not the newspaper industry.  But if you believe Booz Allen, even the newspaper industry ought to see reason for hope--conditioned on some "aggressively fresh thinking."

Not at all gallows humor.  Perspective.

According to the most recent fossil record discoveries, life on Earth dates back about 3,450-million years. But for about the first 85% of that time span, organisms were extremely simple, composed of individual cells, occasionally organized into colonies.  Pretty dull.

Then something striking happened, about 530-million years ago, which is now known as the "Cambrian explosion." For reasons not entirely understood--oxygen reaching critical levels in the atmosphere? more sophisticated predator/prey competition? an immediately preceding mass extinction? "co-evolution" of related species?--evolution came up with a brilliant invention: Mutli-cellular life.

Multicellular life, as expressed in the Cambrian explosion, is not just aggregate-cellular life.  It's organisms with structure, with layers, appendages, limbs conducing to mobility, eyes, ears, and dedicated noses, protective carapaces, offensive tools such as teeth and claws, and essentially the entire array of what we customarily think of as the Lego blocks that can go into making up modern-day and even prehistoric animals. (Something similar happened with an explosion in the diversity of land-based plants about 400-million years ago, in the Devonian period.)

This is a quantum leap.

A profusion of widely diverse body types and anatomical plans arose, some constituting direct predecessors to animal life as we recognize it today (for example, if it's mobility you're after, four limbs--not more, not less--turn out to be really useful). Many many other plans, almost certainly the majority, were less optimally adapted and now belong to extinct lineages--such as Opabinia, with five eyes and a nose like a fire hose, or Wiwaxia, an armored slug with two rows of protective upright scales.

Interestingly enough, the Cambrian explosion was sufficiently powerful, diverse, and creative that no design template for a modern animal post-dates it. In other words, structurally and conceptually, pretty much every animal we see had a recognizable predecessor dating to this period. To be sure, evolution can produce shockingly powerful advances given a few hundred million years, but the point is that it was the seminal moment in the creation of multi-cellular life, where "a thousand flowers bloomed." While many were proven more or less in short order to be false starts and dead ends, the point is that the intensity of experimentation led to some extremely durable and well-proven animal models.

Take a look (click to play the 25-second PBS video):

 

What has this to do with BigLaw?

---

My thesis is that since, say, around 1980, we've been living in an ecological mono-culture: We have all been one-celled creatures, in the sense that we have all had one and only one strategy: Growth.

Aside from our "mono-strategy" as an industry, we have had:

• Mono-associate career paths (8 years, plus or minus, of lockstep to partnership);
• Mono revenue models (the billable hour);
• Mono levers for increasing profitability (primarily, by increasing leverage);
• And mono techniques for gaining competitive advantage (primarily, lateral partner recruitment).

I believe we're on the cusp of our own "Cambrian explosion," where we may begin to see a wealth of experimentation with different business models.

If the Cambrian explosion of 540-million years ago is any guide, there will be a lot of false starts and dead ends, a/k/a extinct species and firms. But there will also be some far-seeing, fast-running, high-flying, incalculably intelligent designs.

Stay tuned for the next installment in this series.

Hogan & Hartson/Lovells?

As amply reported (Legal Week, The National Law Journal, The Lawyer), the firms are in merger talks and, since no one is remotely denying the reports, we can only assume it's all quite for real.

We'll get to what we think it means in a moment, but first, to the numbers:

	Hogan & Hartson	Lovells
Revenue*	US $922.5-million	US $984.5-million
% change Year over Year	+4.9%	+10.9%
PEP	$1,160,000	$932,000
% change Year over Year	-1.7%	-11.3%
Revenue per Lawyer	$835,000	$695,000
Number of partners	202 equity/494 total	370
Number of lawyers	1,111	1,421
Non-home country offices	14	27
Non-home country lawyers	23%	82%
5-year CAGR of Revenue per Lawyer	+5%	+5%
5-year CAGR of Profits per Partner	+9%	+8%

*All figures in US$, using a conversion ratio of 1.594 $/£.

In addition, cities where both firms have offices are:

• New York
• London
• Hong Kong
• Beijing
• Paris
• Tokyo
• Munich
• Moscow

On a pro forma basis, the combined firm--assuming a complete merger--would have these characteristics:

• Revenue: $1.9-billion
• Number of lawyers: >2,500
• Global rank: Neck and neck with Latham & Watkins and Allen & Overy, all in a horse race for Global Firm #7:
  • DLA Piper: $2.26-billion
  • Linklaters: $2.23-billion
  • Freshfields: $2.21-billion
  • Skadden: $2.20-billion
  • Baker & McKenzie: $2.19-billion
  • Clifford Chance: $2.16-billion
  • Latham & Watkins ($1.92-billion), Hogan/Lovells (roughly $1.9-billion), Allen & Overy ($1.88-billion)

Finally, the practice mix would seem at first glance to be highly complementary. Hogan is known especially for its regulatory/government law practices, antitrust, litigation, intellectual property, real estate, and a substantial level of corporate work. Lovells, somewhat unusual for a UK-based firm, also has a relatively robust litigation practice and is less deal-driven than (say) the Magic Circle, as well as having strong real estate, antitrust, and regulatory law capabilities.

---

So: What does this really mean?

Already the naysayers, of course, are keening about the challenges and the obstacles.  To be fair, the commentary has not been uniformly negative, with (for example) Alex Novarese of Legal Week saying that "at first glance, there appears much to commend this union," but he is quite the exception.

A sampling:

• "Merger-averse Hogan" supposedly reversing field;
• "partner compensation is, of course, a tougher challenge;"
• "transatlantic deals are fiendishly difficult to pull off;" and "transcontinental mergers have a mixed [read: dubious] history;"
• "US/UK deals are notoriously difficult to secure given the challenge of marrying differing partner compensation and accounting models;"
• "it's not clear what a merger would do for the combined firms' profitability;" and, of course, the inevitable
• "there could also be conflict over whether control of the combined firm would reside in Washington or London."

I'm here to tell you that it's time for us all to just get over ourselves.

So far as I can tell (no insider knowledge here, folks, sorry to report), this deal makes superb sense.

For how many years/decades/centuries have major corporations been doing transatlantic business on a routine basis? And somehow they have been managing to smooth out the differences between the pound sterling and the dollar, the differences between compensation expectations in the US and the UK (not to mention New York and London specifically), the differences between driving on the right and on the left, and of course the grain of truth in the famous quip about being "divided by a common language."

As for the New York/London divide specifically, we are informed by a UK legal publication that the architects of this deal should be grateful Hogan doesn't have its roots here in the Empire State: "A conservatively-run practice like Hogan, with a centre of gravity outside the brittle egos of Manhattan, shouldn't be the hardest American firm to align with a UK practice." [Note to visitors to the home office of "Adam Smith, Esq.:" Please check your egos at the door; we do.]

Are there challenges? Of course; there are challenges to running each of the firms today, as they stand alone. Would the challenge of running the combination be twice as great? Perhaps, but I doubt it--at least it would decline over time, and in the meantime there would be double the resources to devote to the challenges. Combinations that have far more moving parts than this one (just to pick a current example, Kraft/Cadbury) are pulled off routinely in CorporateLand. Why do we presume market forces end where legal services begin?

More importantly, do you see what's going on here?

Each of the obligatory reservations stated to the deal--partner compensation, the putative transatlantic "challenge," whether Washington or London would "win"--is at bottom a rather shameless exercise in navel-gazing.

When I said it's time for us to "get over ourselves," this is precisely what I meant. So far, the tenor of discussion about this proposed merger has been--at least when it shifts from pure journalistic reporting to implied or overt opinion--about as sophisticated as sports bar debates. (I am compelled to note one outstanding exception, which I would like to believe serves to prove my rule, namely the thoughtful commentary by Aric Press, "What a Hogan/Lovells Merger Would Mean.")

This is potentially a transaction that will change a conspicuous portion of the BigLaw landscape globally. Prattle as we may about the "globalization" of the profession, the Global 100 law firms are still (for reasons that have understandable, if archaic, roots in history and regulation-by-jurisdiction) almost shockingly insular, domestically rooted institutions. Of those 100--pop quiz--how many have:

• Over 50% of their lawyers outside their home country? Only 10 (yes, including Lovells, and counting DLA worldwide and DLA international as one firm).
• And of those 10, how many are of US origin? Two, namely White & Case and Baker & McKenzie.
• Between 30 and 45% of their lawyers outside the home country? Again, only 10, with a somewhat more respectable 7 of US origin.
• And below the 30% bar, the pickings get slim indeed, including some heavyweight name brands with surprisingly low numbers. For example? I would argue that if at least 3 out of 4 of your lawyers are in your home country, you're not yet seriously international. Here are some candidates (not to single these out, just to make a point):
  • Sullivan & Cromwell: 22% of lawyers non-US based
  • Skadden: 16%
  • Sidley Austin: 16%
  • Davis Polk: 13%
  • Simpson Thacher: 11%
  • &c.

The point is simply this: As an industry, we are not nearly as "internationalized" as our clients, and certainly not remotely as global as the premier clients we all aspire to serve.

It sounds to me as though the leadership of Lovells and of Hogan & Hartson are focusing on genuine strategic objectives and not on "who's on first."

We all need to grow up, snap out of our self-referential and unappealingly self-regarding reveries, and seriously contemplate what this may portend. And from my perspective, it will all be good. Overdue, but good.

When the business paper of record (I refer of course to The Wall Street Journal, at least here on this side of the pond, although I'm increasingly fond of the Financial Times), prints a prominent article on its Op-Ed page entitled The End of Big Law, as Arthur Miller might have put it, "attention must be paid."

I'm here to tell you to pay no attention.  Or, if you insist, that it will go deeply unrequited.

The author is Douglas McCollam, described by the Journal as "a former correspondent for BusinessWeek, [and] a contributing writer for The American Lawyer."  So far as Google and I can tell, he has actually written a grand total of one article for BusinessWeek and perhaps two or three for The American Lawyer, the most recent in 2005.

Mr. McCollam's credentials as a domain expert in our industry aside, the article falls quite spectacularly on its own merits, as a truly impressive exercise in the abject failure of critical thinking:

• "For the first time since the Berlin Wall fell, profits dropped..."  The same is surely true of almost every other industry and sector in the economy including, not to make an awkward point, the publishing industry. 
•  "[A] great many members of the American bar fell prey to the same strain of hubris that infected their clients. They embarked on empire building--opening offices from Beijing to Bucharest."   This could also be characterized as participating in the great post-cold-war phenomenon of globalization, or, more simply, as following your clients.  As for "hubris," I have yet to meet a managing partner not exquisitely attuned to the sentiments of their partners and the perceptions of their clients.  As CEO's of multi-hundred million dollar enterprises, they are a modest bunch indeed.
• "[B]ig law firms find themselves just another smokestack industry with too much capacity."  Last time I checked, we were not capital-intensive nor do we have but the most trivial base of fixed assets.
• Finally and perhaps summarily, nothing in the article connects to the headline, "The End of Big Law."  Nothing.

Much of me was loath to, and so I delayed, writing this column.  Indeed, I debated whether it was worth even drawing attention to this misbegotten exercise in tabloid journalism.  Besides, I trust your discernment and analytic skills, to see through such transparently jackleg and misbegotten efforts.

So only a coda on what a wasted opportunity for the WSJ.  Our industry represents 1.4% of GDP--we're 10% the size of healthcare, which has been receiving a bit of ink lately, and I'd like to think we're an economic locus of activity not to be sneezed at--and Murdoch & Co. the editors fumbled it. 

Alas.

By now the news is well and long since out (WSJ Law Blog, AboveTheLaw) that Howrey has decided to fundamentally change the nature of the first and second year associate experience, by focusing on training and an apprenticenship model in exchange for a substantial cut in salary.  DLA Piper has also announced it will be reducing the size of its associate classes and discarding lockstep, while Orrick announced, effective July 1, that it would ditch class years in favor of three bands of talent:  associate, managing associate, and senior associate, with competency gates between the bands.

And just a day or two ago, across the pond, CMS Cameron McKenna, Eversheds, and Simmons & Simmons said they are all moving to merit-based pay: 

Nigel Moore, HR partner at Camerons, said: "Someone being assessed by how competent they are rather than on the basis of years on the clock strikes a chord with the kind of person who wants to work here. From the client's point of view it also ensures they get the best man or woman for the job."

Nearly a year ago, I wrote about the precursor to the Howrey effort, but I believe this is a signal development and therefore worth spending a bit of time exploring.

Welcome to the first shots being fired in what I predict will be the coming War of the Dueling Business Models.

Well, if we care to be a bit less melodramatic, the reality is that the venerable and century-old Cravath system, which we all followed for so long for an admixture of reasons surely including inertia, the hope that some of the prestige/mystique would rub off, and a systemic failure of imagination, may be reaching the end of its life cycle.  Now firms have to do things differently, which means being more focused on their core strengths, more attuned to their clients, and, yes, not necessarily doing what everyone else is doing.  This of course is the single most powerful reason for the durability of the Cravath system.

The standing joke is that when one presents a new idea to a businessperson, their first question is, "I hope no one else is doing this!", whereas when you present the same idea to a lawyer, the question is, "But who else is doing this?"  Or, as I heard it expressed slightly differently just this week--and trust me, you cannot make this stuff up--when a particular managing partner was criticized because his firm wasn't terribly innovative, he replied, "It would be useful to have guidance from other firms on their efforts at innovation."  (I promised you you can't make this up.)

But back to departures from the Cravath system.  Will we see much more of this?

As a recent Vice Presidential candidate surely would have put it, "You betcha!"

Why?

Because we have come to the end of the road for business as usual.

Every firm--not just Howrey, DLA, and Orrick--is experiencing a severe problem as the deferred starting dates of summer associates and first-years begin to collide with (what would be the normal) starting dates of subsequent classes.  While few firms have acknowledged this publicly, and fewer still have discussed how they'll deal with it, one almost inevitable consequence is that two or more classes will be in competition with each other for the slots of one class--and a "downsized" set of class slots at that.  What's the answer?

A simple, but accurate, way to think about summer associate programs is through the familiar analogy of the pig in the python:

• Virtually all firms have a surfeit of associates as it is, both because of reduced demand and the utter and complete disappearance of natural attrition (nobody but nobody is quitting voluntarily in this environment);
• Summer associate programs were put together before the meltdown and are, to put it diplomatically, not attuned to current reality;
• Every summer associate that could fog a mirror while keeping their clothes on used to get an offer; that cannot and will not be the reality going forward; and
• The common, understandable, and entirely rational spate of year-long deferrals is going to create a pileup a year from now.

In other words, if your firm has deferred the Class of 2009 from September 2009 to mid-2010, what are you going to do about the Class of 2010? Defer them to 2011? And the Class of 2011? As my high school physics teacher used to say in his inimitable New Jersey accent, "You can't play dat game fuh-evah."

One approach would be to tell two classes that they'll be competing for the (reduced) slots previously available to one class. This has a brute-force appeal, in that it solves the problem expediently and you have the pick of twice as many candidates for, say, half the slots. But it stinks of betrayal.

So firms that have announced deferrals are going to face, sooner rather than later, the two-years-on-one pileup: Not just one but two pigs in the python. There is no Platonically ideal solution to this arithmetic and calendar-driven problem. But I haven't thought of, or heard of, a better answer so far than that of simply taking a year off on-campus recruitment. 

The most forceful and cogent objection, and I readily agree it's got teeth, is that no firm can afford to forego one entire year of seeking out the best available talent coming out of the nation's law schools. If your firm so chooses to jam two years' worth of graduates into one year's worth of opportunities, so be it, and that's surely one rational response among others.  My only thought is that If someone does have their heart set on working for your firm, they'll still know where to find you, and last I noticed we had not outlawed the lateral marketplace.

Radical as it may sound, I think some firms will "take a year off."  Not just asking their incoming associates to defer for a year, but re-synching their recruiting to their demand by opting out of recruiting altogether for a year.  Really, how many alternatives are there?  You can renege on commitments already made to students who are, at least to some extent, known quantities in favor of unknown future quantities, or you can continue to appear for on -campus recruiting knowing in the back (or front) of your mind that you will be making few or no offers:  Both appear economically irrational and morally dubious to me. 

MIght it not be better to be open about The Pig and conform everyone's expectations to reality by announcing a one-year recruiting sabbatical? 

Indeed, Morgan Lewis has announced it's canceling its summer associate program for 2010:

In a letter to law school deans, Morgan Lewis' firmwide hiring partner Eric Kraeutler said the firm first wanted to fulfill present obligations.

"We continue to be committed to law school recruiting and entry-level hiring. However, our highest priority is to provide opportunities for our existing associates and 2009 summer associates," Kraeutler wrote.

You have promised (your word is your bond, isn't it?) slots to the current class, whereas you haven't promised, so far, anything to the succeeding class. This must be what Eric Kraeutler was thinking when he said they would put existing and 2009-promised associates ahead of future unknowns. (Disclosure: Eric and I were Princeton classmates, but I haven't spoken to him about this column, although I'll send him the link once it's published.)

From our flank now comes the salvo, Welcome to the Future:  Morgan Lewis Signals Armageddon, which opens with this and gets only more apocalyptic from there:

There's no way to overstate the importance of last week's announcement by Morgan, Lewis & Bockius that the firm was canceling its summer associate program and on-campus interviewing (OCI) for the summer of 2010. ... OCI is not just any activity for a big law firm. It is, in the language of modern business, the core process of a large law firm.   The whole value proposition of a large law firm is built around the syllogism: "We hire the smartest people from the best schools. They work the hardest and do the best work. And we charge the most money." 

In case you missed it, this would indeed be Armageddon.  If "the core process" is broken, then to be sure "the whole value proposition of a large law firm" is on its deathbed.

What, then, to do?   From the premise that we are experiencing apocalypse now, we learn "the urgent necessity to 'mark to market,' to correctly set prices based not on wishful thinking or yesterday's sense of entitlement but on reality."  The implications of this new-found operational discipline and rigor, which are then enumerated, include, among other things:

• Telling publishers and technology vendors there are too many of them and that there will only be one winner "and you have 15 minutes to decide if you want to be that guy."
• Beating up on landlords, including unilaterally halving rents per square foot and unilaterally abandoning space, all presumably achieved in a consequence-free zone.

Culminating in "If you didn't realize this before, Morgan Lewis just stamped it on your forehead."

---

A bit of perspective, prithee? 

To begin with, we are not the newspaper industry, or even the investment banking industry:  We are not dealing with existential threats to our continued existence in a 21st Century global economy. 

Indeed, if you believe any of the following:

• Globalization is here to stay;
• Regulation is going to become more complex, not simpler;
• Cross-border transactions and cross-border mobility of people, ideas, and capital will accelerate;
• North America, South America, Europe, and Asia are each centers of financial and economic power in their own way;

then you have to believe the future for our industry has never been brighter.

Are our business models changing? 

I believe they are, and I also believe the risk of attempting to meet the changing client- and economically-driven zeitgeist of our industry through denial and passivity has never had a shorter half-life.  I'd actually give denial a half-life of two--five years.  (And to think that GM had 30!)

But our value proposition, apocalyptic commentators to the contrary, is in many ways more powerful than ever.  The smartest people from the best schools, working very hard and doing great work, are worth whatever the market will bear.  And so far as the eye can see, the market for that extremely limited supply of focused and applied expertise will bear a lot.