At the NALP Conference: It’s the End of the World As We Know It
As mentioned previously, your above-signed writer is currently at the annual education conference of the National Association for Law Placement (NALP). Yesterday we attended some excellent events.
One of our favorite presentations, despite its deeply depressing nature, was “Understanding the Current Legal Economy.” Law firm management guru James Jones — Managing Director of Hildebrandt International, and former managing partner of Arnold & Porter — spoke to a packed ballroom about how the legal industry is, in short, completely screwed (at least for 2009, and probably beyond).
We took some notes on Jim Jones’s talk, which we’ve written up in this post. It is, we confess, what some might call a notebook dump. Alas, we don’t have the time for a more polished write-up.
Even if inelegantly written, we think you’ll find it interesting. Check it out, after the jump.
In his presentation, James Jones sounded themes similar to those raised in Adam Cohen’s superb New York Times piece (via Morning Docket). But Jones provided a level of granularity — as well as statistical data collected by Hildebrandt and Citigroup, a major lender to large law firms — that one wouldn’t see in a general-interest publication like the Times.
What was 2008 like for large law firms, and for the legal profession as a business?
Pressures on profit margins grew in 2008 (and will get worse in the near future). In terms of practice areas, comparing 2008 to 2007, bankruptcy was up — quelle surprise — and so was securities regulation.
The real surprise: litigation, usually a countercyclical practice, was soft. In response to a question from the audience, Jones acknowledged that some litigation work may be going to smaller — i.e., non-Am Law 200 — firms.
In terms of law firm merger activity, 2008 was similar to prior years. Surprisingly, it was also similar in terms of dissolution activity, at least in the sheer number of dissolutions (even if the 2008 dissolutions were fairly high-profile ones — e.g., Heller, Thelen, Dreier). In 2009, expect to see additional dissolutions and/or “mergers in lieu of dissolution.”
What will 2009 be like for the legal industry?
It won’t be pretty. Jones predicted there will be “no quick turnaround” for the legal business in general. There may be some improvement in specific practice areas: bankruptcy, labor and employment, regulatory (with a capital markets focus), and infrastructure / stimulus-related legal work.
Unfortunately, even if there’s improvement in the economy in 2009 (which there may not be), this won’t help law firms. Law firms are cash businesses — so an uptick in legal work in late 2009 won’t show up in the books until 2010.
For 2009, Jones is predicting flat to declining overall demand for legal services. There may be some modest rate increases — but these may be offset by heavier discounting, as well as no uplift from premium fees.
Expect modest revenue growth, in the 3 percent range. This will, however, vary wildly from firm to firm. Also look for additional layoffs and other cost-cutting measures, more merger activity, and higher law firm indebtedness (according to Citigroup, which lends to many law firms).
For the first two months of 2009, legal fees and demand for legal services were down, and lawyer productivity was down dramatically — by almost 50 percent. According to Jones, law firms face “a productivity challenge.” Average billable hours are plummeting across all classes of attorneys. Interestingly enough, equity partners are now working as hard as associates. This suggests hours hoarding.
What’s different about this downturn?
Several things, according to Jones. If you discount the popping of the tech bubble, which didn’t affect the broader economy as much, you have to go back 18 years to find a crisis comparable to this one: the S&L debacle. As a result, the current economic climate is one that many lawyers have no experience navigating.
“You have people at firms for whom this is terra incognita,” said Jones. Many lawyers, including many partners, weren’t in legal practice when a downturn of this severity last hit the profession. Biglaw is “coming off of two decades where the mantra for firms was ‘growth and expansion.’”
Jones explained that law firm profits are driven by five levers:
According to Jones, in the decade leading up to this bust, one factor was truly driving profits: rates. Rate increases of 6 to 8 percent per year were fueling record profitability. In this climate, however, pushing through rate increases will be tough: “We’ve awakened the sleeping giants of our clients.”
Jones explained, however, that the main issue isn’t hourly rates so much as the overall cost of legal services. Clients are happy to pay for the $1,000-an-hour partner who can solve their problem efficiently. The problem is that the provision of legal services is not, in general, an efficient process.
The legal business is moving from a period of never-ending growth to a focus on increased efficiency. This is the natural development pattern for a maturing industry. (Jones didn’t mention this example, but one thinks of the automobile industry today, or the steel industry before its overhaul — not inspiring comparisons.)
This natural trend is being exacerbated by the economic crisis. So firms need to shift gears from a growth model to one of increased efficiency and cost-effectiveness.
What are some trends that we will see in the years ahead?
This crisis may mark the end of the legal world as we know it — but not necessarily in a bad way. The Great Recession may trigger significant changes in the way that law firms operate as businesses. Here are some trends — or at least “trendlets,” as Jim Jones put it — to watch out for:
1. Rethinking associate compensation.
There will be pressure to end the fixed starting salary model. Firms will move towards more flexibility, away from lockstep schemes, and towards incentive- and competency-based compensation models.
There may be some rollback of associate salaries — which we’ve already seen at some firms. Joked Jones: “I can say that and you can’t, because I’m not violating the Sherman Act.” (Ah, antitrust humor — gotta love lawyers.)
2. Rethinking staffing models.
The model of a firm made up basically of (1) partners and (2) partnership-track associates, or essentially (1) business owners and (2) owners-in-waiting, is a very inefficient model. Expect to see a growth in other types of attorneys — e.g., staff attorneys, counsel / senior counsel, and contract lawyers.
Law firms may move towards a Big Consulting or Big Accounting model, where you have many more types of employees. There is nothing wrong with a firm bringing on board a specialist to work on certain types of cases without any expectation of that lawyer ever becoming a partner — and firms should stop treating such specialists as second-class citizens.
3. Rethinking models for the efficient delivery of legal services.
Expect a “disaggregation” or “unbundling” of legal services, either in terms of top firms working alongside cheaper firms as co-counsel on the same case, or top firms offering less expensive services under the same roof. Think of in-house lawyers focused on discovery work — basically, staff attorneys — who cost clients less than partnership-track associates. Or librarians who pull cases and then turn them over to associates for reading and analysis, which is cheaper than having associates do the Westlaw / Lexis searches themselves.
4. Rethinking pricing models for legal services.
Jones said that he’s been predicting the death of the billable hour forever. After years of it not happening, he said: “I concluded that the billable hour is the single most resilient idea in Western thought.”
But now he’s dusting off his old speeches. This economic crisis may finally precipitate a significant shift away from the billable hour model. We’re already starting to see more project pricing, for example.
Question and Answer Session
During the Q-and-A session, an audience member got up to offer her ambitious proposal for changing the legal profession. She described her pet theory as a “crazy, radical scheme, untested by experience.” Responded Jones: “We’re running the whole country that way these days!”
Her idea: two years of law school, not three; have students work at firms as “interns,” with low compensation; charge clients less. (A more radical version: have associates pay their law firms for the training they receive in the first few years of practice.)
Jones observed that such a system isn’t completely crazy, insofar as it’s similar to legal systems in other countries. In Canada, for example, there’s the apprenticeship period known as “articling.” In the U.K., law degrees are undergraduate degrees; graduates then go out for more practical training.
The challenge: persuading U.S. universities to move away from the current, entrenched system. “Law schools are cash cows,” Jones observed.
CONCLUSION
There’s no denying it: 2009 is “plainly going to be a challenging year” for law firms (read: absolutely awful).
But the recession may trigger reform. “A financial crisis is a terrible thing to waste,” said Jones. “We may someday look back upon 2009 as a tipping point for the legal profession.”
With the Downturn, It’s Time to Rethink the Legal Profession [New York Times]
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Comments
4th?
4th?
Well this pretty much confirms it: NY to 100k!
not first.
Hooray! Everything will be new, fun, shiny and full of weekends off!
Cash "chow"? Bring back MysTTTal.
good post. anything is better than "firm lays off a 100 attorneys, and you are next"
I would take a huge cut in pay in exchange for an employment contract covering a few years. And I know I'm not the only one. Seems like a win-win as far as firm costs go.
I would take a huge cut in pay in exchange for an employment contract covering a few years. And I know I'm not the only one. Seems like a win-win as far as firm costs go.
I would take a huge cut in pay in exchange for an employment contract covering a few years. And I know I'm not the only one. Seems like a win-win as far as firm costs go.
Rumor has it that Mystal actually ate himself.
I would take a huge cut in pay in exchange for an employment contract covering a few years. And I know I'm not the only one. Seems like a win-win as far as firm costs go.
I don't pity any of you.
Would anyone take a huge cut in pay in exchange for an employment contract covering a few years? Would this person be the only one? Would this be a win-win as far as firm costs go?
this notebook dump still reads better than most of MysTTTal's posts.
this notebook dump still reads better than most of MysTTTal's posts.
this notebook dump still reads better than most of MysTTTal's posts.
this notebook dump still reads better than most of MysTTTal's posts.
this notebook dump still reads better than most of MysTTTal's posts.
this notebook dump still reads better than most of MysTTTal's posts.
this notebook dump still reads better than most of MysTTTal's posts.
Amazing how much better Lat's unedited scribblings are than Elie's best "proofread" work.
Latham is like the guy who tells you he loves you, takes your virginity, then dumps you.
Latham hired me during my window of opportunity (2L oci), just to dump me into a rancid market after a few months.
Yep. Glad I turned down other offers for Latham.
Does this notebook dump still read better than most of MysTTAl's posts?
WOuld you people stop pressing post 900 times?
Elie Mystal is just David Lat's alter ego.
Great post, Lat. This site needs more content like this, and less of the other garbage.
Agree #27. This is a better than gossips. We should keep the bitter laid off people and paranoid people who are yet to be laid off to other blogs, like mine:
laidoffdiary.wordpress.com
Why do (ex) Arnold and Porter managing partners hate associates? The first thing this guy suggests is cutting associate pay. James Sandman (another former A&P managing partner) also suggested that associates should be paid less. I haven't seen either of them suggest that partners take in a little less.
So I'm totally fine with a gigantic paradigm shift in the legal world. Seriously. 100% AOK with it.
Except how the fuck is that going to help me? I'm still in school, I have tons of debt, and I'm getting hit with a changing employment arena but absolutely no change in cost of tuition. Is the class of 2010 to be the class that time forgot?
As a reader of this blog, I certaintly don't have problems with inelegant writing.
24: see above
No one actually calls it "articling." We call it "being a bottom." Only we don't get paid like professional bottoms.
33 - Hey guy, nobody cares what you are talking aboot.
Almost inevitably, when people speak of fundamental changes in connection with a cyclical downturn or boom, they are wrong. It happens every, single, damn time. Those that understand this can intelligently navigate these times. Few do.
Thank you, 35. This guy isn't Nostradamus. Really just sounds like he repeated much of what Adam Cohen put in the NY Times today, which wasn't all that fantastic a piece either.
Adam Smith, Esquire has been churning out really interesting posts about the impact of the downturn and drilling down into detail about leverage, etc.
Amazing how Lat's quick and dirty writing is more error free than Mystal's. Amazing.
Demote associates to staff attorneys, turn summers into interns. Sounds like fun.
One bad year. The legal industry will have one bad year and everyone and their fucking mother is sounding the warning bells for a complete thermonuclear meltdown.
Though the "Dow is Up" guy speaks tongue in cheek, there are enough financial indicators pointing upwards that we can say with confidence that the economy has stopped its nosedive. This timing follows historic recessions. Specifically late 80's early 90's, taking into account the mini-recession we had circa 2001-3. Our nation isn't going to be living in a mass of cardboard boxes, that's for sure.
The legal industry typically trails 6 months behind the economy. 2003-4 law school graduates had a heck of a time finding employment -- not so for 2005 and 2006 graduates. 2008 was an OK year for most firms. Some firms saw declines in PPP, some firms saw increases, and most firms saw no growth. 2009 will show a precipitous drop in PPP. What does this mean? It means that partners making $1.2mm per year will only make $1.0mm this year. Maybe only $900K. Some more junior partners will see a 25% drop in earnings. Associates have been seeing layoffs, salary freezes, and pay cuts. They will also see little if any bonuses.
2010 will not be worse than 2009. To be more accurate, 2010 has little probability of being worse than 2009. Furthermore, 2010 will most likely be BETTER than 2009. So, WTF is this doom and gloom shit about, if not to simply prop up your own enterprise? I'm talking to you, legal consultants and legal media . . . there is NO NEED TO BE AFRAID OF THE FUTURE OF THE LEGAL INDUSTRY. Hours will come back -- if not by the end of this year, certainly by the beginning of the next. Firms will need to hire again. Outside counsel and non-firm positions will open up. The government (especially the fed.) will snatch up many good firm lawyers, opening up positions for new firm associates. The world will be fine. Likely better.
This sucks for all the 3Ls with deferred start dates. This sucks for all the junior associates laid-off. This sucks for all the non-laid-off associates whose pay was cut and salaries were frozen. This even sucks for the over-leveraged partners who will have to sacrifice (do you really need that second home in the hamptons anyway?). This, however, is NOT THE FUCKING END OF THE GODDAMN WORLD.
End transmission.
I'd gladly give up all the Fordham grads and people with shitty grades to maintain current salaries.
The idea that "librarians . . . pull[ing] cases and then turn[ing] them over to associates for reading and analysis, [] is cheaper than having associates to the Westlaw / Lexis searches themselves" reflects a lack of understanding about how good, efficient research is actually done.
If you're doing your job, you are modifying your search terms as you get deeper into the cases, following citations backwards in time and shepherds results forward in time as you go along. That's the most efficient way to do research.
You want me to pass the librarian initial search terms, have them hand me a bunch of printed cases, then ask me to go back to the librarian for each modification, follow-up on a cited case, or sheps search? Ok . . . but if you think that's going to result in fewer hours billed to the act of researching, you're crazy.
8, really, you would take a pay cut for a few years of guaranteed employment. You are weak. Winners win, thats it. If you know you're the best you don't need any guarantees. The few that survive this are going to be better off in the long run. Stop bitching about the uncertainty of your future employment and be better at your job so you don't have to worry about it.
Thought the most interesting part of the comments was the discussion of law firms modeling themselves more like consulting firms. Those businesses still have "practice groups," which function similarly to, e.g., a bankruptcy group or real estate group at a aw firm.
While this model would be more flexible and possibly lead to more reasonable demands on lawyers' time, I have no doubt that legal ethics rules would stand in the way.
39: THANK YOU.
As others have said - Lat's notebook dump is more informative, cogent, professional and grammatically correct than anything Elie has ever offered. It's just staggering the difference between their posts. Elie, take note, Lat didn't drop in bad jokes or some kind of stream-of-conscious f-bomb, ladened phrase. He summarized a significant amount of information in an easy to read, digestable manner. Give it a try.
39,
You're wrong, wrong, wrong. This recent dead cat bounce in the marker is just that. The banking system is not going to recover until the government takes decisive action to nationalize the banks. Unfortunately when that happens nobody will be making any money. The housing market still has a loooong way to go down and the enormous amount of wealth destruction means that the American Consumer can no longer be the driver of the economy.
This means things are going to contract considerably for the next couple years. NOTHING IS GOING TO GET BETTER BY 2010. Especially not in the legal industry. More firms will dissolve. Plenty will cut salaries. Offers will be revoked right and left. The entry-level market will be an absolute bloodbath.
But by all means, continue your Pollyannish ways.
39: you're probably right, but it's hard to believe that a bubble hasn't been, to some extent, popped for good. Paying 1st year lawyers that much money and billing them out at such high rates is insane. I never could figure out why cilents put up with it.
42: you must be a treat. I'd love to see you cope with a friend or loved one who's going through a tough time.
39 - it is the end of the world, and the thermonuclear war is coming. It just has nothing to do with the legal profession.
NORTH KOREA IS BOMBING US ON SATURDAY!
End of transmission, and everything else.
39, you clearly lack expertise in this subject.
They really broke the system this time.
Great post. Thanks. More like this please.
Does anyone have any idea how this will impact areas of law once thought to be in high demand (read: IP)?
Scared IP 3L
42 = poop in a hat.
This is a really great post. It's amazing what happens when writers actually leave their offices and go out into the world, rather than just cutting and pasting NY Times links and/or rumor-mongering.
Speaking of rumor-mongering - Goodwin layoffs tomorrow.
Are the days of sleeping your way to the top over as well?
42:
Are you an idiot? One of the worst economies in over a century and you'd pass on guaranteed (high) compensation because of some b.s. "winner's win" slogan?
You're like one of those yutzes who goes on a game show, gets greedy, and loses $10,000 because he had to push for the extra toaster. I hope you don't have a family that's counting on you to support them -- moron.
42:
Are you an idiot? One of the worst economies in over a century and you'd pass on guaranteed (high) compensation because of some b.s. "winner's win" slogan?
You're like one of those yutzes who goes on a game show, gets greedy, and loses $10,000 because he had to push for the extra toaster. I hope you don't have a family that's counting on you to support them -- moron.
42:
Are you an idiot? One of the worst economies in over a century and you'd pass on guaranteed (high) compensation because of some b.s. "winner's win" slogan?
You're like one of those yutzes who goes on a game show, gets greedy, and loses $10,000 because he had to push for the extra toaster. I hope you don't have a family that's counting on you to support them -- moron.
Translation: all your salaries are belong to us.
42 --
Next time you want to come off like a tough guy -- "winner's win" -- don't include a typo in the same sentence ("thats"?). You open yourself up to mockery and just look dumb.
-8
42 --
Next time you want to come off like a tough guy -- "winner's win" -- don't include a typo in the same sentence ("thats"?). You open yourself up to mockery and just look dumb.
-8
law students should stop worring about all their debt. with 1970's era inflation on its way, us debtors will repay our loans in no time...
Lawyers in the top tier may also need to let go of their desire to be media stars. With that desire comes huge marketing and PR expenses. And do any of you associates know how much the top Chief Marketing Officers make?? Go and ask. You will be shocked. Then ask what their credentials are and how their ROI is tracked. You'll start crying.
No, #30 - the class of 2009 is...
Yeah, but I can still stay at your place, you know, until this end of the world thing blows over, right? It's only going to be a few days.
42 must be a yalie - despite being not-too-bright he thinks he is the shit.
Prestige has always been a house of card proped up by mystique from information assymetry. It is one's hubris to based self-worth and social status on rankings and test scores. The market is now rapidly readjusting the skewed valuation of the cost of legal services.
One day in the near future, someone will produce and post free webcasted video lectures of the entire law school curriculum taught by the foremost recognized experts (Sunstein, Chemerinsky, Supreme Court Justices and etc.) on the web and remove restrictions as to the eligibility of taking the bar. Most legal research and basic legal services will be simplied by new software and databases to be as simple as filling out electronic forms.
What will you do then? Evolve and thrive by adapting to provide more added value? Or decline and perish by resorting to protectionism, limiting competition and mass hysteria?
Legal services will become accounting with letters instead of numbers. Feel better.
39 -- great post. All the doom and gloom is all self-serving BS! This "consultant," as well as the NYT, knows that you don't sell your services/newspaper by saying that "everything is OK, a few bumps, but no big deal, some changes at the margin, but stay the course." That may be the truth, but it doesn't SELL.
You have to make things sound DRAMATIC and predict "new paradigms" and "new models' and "radical shifts." B/c then, the suckers will buy your worthless services to help you "deal with" these changes.
Would you ever buy a book titled, "Dow 12,000, with 5% Growth" or "Oil will Probably run Out in 2400" or "The Earth's Temperature May Increase by 2 Degrees, but Big Deal"??
61- that assumes salaries rise with inflation. otherwise, the increased cost of living just eats into the income you would otherwise use to pay off your debt.
46 -
Eh. Housing prices will stagnate around 2003-4 numbers. Historically, people didn't use houses as piggy-banks, so I'm not sure why this is a big deal. There will be a lot of defaulters, but we knew that already. Historically, housing prices have increased around 1% per year. What's the big deal if they stagnate at 25%-35% down from highs for 10 years before starting the steady 1% climb with predictable fluctuations? It will simply be a return to the status quo on that front.
And just because many firms relied on banks as their big cash cows doesn't mean that they can't rely on other enterprises in the future. Oh, and banks aren't going away completely, by the way. The legal industry is perfectly capable of marketing its services just as aggressively at other industries and in other areas. Think: aging baby boomers. Think: Investment Management and Healthcare practices. Any firms well positioned in those areas is set to make a bundle in the next 10-15 years.
So - call me wrong if you want. Truth is, you can't point to a single time in history where the legal industry downright collapsed. Of course, that doesn't mean that it won't . . . but I'll need a lot more proof than one bad year to be a believer.
- 39
69 - you say "capable of marketing its services" when I think the word should be SELL. That's why the Big 4 model makes sense not only in the wide-based billable pyramid staffing structure, but from a business development standpoint as well.
62 - yes, our CMO comes from PWC. A huge improvement over the last one who was a legal secretary who worked her way up so he should be paid much more than her - she had programs in place to get materials out but had no idea how to create a sales culture. This guy seems to be doing that.
39 is right. Pakistan is one of the most ass-backward places on the planet, and even its legal industry hasn't fallen apart.
Did this get posted?
http://www.youtube.com/watch?v=S60U-hl35Gw
impeach.
42 = guy bring the new leads from Mitch & Murray downtown.
69-
You may have a point, but 2003-2004 house prices are a pipe dream. Try 1998.
I agree partially with 42. I would not take a drastic pay cut simply for a 2-3 year contract. My group is busy and will be for the remainder of 2009. Our numbers are even, if not slightly better, than they were in 2008, and my billables are huge right now.
I am not going to take a holier than thou approach like 42 because most of the low-billing associates around the country are not to blame for their hours. But, given my present situation and workload, I would be very annoyed with any cut in pay.
"Even if inelegantly written, we think you'll find it interesting."
This suspiciously sounds like the disclaimer Elie would always attach to every client or partner or court correspondence.
I wonder when the white hot glare of the spotlight is going to be directed to legal management. The lawyer managers of BigLaw have done an amazing job of pushing up their income and maintaining their jobs while dangling the rarely attained carrot of partnership and throwing legions of lawyers down the elevator shaft. We're sorry, it's not us, it's the economy. You'll be missed. Thanks for all the money you made us. Now leave. Across the industry, hours per attorney have been going down for the last ten years while legal management knew it and continued to hire into it. They created jobs where there were no jobs. You thought it was a career - they saw it as marginal profit. Everyone is in on the scam. Your law school. Your recruiter. Your mentor. NALP. They only needed bodies to feed the per partner profit beast - that's where you came in.
Prediction: Look for people floating the idea of allowing publicly traded law firms (currently restricted by 5.4 of the Rules of Professional Conduct), as has happened in relative recency in Australia and the UK. Who says law firms don't need an influx of working capital?
For all those who think this isn't so bad, ask a few of us who graduated in the 1990-92 downturn. Six months ago I said it look very much like 1991 for the legal industry ... now it looks worse.
Hopefully, management gets their __it together and starts now to reshape how things are run and done ... problems loom for those who wait or don't.
I think 42 is WAY off base. Anyone providing for a family in these times would be nuts not to take a guaranteed contract for less than present Biglaw salaries. Even if the cut were 25-30%, that's still plenty to live on even in a large market.
I can see someone wanting to take their chances, but to dismiss it wholesale for anyone is nonesense.
Is this a law blog or a wall street forum for investors who drop unsupported claims in an attempt to drive the market up or down? Some of the claims about historical performance and what's in store for us in the future are crazy.
39 - Good points, the world is not over.
69 - 1%? where did you get that figure? The average home price has increased from $25,000 in 1970 to $250,000 today (a CAGR of 6%)
75 - 1998? That would require another 25%-30% drop on top of the 25%-30% drop we've already experienced which regardless of whether it happens or not is a bold, unsupported claim.
82 - Bold, unsupported claims on ATL?! Never! Now I know the sky must really be falling.
82 - It's called inflation, idiot.
Long post, but interesting.
This Lat guy is pretty good.
39 et al, spring 1930 was also a time of rebounding stock market and optimism that the world wasn't ending. The only relevant history is the Great Depression. That's the only debt bubble that even comes close to what's happening now. Back in 1930-31, the fed slashed interest rates, unveiled its own version of TARP, and tried to force insolvent banks to lend and over-leveraged borrowers to borrow, and otherwise acted a lot like it's acting now.
P.S. It didn't work.
86 is, sadly, correct.
We are going to be in this recession for a long time. We don't have a world war to get us out of it.
Some of this is good, some is bullcrap.
Even if law firms can demote associate work to staff attorneys, and pay less, you can be damned sure they are still going to bill the client at associate rates. They will just call the staff attorneys "project associates" on the legal bill, the same as they do with contract attorneys (a/k/a temps).
53 - I agree that this is an excellent post and that ATL should do more in-the-field reporting.
But I disagree that their layoffs coverage is "rumor-mongering." Most of their layoff posts are based on (1) an internal memo /document, (2) an official firm statement to ATL, or (3) another source (like the American Lawyer).
I'm not an economist but I play one in the blogosphere: It's funny what role 24 cable news plays in this. No doubt, we have a massive number of problems. You don't just destroy a few trillion dollars of wealth and not have to answer for it with real pain. But CNN's second by second, minute by minute, analysis of the recession is so pointless and idiotic it's hard to take. In that respect there is some resemblance to this blog. Covering 25 people fired here, 6 people fired there, even 100 people fired over there. Really, the sad thing is how meaningless the minute by minute coverage by Elie really is. It's a great tragedy for those individuals affected (trust me I know, I went through it myself and it was horrible), but globally, industry-wide, it's totally meaningless, which is some sense is the thrust of Post 39. So the truth is, the recession isn't as bad as everyone is saying. We won't see 25% unemployment or 20% interest rates or anything like that. But this is also not a "we've hit the bottom we're on the way up story." Predictions are worthless, but my feeling is a snapshot of this blog in 2011 and 2012 will look pretty much like it does today -- Japan's lost decade wasn't about falling into a catastrophic black hole. It was about falling into a catastrophic stagnant period of insignificant growth. What does this mean for the law? I think that the jobs will bleed out this year and never come back. And the salaries won't move up again for maybe 5-7 years. It's called stagnancy - get used to it.
This depression is just beginning. There will likely be no (or negative) growth until 2015. And BIGLAW as we know it will no longer exist by then. Summer Associate positions will become a thing of the past -- something we tell our children about. And they probably won't even believe us!
three months from now firms will be overhiring like crazy when clients figure out it's not a depression and jump back into the market. amazing how panicky lawyer types are.
91 - You are probably right.
92 - You are definitely wrong. Please pass the crack pipe.
#39 I like your optimism, however I am afraid to say that you are most likely way too optimistic. I am fairly convinced that we are in for a big-time hurting for several more years. An incredible amount of wealth was destroyed in the past 6 months and I regret to say that a large amount more will soon be destroyed when this bear-market rally gets blown to smithereens when the next shoe drops. The fundamental cause of this calamity is still playing itself out. Toxic assets were a result of foreclosures making mortgage-backed securities worthless. This sunk the banks which then wiped out stock values which wiped out 401Ks which freaked out the average joe which made him stop spending which closed the shops on main street which led to more unemployment which led to more mortgage defaults and foreclosures which made more mortgage-backed assets worthless and so on. Unemployment is accelerating which will accelerate the fire already burning. Whatever pain law firms are feeling now is simply a tast of what is to come in the next few years. Put simply, wall street and I-banking jobs will NEVER be the same and Big LAW jobs will never be the same. Sorry.
#39 I like your optimism, however I am afraid to say that you are most likely way too optimistic. I am fairly convinced that we are in for a big-time hurting for several more years. An incredible amount of wealth was destroyed in the past 6 months and I regret to say that a large amount more will soon be destroyed when this bear-market rally gets blown to smithereens when the next shoe drops. The fundamental cause of this calamity is still playing itself out. Toxic assets were a result of foreclosures making mortgage-backed securities worthless. This sunk the banks which then wiped out stock values which wiped out 401Ks which freaked out the average joe which made him stop spending which closed the shops on main street which led to more unemployment which led to more mortgage defaults and foreclosures which made more mortgage-backed assets worthless and so on. Unemployment is accelerating which will accelerate the fire already burning. Whatever pain law firms are feeling now is simply a tast of what is to come in the next few years. Put simply, wall street and I-banking jobs will NEVER be the same and Big LAW jobs will never be the same. Sorry.
Not quite 86. Hoover handled the early years of the Great Depression very differently from how first Bush and now Obama have attacked the problem. He cut government spending and he raised taxes. That's *nothing* like what the government is doing right now. He instituted a TARP-like act in 1932, which many think had some good impact, but was enacted too late. Now, you can debate the merits of the 1932 and on response to the Depression, which does resemble some of what is going on, but this situation is quite different from 30-31.
Hey, I saw Suze Ormand on Oprah today and she said no recovery until 2015.
There are some great benefits to being unemployed.
"cash chows"!
is that like a chowchow dog?
Basically, Bernanke's a Depression scholar who learned all these lessons and will now save us, but all he's apparently learned is bigger, faster, harder. It's like he watched Hoover break his hand punching a brick wall, pondered it, and realized that you need a running start.
Paul Krugman rocks!
@87
We don't have one... now.
Really, how hard would it be to start some shit with North Korea? Especially if we manage to get China to get in on our side in exchange for a hefty cut of land.
Heck, even better is if we can start shit between India and Pakistan. Best case scenario, India wins and we quit worrying about Taliban in Afghanistan. Plus we make bank selling weapons to both sides. Worst case scenario, both sides nuke each other to hell and we no longer worry about outsourcing.
I ask you all to click on this guys profile. What biz is he in? Oh right, the director of a strategic consulting firm for law firms. This guy is a business man--a very good one
What he says has some basic truth but comparing lawyers to commodity industries is far from an apt analogy.
The economy is still f'ed. Biglaw won't get raises for years and yes clients will demand more for less. But the party is still going-we were just asked to turn down the music.
98 - What are you talking about? That typo got fixed within 15 minutes of the post going up.
102 - your hammer has an amazing ability to hit that nail precisely on its head.
As is the case with every deep recession, it's going to take a long time to get to where we once were. But what most people don't realize is that absolute economic value (the AV of the GDP, for lack of a better indicator) is NOT what really matters for you, me, or our job prospects. GDP GROWTH would be the relevant indicator. What happened with the great depression? GDP growth was negative from 1929 to 1933. That hurts. It hurts much more than if GDP fell by 25% in one year and then increased by 5% annually thereafter. Do you really think that we're going to be in a prolonged period of negative growth?
If ANYTHING, the stimulus that the G-20 is injecting into the world's economies is going to bump us up for a couple of years and then we're going to have another recession of debatable magnitude. I don't think that any serious economist could say that the world is ending . . . at least not with a straight face.
The problem: As others have noted, any economist saying, "Things are bad now, but they're not going to get much worse and they're going to be better next year," is drowned out by all the hacks trying to make a name for themselves by saying that the sky is falling. The sky might have been falling in January. It's not falling now. This has nothing to do with the dow being over 8000. Maybe once it's over 9000 we can get Oprah to do a special on it.
Disclaimer: I was an economist in a former life. I try damn hard not to rant on silly blogs. I don't always succeed.
"Maybe once it's over 9000 we can get Oprah to do a special on it."
hehehe, nicely said, 102.
trolls trolling trolls
hey 62, where did you get the audacity to question the cost-benefit ratio of law firm marketing officers? and you really want to do an ROI analysis? LOL , LMAO- from my very limited experience, law firm marketing departments are little more than an excuse to hire some eye candy
correct 96 - wrong 86. Additionally, much of the first four years of the New Deal were whiped out by the Court in its Lochner-era hey-day, so society didn't get to enjoy what government regulation can actually do to fix a depression. Look to FDR's second run at everything if you want a better indicator.
correct 96 - wrong 86. Additionally, much of the first four years of the New Deal were whiped out by the Court in its Lochner-era hey-day, so society didn't get to enjoy what government regulation can actually do to fix a depression. Look to FDR's second run at everything if you want a better indicator.
good post David - glad you're covering the conference. Pulling together resources to help public interest orgs and associates deal with placement: http://equaljusticeworks.wordpress.com/2009/04/03/placing-associates-at-nonprofits/
The statement about the Sherman Act is no joke. Top laws, the ones that will eventually set the pay for every other firm in the country, are a tight oligopoly and they are signalling each other like mad these days, overtly and probably covertly, testing the waters to see who is willing to coordinate on an associate salary decrease. Of course, that's the problem with the law. No one will enforce the antirust laws when it is lawyers themselves who are violating them.
I feel sorry for those who believe the government can fix things, as opposed to making things worse. You're really going to get blind-sided (again).
The most successful firms I've seen have business development specialists, basically salesmen. Problem is they burn through those poor bastards a little to quickly. Lawyers, it seems, all have a psychological compulsion to treat people who have skills they lack like total shit. Psycho-therapy toward ridding associates of this compulsion should be built in their salaries. Now that's sustainability!
The most successful firms I've seen have business development specialists, basically salesmen. Problem is they burn through those poor bastards a little to quickly. Lawyers, it seems, all have a psychological compulsion to treat people who have skills they lack like total shit. Psycho-therapy toward ridding associates of this compulsion should be built in their salaries. Now that's sustainability!
The most successful firms I've seen have business development specialists, basically salesmen. Problem is they burn through those poor bastards a little to quickly. Lawyers, it seems, all have a psychological compulsion to treat people who have skills they lack like total shit. Psycho-therapy toward ridding associates of this compulsion should be built in their salaries. Now that's sustainability!
I like the current system. Now-unemployed lawyers at my university paid for my MBA.
I like the current system. Now-unemployed lawyers at my university paid for my MBA.
The most successful people are those that don't post three times.
This crisis is God's justice putting the squeeze on the partners. Although they make the underlings pay the prize, in the end, it's the partners who will pay for their mistreatment. Remember, the rule is "Do unto others as you would have them do to you."
Here's another one: To whom much is given, much is required.
Summation: all those people you spit on will rule over you. Sounds to me like a partner's worst nightmare.