The Cravath System and the Bi-modal Starting Salary Distribution (Or: Why some firms need to admit they can’t play with the big boys.)
Over at Empirical Legal Studies, Professor William Henderson has a must-read post, How the “Cravath System” Created the Bi-Modal Distribution. It’s lengthy but well worth your time, if you have any interest whatsoever in the economics of large law firms and law as a business. Henderson analyzes the peculiar bimodal distribution of lawyers’ starting salaries — it’s not a standard bell curve, but a distribution with two big spikes, one on the low end and one on the high end — and he explains the reasons for this.
There is really too much good stuff in the post to do it justice; read it in full here. At the risk of discouraging you from reading the complete post, which Dean Jim Chen of MoneyLaw deems “the most important blog post of the year,” here’s an excerpt:
[T]he runaway $160K [starting salary] mode is a confluence of two factors: (1) the continued growth in the corporate legal services market, primarily due to the growing scale and scope of transnational corporate activity; and (2) law firms’ nearly universal adherence to the “Cravath system,” which purports to hire the best graduates from the best law schools and provide them with the best training.
The New York firm of Cravath Swaine & Moore created and refined this system during the early 20th century. The emphasis on educational credentials was initially an attempt to establish a distinctive brand of legal services that could differentiate the firm from other Wall Street competitors. Now, ironically, it has become a uniform industry practice utilized by every large law firm that claims to provide first-rate services.
Virtually all firms mimic the Cravath system without understanding its logic.
Read more, after the jump.
Professor Henderson continues:
[As] regional law firms morphed into the Am Law 200, their partners remained psychologically wedded to their own perceptions of eliteness. In the ensuing salary wars, these firms slavishly paid the prevailing rate rather than signaling to the market that the firm had become “second rate” (a term used by a Proskauer Rose partner in rationalizing the higher pay). In turn, the laws of supply and demand produced the bi-modal distribution.
Will this bimodal distribution persist? Is it economically sustainable for all Am Law 200 firms to pay like Cravath? Henderson doesn’t think so:
Based on a dataset of lateral partner mobility within the Am Law 2000, it is possible to tease out a relative hierarchy of practice areas. The table below, which covers the 2000 to 2005 time period, orders legal specialty by differential profits per equity partner (PPP) between the firm a partner left and the firm he or she joined.[See fascinating chart of the practice area hierarchy / food chain, available in Henderson’s post.]
The trends are straightforward. Partners in marquee practices like white collar crime, securities enforcement, M&A, private equity, emerging markets, and intellectual property litigation are disproportionately moving upstream to more profitable firms. Partners specializing in regulatory compliance, real estate, public finance, project finance, and trust & estates are disproportionately moving downstream….
In the long-run, firms without a optimal mix of premium practice areas will have a hard time sticking with the Cravath system.
So what do they do? Henderson doesn’t say this explicitly, but we view the recent spate of associate layoffs, whether public or stealth, as a consequence of certain firms flying too close to the sun (read: Cravath), and falling to earth. Their partner profits aren’t high enough to allow them the luxury of having hordes of junior lawyers sitting around, all getting paid $160K or more, and not doing a lick of billable work. Cue the layoffs.
Here’s a great take on Bill Henderson’s research, from Bruce MacEwen, at Adam Smith, Esq.:
The bimodal distribution of starting lawyer salaries is not, economically speaking, an equilibrium condition. It will change.The last great associate salary spike, from $125Kto $160K, took place roughly 18 months ago when times were flush. Even then, some firms began panting at the effort to keep up. (Recall that the instigator of that spike was Simpson Thacher, which didn’t have to raise its resting pulse to manage the spike.)
The next spike—I won’t predict when it will be but I will predict it will be to $200K—will leave a lot of firms crying “Uncle.” They will stop struggling to keep up with the receding red lights moving on down the highway. And it will be economically rational, geographically defensible, and culturally unifying.
Don’t expect $200,000 starting salaries anytime soon. “NY to 190,” while a nice rallying cry in the ATL comments (before the credit crunch), is not a realistic expectation right now.
Even the firms that are weathering the downturn well have no particular incentive to raise now. One could argue that today might be the perfect time for the Wachtells and Cravaths and S&Cs of the world to strike a death blow against “inferior” firms. But the “inferior” firms are having enough trouble as it stands; they don’t need to receive death blows in order to die.
We agree with the central point of Henderson and McEwen. If you’re not Cravath — if your profits per partner are not over $2 million, or even $1 million, and you’re not a major player in the premium practice areas — why try to pretend that you are? Why not pick up your bat and glove, and go play in a different ball field?
P.S. Don’t forget — to read more, including underlying data and a wealth of charts, go to Henderson’s original post. Great stuff.
Also check out the links collected below, commenting on Henderson’s work.
Update: Thoughts on Henderson’s research, from Professor Larry Ribstein, appear over at Ideoblog. An excerpt:
Bill’s paper proposes a solution that emphasizes the value of training lawyers. I’m sympathetic with that approach, but I wonder whether it completely deals with the problem. The bimodal distribution may reflect a basic talent disparity between top law students and other law graduates that matters in the increasingly sophisticated, intellectual, and policy-oriented high end of law practice. Training can accomplish a lot, but not everything. I am not asserting this as a fact, simply an alternative hypothesis that needs to be considered.
How the “Cravath System” Created the Bi-Modal Distribution [Empirical Legal Studies]
The Bi-Modal Starting Salary Distribution [Adam Smith, Esq.]
The Blog Post of the Year [MoneyLaw]
The Cravath System and the Demise of Large Firm Business as We Know It [Legal Blog Watch]
Henderson on the bimodal distribution of entry level salaries [Ideoblog]
(143) 
Comments
Comments hidden for your protection. Show them anyway!
cravath=ttt
Simpson to $201!
11:27 - let's see (a) your offer letter from Cravath and (b) your polite decline letter. Otherwise, shut your pie hole.
I wrote this article back when I was in High School. It was no big deal.
#3, you don't have to refer to time anymore, refer to #1.
11:35 some of us still prefer time references
11:35, see the first blogger who mentions $201 and let's all eat pie.
Another advantage of time references is that they are fixed.
If Lat deletes spam, offensive comments, or multiple postings, like on the staff attorney post from yesterday, the numbering gets thrown off. But the time references stay the same.
#6, some of you are just plain stupid.
Sincerely,
#5.
11:35--thanks
Cravath Model = ivy nerds giving other ivy nerds the reach around.
Much happier with a firm that pays solid salary with people who are less pretentious (and better looking).
11:31 - s&c, quinn emanuel any time over cravattth
What's a Cravath?
I think firm's don't want to play on a different "ball field" because once you're off that field, you're off for good reputation-wise -- even when the markets turn around and you can't jump back up to that second level right behind the Cravaths of the world, because your reputation is tarnished.
I think no one wants to be in a third group, so they try with all their might to stay right on the coat tails of Cravath.
why not allow deletion of certain posts as well as the number reference? that way the posts keep the original number they were initially assigned no matter what. e.g. 1, 2, 3, 7, 8, 10 (if 4, 5, 6 and 9 were multiple postings).
i don't see the downside - unless you, for some reason, really want to keep track of how many comments are currently showing.
#2 -
Simpson to gas cards! - $201 is not asking for much. That's less than a billable hour.
This type of recruiting (1) is easy; (2) justifies high billing rates. However, what is the attrition rate for these types of recruits. Most of the top 10% from the top schools are not satisfied reviewing documents or the like and are also more marketable and thus more mobile.
Cravath Swaine & LESS = ttt
Ummm...to #17, FYI, all law firms plan for, expect, and want attrition. The pyramid would topple if people hung around too long. Duh! It may not make economic sense once recruiting costs are factored it, but it is the way of the modern law firm.
And, on the contrary, the signaling effect from having been an ex-Cravather is really strong. So often Cravath spits out junior associates (after their first or second rotations) and the rest of the world thinks they're gold, even if they suck. It's smart. Much like the McKinsey or Goldman sunshine out of one's a$$, pedigree trumps reality.
Dean Jim Chen, from one of the posts linked to by Lat:
"The love of credentials has become the root of all evil."
http://money-law.blogspot.com/2008/07/blog-post-of-year.html
This sorting process is already starting in terms of year-end bonuses.
Cravath pays top bonuses across the board, on a lockstep basis. So do a few other top firms.
The rest pay top bonuses only to top performers (or top billers).
Why can't other firms succeed at the same level as Cravath? Their model isn't too complicated.
By saying no one else does it like Cravath, and therefore, no one should try, means we should have one i-bank (Goldman), one law firm (Cravath), and one hospital (Mayo or something).
And last I checked, Cravath doesn't have the highest PPPs, so other firms with higher PPPs obviously have something going for them as well.
qualified but jobless wisconsin student eager to interview henderson's 85k/yr chicago firm
Just out of curiosity, why is Cravath the gold standard firm, and not Wachtell?
I refer to the chart setting out the profits of partners in various practice areas. Given that the chart is based on 2000 - 2005 data, perhaps ATL can run a thread/survey on the average current salary of associates (and partners) in various practice areas? This ties in with the recent roundtable discussion in which a question posed by Lat was "What practice areas are hot now?"
It would certainly be of help to those of us who are considering which practice area to join as a 1st year attorney. Thanks!
Where can one obtain a list of firms that use the "Cravath System?"
#24: Because Paul Cravath invented the Cravath System--the template for all the other BigLaw firms--100 years ago.
The Cravath system has been great for the Law School industry. If firms are going to pay 160 to everyone they hire, they expect those kids to have gotten an education that justifies the expense. In turn, the law schools feel that they can justify raising tuition to astronomical heights, even if the eduction isn't improving, or particularly applicable to law firm life. This is also a reason that I doubt most schools are likely to follow Northwestern to offer a 2-year degree. Regardless of the fact that the 3rd year (and possibly 2nd) offers little in the way of practical lawyering skills, the schools can point to the starting salaries and say that they have to keep the 3rd year because otherwise the law firms won't be getting what they pay for.
Cravath has bedbugs:
http://www.abovethelaw.com/2008/03/cravaths_achilles_heel_bedbugs.php
I would take Wachtell or S&C over Cravath any day.
Bed bugs are IMPOSSIBLE to get rid of once you have them, unless you burn all your clothing and furniture.
Again from the minority lawyer - F&*^ Biglaw!
You hire white frat boys and pay them ridiculous amounts for their puny brains, you deserve what you get.
"The New York firm of Cravath Swaine & Moore created and refined this system during the early 20th century. The emphasis on educational credentials was initially an attempt to establish a distinctive brand of legal services that could differentiate the firm from other Wall Street competitors."
I'm sure in the early 20th century that was the only reason they shut out lawyers from non-Ivy law schools. Uh-huh.
28:
Doesn't Northwestern make people in the 2 year program pay the same total amount as people in the 3 year program? They just pay 50% more per year for only two years.
Law Schools won't be reluctant to implement a 2-year program if they can increase the student turn over, tuition collected per seat, and thus increase their revenue from tuition by about 75%
NY to 190k!!!!!!!1
(24), I think that Cravath is the gold standard for firms rather than Wachtell, because it's the Cravath business model that other firms are trying to replicate. Wachtell is more profitable, but it doesn't follow the Cravath system at all, and it's not clear that other firms could profitably emulate Wachtell.
How is a capital markets lawyer different from a corporate securities lawyer? It is surprising that capital markets attorneys get huge increases in salaries switching between firms, but corporate securities lawyers receive much more modest increases...
Cravath = TTTTTTTTTTTTTTTTTTT !!
32-
I believe you may be correct about Northwestern, and it serves to make the point all the more about skyrocketing academic costs. The more the costs are tied to the assumption about high starting salaries, the more difficult it becomes for those who take non-Biglaw jobs to pay back their loans.
-28
#30,
I thought those types of comments were going to stop now that Obama is the democratic candidate!?!?!? Guess He'll have to be president before that happens huh....
Lat's title is contrary to the point of the working paper, and the point of the working paper is supported by 24's question regarding Wachtell. Wachtell became excessively profitable by catering to an ignored market demand. The working paper identifies an ignored market demand and how it can be met. Deviating from the Cravath system would not be a concession that some firms "can't play with the big boys." It would simply be an acknowledgement that today's "big boys" are ignoring a market demand. The firms that successfully meet the demand will become excessively profitable - just as Wachtell did - and in 30 years some law student that didnt bother to rtfa will be asking "Why is Cravath the standard and not [today's supposedly second-rate firm]?"
(39): I think that Wachtell is a special case because while it abandoned the Cravath system, it didn't concede anything in terms of salaries: in fact Wachtell associates are far better compensated than associates at any Cravath-style firm.
The article suggests that firms think about lowering salaries and change their billing policies to better cater to the needs of their clients. This might make sense from a bottom-line standpoint, but it would be a concession that these firms are not able to compete for the high-value legal services that Cravath and the other top firms provide.
39: what did Wachtell do differently? Corporate M&A?
39 - I think Lat is familiar with Wachtell, since he was an associate there for several years.
http://www.linkedin.com/in/davidlat
The 80k firm's new tagline:
"Our lawyers graduated from average schools with slightly above median grades! One guy even nearly wrote-on to LR, but ended up on a secondary journal!"
I'm sure it'll be a smashing success. Corporations will be falling over themselves to hire them.
(40): I don't know too much about the difference, other than what I've read about Wachtell (there's an article on this subject floating around the internet somewhere), but I think the main differences are that Wachtell is more innovative (they came up with the poison pill, among other things), and as a result can charge more for its services. I understand that Wachtell effectively charges a percentage of the deal, like an investment bank would, rather than just billing hours. This is why it's so profitable, even though it is barely leveraged.
-39
the description below makes cravath sound like a cult
http://www1.iwon.com/home/careers/company_profile/0,15623,1077,00.html
er, this is (44). i mistyped - was responding to (41), and i am actually (40).
The problem with many firms being unable to pay associate salaries is poor management. When I started at LLGM a few years ago, it was reviled on GA and XOXO as a second-tier firm. Now, D&L is easily headed into the V5 in the next couple of years. (Whose laughing now!) All it takes is great management and the rest works itself out.
"Who does #2 work for?"
Agreed, #28. The Cravath System overemphasizes the name at the top of the diploma and ignores the actual training a school provides. The Cravath System creates no incentive for legal education, but rather encourages schools to climb up the US News rankings. As a result, people graduate from top schools knowing nothing about how to practice law, and an associate's first year or two are spent teaching him what he should have learned in law school.
What's ttt?
49: people graduate from bad schools without knowing anything about law as well. Clinics compensate somewhat, but law school pedagogy has never been set up in a way that teaches you how to practice law. You can blame Harvard Law School's administration in the 1890s for that problem.
what does TTT mean?
12:42/12:45 - the only time law students knew anything was before law schools became the way to earn the right to practice. back in the day you apprenticed and got the right to practice thus when you started out you actually knew how to do something.
lat i think that you need to post on the home page the following:
ttt=third tier toilet
Asking what TTT means = TTT
You know what the best part about all this? The legal market crash for associates is coming. Over the next year or two, less associates will be hired for less money and more will be laid off. All the while I'm making 6 figs as a federal attorney! 9 to 5 bitches! HAHAHAAHAHAHAHAAHAHAHHAHHAAHAA!!!!
52, "ttt" comes from an idiotic website called AutoAdmit populated by teenage pre-gunners. It's a reference to Third Tier law schools, but is used to mean something is not very good. Every time someone uses it, this website loses ethos.
52, "ttt" comes from an idiotic website called AutoAdmit populated by teenage pre-gunners. It's a reference to Third Tier law schools, but is used to mean something is not very good. Every time someone uses it, this website loses ethos.
11,
Which firms have good looking associates?
Hitting"Post Comment" twice = TTT
Hitting"Post Comment" twice = TTT
51,
I don't disagree. I'm only saying that if Paul Cravath (or anyone since) had decided that they will only hire people from schools that offer a good legal education instead of only hiring people who went to top ranked schools, law schools would focus more on education and less on US News rankings. Both students and the legal profession as a whole would be better for it.
- 49
Its beyond obvious that Pillsbury should not be paying associates 160 because Cravath is doing so. The problem is that Simpson Thacher competes with Cravath, Covington competes with Simpson Thacher, Gibson Dunn competes with Covington, Akin Gump competes with Gibson Dunn, and Pillsbury competes with Akin Gump.
55 needs to calm down. I can imagine that idiot laughing as he's typing, then all of a sudden, a stroke happens and he's lying on the ground, paralyzed.
#49, you are an idiot. People who complain about law school not teaching the skills a lawyer needs are not people capable of playing at top tier. If you look around at Wachtell, S&C, and Cravath, you see people who didn't just achieve academically, but also have an intellectual curiosity. Whatever you envision law school to be, perhaps more like plumber school, the move toward "skills training" are for people who practice public interest or hang a shingle.
Throughout its history, law school has been a mechanism for shaping how your mind thinks, to develop your analysis and improve your problem solving skills. If you're smart enough to get out of a top school at the top, chances are, you'll learn the ins and outs that you need over the course of your employment. It turns out that high-stakes litigation and deal-making is complicated and under no circumstances could you learn how to do it in law school.
The Cravath method works.
55...and you will continue to do that for the rest of your life. Bitches whine about working more than 40 hr weeks. Show me a person who drives home in five o'clock traffic every day, and I'll show you a loser. The legal profession is a "profession", not the kwik-e-mart. Sweet that you want to work forty hr weeks, but ambitious people generally want something more and will work for it.
"Increasingly, corporate clients are refusing to have their cases staffed by expensive first- or second-year associates who don't know very much and tend to leave. Hence, the training the clients are allegedly paying for has little or no future payoff."
-- What training are these firms providing? This side of the "Cravath sytem" is broken in most firms. Reviewing documents or managing document reviews or collections is not real training. Those activities do not teach advocacy or negotiation skills, strategy or judgment. When I worked at a biglaw firm following the Cravath system I could count on one hand how many associates I knew who had ever argued a motion or taken a deposition, let alone any who had ever managed a case or conducted a trial.
Everybody competes with Baker Heller. We dominate the world.
66: most law schools teach you how to take a deposition. You ask questions in a room with other lawyers present. It's not hard.
A large block of seats at the front of the sanctuary remained empty, enclosed by the velvet ropes. Then, as the organ swelled and the faint hush of whispered greetings among the mourners subsided, a procession entered from the rear. Marching two by two, uniformly clad in dark suits, ties, and white shirts, sixty partners of Cravath, Swaine & Moore marched slowly down the central aisle in a procession know as the Cravath walk — a tradition at the funeral of every Cravath partner. As they filled the front of the synagogue, their en-banc presence announced, as it had on so many occasions in the past, "A partner has died; the firm lives."
The funny thing is that schools like HLS weren't as elite in the 1970s and 60s. The Cravath System forced them to take the best and brightest.
Do any of you watch South Park?
I don't get it. Do corporations hire people to look at where a firm's associates graduated? Or whether they have LR from lesser-ranked schools? Why can't a lower-ranked firm pay 80k to a dozen average graduates and tell clients that they're good lawyers? Who audits these degrees in the first place?
Do corporations ever say, "Well, this firm has 10 HLS graduates, and this firm has only 9, so we'll take the former?"
TTTs - I'd rather hire a graduate who edited and regularly contributed to the law journal of his/her school than a HLS grad who was just there for the name recognition.
#69 re the cravath walk - read the full article at http://blogs.wsj.com/law/2006/03/07/law-blog-flashback-the-1992-death-of-cravath-partner-david-schwartz/ which shows that even the most reprehensible deceased Cravath partner is accorded this "honor." Mr. Schwartz was murdered by a young black male prositute ain a seedy by-the-hour motel in the Bronx buy the Hutchinsoin River Parkway. (Don't flame me - the facts are what they are.) The story made the first and second editions of the New York Times, but was pulled inlater editions, showing Cravath's influence in 1992. They weren't so adept in suppressing the news about the Cravath tax attorney and underage girls. Maybe it had sonething to do witrht he porno theatre across the street...
Interestingly, when I had a pool built three years after his death, the salesman pulled out a thick binder of "thank you" letters from previous customers - including the the lat Mr. Schwartz. Not sure if the salesman kept the letter after he leartned the details of the deceased's passing.
68, if it's not that hard why don't elite biglaw firms let associates do more of them? Oh, that's right, the client being sued for a couple billion dollars doesn't want to trust a deposition of a senior executive to an associate. (And the firm's high associate rates and elite fortune 100 clientele don't allow it to take on smaller multi-million dollar cases that other amlaw firms take on and may allow associates to take depositions for.)
Why is this an important blog posting? It seems that it is only important to those people who have never spent a significant amount of time at a large law firm (such as Henderson). We know that the top firms pay similar salaries and will match each other. We know that some of the less profitable firms are having difficulty matching these raises (see ATL's numerous postings on delayed raises, different slaries for associates of the same firm working in different cities). We know know that students at less prestigious law schools have trouble obtaining jobs at these top law firms and therefore earn smaller starting salaries. We know that successful partners frequently jump to mroe prestigious law firms. We know that some practice areas (M&A, securities, white collar and commmerical litigation) are more lucrative than others. Plus the Cravath system has been around for over 80 years, so that is not new.
This is a perfect example of law professors with no practical experience opining about the real world and making themselves believe they are the first ones to notice a certain phenomenon.
72 --> corporations have have inhouse counsel to watch over the legal work firms do for them. inhouse counsel know that school ranking and class rank within the school are a strong proxy for intellegence and lawyering ability.
there is plenty of incentive for in house counsel to keep the bills down, so if they thought a TTT grad could reliably do what amlaw 200 attorneys could do, they would hire them in a second.
Seems that the difference in results between the top-tier firms and the next level will be marginal at best; kind of like the difference in products turned out between, say, Columbia/NYU/Chicago and Cornell/GULC/Nothwestern...
If the second tier firms can cut costs (and offer lower prices), with very little effect on the quality of work-product... Well, you might see market share swing toward them. They may be the firms that do the best in a market downturn...
I guess it depends on exactly how marginal the differences are between the tiers...
1. Wachtell rose to the top in the '80s by focusing almost exclusively on representing M&A takeover targets, and they are still the gold standard for M&A. (I actually was CSM summer who is clerking now.) Several of the top firms at the top, but really Cravath in particular, was pretty beholden to the old Corporate model of just representing big institutional clients (Johnson & Johnson, IBM, etc). Skadden also firmly entrenched itself during the 80s by representing acquirors.
Wachtell now is the most elite firm (at least as far as big-time corporate NY goes; if you're a Supreme Court litigator type there might be a different answer) but Wachtell is having a bit of an identity shift. They are definitely expanding, but I think they want to remain smaller than the highly leveraged firms (Skadden, S&C, etc).
2. I think something has to give. The Associate-Partner ratio has gotten worse and worse, and I think those of us doing Biglaw are trading in money now for partner prospects later. The numbers are terrible.
64,
All I am saying is that law school should provide value added beyond a fancy name. Maybe it comes in the form of practical skills. Maybe it comes in the form of an education that will "develop your analysis and improve your problem solving skills." My liberal arts college experience was good enough that my top 3 law school experience added nothing on these fronts--maybe if you went to a crappy undergrad law school adds something, but for me it didn't.
So long as firms hire off of name and not value added, law schools won't value add, or at least won't value add up to their potential. While I got a $160k starting salary for my $120k of tuition, I could have gotten more, and my firm certainly should have gotten more from me after 3 years of legal "education." Absent any pressure from employers, though, why should a law school bother?
-49
Given the graph, it seems like the only ones really getting screwed are Cravath associates. So long as law students insist on going there to do more work for the same pay, Cravath will not be forced to raise its salaries.
64: Former BIGLAW associate stating unequivocally that lawyers are among the least intellectually curious people I know.
All I wanted from my law school was the fancy name. You can't teach someone to be a good lawyer in a classroom, just like I wouldn't want to go get surgery done by a doctor who did great in school but has no actual training. The biggest drawback for junior associates is the billable hours model, which forces everyone into focusing all their time on what is billable instead of taking the time for training.
76, that's not the point of the article. The point of the article is that every Amlaw 200 firm is following the Cravath model -- even though it doesn't make sense because many Amlaw 200 firms do not have the same profitability and the same type of profitable practice areas to pay top 14 law school grads 160k to start. But since law students are only looking at starting salary, firms that shouldn't be paying 160k (and the resulting increases up the associate ladder) still feel the need to do so under this model. Not every Amlaw 200 firm can be Cravath and not every Amlaw 200 firm can pay like it.
Since law students are too short-sighted to go to a lower ranked Amlaw firm that offers them a better chance of partnership and has lower PPP and starting salaries over the more prestigious firms where they have no chance of partnership, there isn't much incentive to change recruiting practices under the Cravath model.
84 - Yes, and you don't think every law firm partner who votes every 1-2 years to raise starting first year salaries doesn't ask himself: "Do we have to do this?" and then realizes that if the firm doesn't match salaries it will be seen as a second tier firm and have trouble recruiting students?
This is an old dilemma. We know this because we have ample evidence of firms over the past 10 years trying to save money in alternative ways: not raising starting salaries of associates at non-NY offices, reducing 401K contributions, reducing future salary step increases, creating minimum billable hour requirements, cutting back on pro bono, hiring fewer associates in favor of contract lawyers, lengthening partnership tracks, etc.
I am not the first (nor is Henderson) in noting the disincentives for law firms to break from the group and try to reign in associate salaries (or, more accurately, not make every attempt to maximize partnership profits).
Wow, I went over and read the article on the elsblog and the comments, then came back here and read some of these comments. It was like going from a Ph.D. class to a kindergarten class.
I think reading ATL (especially the comments) on a regular basis makes you dumber.
This may be a little highbrow, but there is very interesting legal history scholarship on the white shoe law firms at the turn of the century and into the 20's and 30's that describes the legal culture that gave rise to the Cravath system. The irony is that the unspoken purpose of the Cravath system was good old fashioned pre-war anti-semitism. As more and more Jewish attorneys graduated from the growing number of public law schools, the New York legal market saw an influx of Jewish plaintiffs lawyers that were black balled out of practice at the fancy firms. At the turn of the century Jews (along with the Irish and the Italians) were considered to be low class and inferior. The prominence of Louis Brandeis and his later appointment to the SCOTUS in 1918 was particularly threatening to the White Male Protestant legal establishment.
What to do? How do we ensure our White Protestant Male Wall Street clients that we don't associate with such undesirables as Jews and Catholics? Easy - have a policy that you will only recruit from the Ivy League, which at that time were all Protestant organizations that did not admit Jews (Harvard the exception), and admitted very few Catholics. We will call these schools "elite" even though they teach the same subjects, in the same way, as the public law schools. We will then be able to differentiate our firm from the other, more "Jewish" firms taking root (Riegelman & Bach for example - which is now Fried Frank).
Of course, in the ensuing 100 or so years the system has changed such that Jews represent a disproportionate percentage of the partnership of the major law firms. Americans Jews have become an ethnic affinity group that benefits greatly from the "Cravath system" due to their cultural focus on educational achievement.
Mr. Cravath, one hopes, is spinning in his grave.
65 -
"Show me a person who drives home in five o'clock traffic every day, and I'll show you a loser. "
Best...line...EVER!
"better chance of partnership and has lower PPP and starting salaries over the more prestigious firms where they have no chance of partnership"
Really?
89:
Look at leverage at firm.
Look at average pedigree of lawyer at firm
Compare to own pedigree.
If firm has high leverage and you are not markedly better at both work and politics than peers at firm, chances of partnership =
partners cultivated internally per class/your class size.
If firm never promotes partners internally, skip this exercise.
HAHAHAHAAHAHAHAAAA!!!! ....................urk...............can....only.....type......wit....right.....hand.........unnnnnnnnnnnnnnnnn......*
---55
65 - So what is that something more you're getting from all of this? Please. Tell me.
54 = HSL grad who failed the Bar. There are first-time readers who check this blog out who are not necessarily associated the legal industry.
The former CSW partner who paid a mother to have sex with her underaged girls is suing AMEX for helping the authorities hunt him down. Now that takes balls. http://www.news889.com/news/national/article.jsp?content=n072178A
1:01 is right. Talk to people who transferred from Tier3/Tier4 schools to top 15 schools, and ask them if there's a difference in quality of legal education/preparation.
And look at the work product that comes out of places like Cravath et al. where the lawyers have top pedigree, and compare that to the work product coming out of places with attorneys with lesser pedigree. There's a noticeable difference.
EDIT: "CSM" partner
2:12 - there is alot of trutht to that theory. the facts are clear: jews and others were not allowed in wall street law firms. (called that because they were all downtown).
Some of the firms, like Paul Weiss, actually had fairly mixed partnerships, while others, like the firm now known as Fried, Frank, were heavily Jewish. Kaye Scholer; Stroock & Stroock & Lavan; Weil Gotshal; Proskauer Rose; and Skadden, are other firms once regarded as Jewish. Cahill Gordon & Reindel, was an analagous Catholic firm. And of course that is how wachtell came into being.
today obviously things have changed.
#94 - how is it that you are reading news 88.9 from SJ? Is there another atl reader out there from sj?
2:50 - i hear that jeremy pit'cock' is representing the csm partner in this landmark ip case
#87 - good post. Very interesting. Not too highbrow. Yay Jews and people that like education.
I think I got sand in my Cravath.
I wear my frilly lace Cravath to work quite often.
87: You're absolutely right. And certain practices areas were considered lowbrow for precisely that reason - bankruptcy, real estate, and matrimonial law, in particular.
95,
But is that because the better law schools prepared them better, or because the students were smarter coming in? The friends of mine who transfered into my law school were impressed by the difference in the student body but less so with the difference in their instruction. If Harvard admits a smart kid and Suffolk admits a less-smart kid and both schools teach them nothing, you can't then say that because the Harvard kid is smarter after graduation that Harvard is a better law school.
And Cravath produces better work product than other firms, including other firms that hire lots of HYS students, because Cravath attorneys were trained by other Cravath attorneys ON THE JOB, not in law school, which is exactly my point. The better test would be to see if Cravath attorneys from HYS preform better than the occasional Cravath attorney from a lesser school. If you can prove that then maybe you have an argument.
- 49
26 here again -- how can I find out which firms use the Cravath System?
LOL @ 101!
Anyone who pays the market rate, which is $160K to first-year associates in most places, would probably be considered to use the "Cravath System."
107, I'm 26 and 105 -- I'm referring more to the "work 18 months in one area and then move" system rather than the "lure top students from top schools with big money" system. Were you referring to the former as well?
Cravath=FTT
What is this 'Cravath'?
3:44 is that filthy tier toilet?
111, I think it stand for "Flee To Toronto."
104 - The trick is that even with the same books, and even if the faculty were of similar quality (the latter of which is definitely not the case, but I digress- assume they are the same for this purpose), the HYS kids learn more because they learn from each other and not just the books and professors.
Thus, top tier students come out better trained because their classmates challenge their thinking and impose at least a little bit of additional rigor. They also come out better connected for the future because their classmates started out smarter and with better prospects.
Not that the effects of these advantages are uniform, obviously, but on average, I'm sure a firm like CSM sees the difference.
TTT comes from a Princeton Review site that predated Auto Admit.
63 & 65,
Here's the angle you're missing - federal employment is a wonderful way to jump ship when you're about to burn out and, depending on the agency, jump back on as a partner a few years down the road, when you and most of your colleagues have already become a part of a firm's attrition rate.
Sincerely,
Smarter-than-You
Could you tell anything about Davis Polk & Wardwell & White & Case, I cant choose betweent them.
(social, office,associate environment, ect...)
This is the Cravath recruiting model in the sense that Toyota now utilizes the Ford model of assembly lines.
In both cases, the original has been surpassed by upstarts: in the case of Cravath's recruiting, by firms that pay the same, or the same minus a $3K signing bonus, but offer a more meaningful variety of work early on and a better lifestyle, and in the auto market by higher quality, more desirable cars.
I always thought the people who went to Cravath were the ones too insecure to consider going to one of the other top firms.
Former Cravather here. There is a distinction to be drawn between the "Cravath System" as in hiring the best and brightest and paying them top salaries and the "Cravath System" in terms of training.
The training at Cravath involves up to six rotations of one-two years each (with the associate coming up for partner in the fall of his or her 8th year). There are no billables. You are expected to work hard and mentor junior folks. You are expected to gladly accept the partner group assignments you get, good or bad. You are expected to be a trooper. Clients always come first and you work (insanely long hours) as necessary to serve the client.
I currently work at another V5 firm. This firm manages by numbers. It has 1 million committees. No one at my new firm cares about attorney development or really anything that doesn't help their own "billables bottom line."
THAT'S the difference. Not salaries, but the quality of attorneys/work product that results.
100 here, responding to 108/105/26. I don't know any firms in Chicago that use the Cravath training system, as described by 118. I'm not as familiar with other markets.
However, firms can certainly emphasize training and associate development without taking it to that extreme. For example, some firms count writing articles or other associate development-type activities towards associate bonuses.
The model clearly isn't sustainable and it, along with 2L OCI recruiting for permanent employment, really needs to change.
You hire people based on two semesters worth of grades (and frequently one or two grades when it comes down to class rank), most of whom have never had any significant job in their life, pay them $160K + bonus for hellish hours, and then wash most of them out, while the client gets mad about huge rates paid for incompetent and slow work and constant changeover of associates staffed on multi-year matters.
Hire later, pay them less, work them less, train them more.
118 - Thanks for posting. So Cravath has no billables requirement? And if you're being rotated around so much when do you develop a practice area?
118 - Thanks for posting. So Cravath has no billables requirement? And if you're being rotated around so much when do you develop a practice area?
Why does the front page say zero comments when there are over 100 comments?
122: You don't need to specialize at Cravath. You can go into any practice area and figure it out by touching the pertinent treatise. Mere mortals "develop" a practice area.
Wow, 118, thank you -- that's exactly what I was looking for (I'm 26, 108, etc.). It does beg the question, however, (as 121 said twice) how do they specialize?
125: You don't know what "beg the question" means.
As correct (and annoying, pompous, condescending, etc.) as that is, it doesn't do anything to answer his question. Lots of know-it-alls on this site.
11:31am
Why would Simpson raise salaries at the same time they laid of 10 lawyers?
meanwhile firms are pouring millions into breastfeeding summers for 3 months. the thousand pound shithammer is coming.
So, is the answer that Cravath should hire the bottom of the class from Golden Gate Law?
116, Go to Davis. MUCH BETTER THAN WHITE & CASE. You will at least be treated like you matter.
116 - I can't speak to Davis, but I found W&C to be a good place to work.
I am also thinking of Cravath,Davis and W&C. they all seem like the perfect NY law firms.
66... the reason why cravath trains their associates better than other firms is because they actually DO get real responsibilities at an early stage. That is no joke... ask anyone who actually works there. They have first years doing work that other top 10-20 firms have their third or fourth years doing.
Marquee practice: intellectual property litigation.
Booya!
Wait, Simpson laid off 10 lawyers?
134--yeah, maybe, but some of those cravath lawyers are not so hot. Try working on a deal with one of the not so hot ones.
I am also thinking of Cravath,Davis and W&C like 133 can anyone give us any insight about these law firm.
Which law firm is more social?
118 Here:
Cravath does not expect you to specialize...check their website. Inevitably, as you get closer to your last few rotations, you will "double-up" and do a few more that overlap. A track there could go like this: Securities, M&A, Banking, Securities, London (Mostly HY/144A), M&A, Securities. Remember that you could do, say, securities 3 times and work for three different partner groups. It would be more likely, however, that you would lateral after 3 years or five years and lateral into the area you like at another firm and specialize there.
To 138--Cravath is not social. Cravath people are there to work. Although, I must say that the Christmas party at the Rainbow Room is awesome. Cravath hires super-smart people, who, as one link mentioned, did not go to charm school. The support staff is more interesting and fun than most attorneys. If you are looking for good friends, look elsewhere. It is biglaw at its most focused.
Don’t associates share offices for a long time, how long?
There is no official policy, and they've built out some floors since I was there, but it used to be that by the time you were a third year, you had your own office. Back in the day, people could "claim" their own offices even if they were more junior by being excessive smokers. Alas, no more smoking in the workplace in NYC. Hallelujah Bloomberg. And Jeff, we still remember the amazing cloud of smoke that would hover late night in your office. unreal!
ivy league school + good grades does not a fantastic lawyer make. some people are good on paper, but suck in real life. It's like paying for a fancy mercedes, but it leaks oil and only gets 8 miles to the gallon.
The Cravath system sounds great "on paper." However, it assumes that the senior teaching/mentor attorneys are all excellent. I came from a firm with a similar approach and after taking a new position outside the firm, realized that I had learned some bad habits. The Cravath system fails to admit new blood into a closed-off and sometimes faulty oligarchy.