I’ve got news for you: The future of practicing law will not be about cloud computing. It won’t be about tablets or offshoring or client self-help or virtual law offices. It won’t be about e-discovery, or practice management, or paperless offices. Yes, these things will certainly all happen; many are happening now, and a number of them are helping to give small firms an advantage, or at least level the playing field. But they will not be the biggest change in our industry.
I recently gave a speech on what the practice of law would look like in 2019. I chose that year for two reasons. First, it’s the year that the classic sci-fi movie Blade Runner takes place, with a younger-than-Calista-Flockhart-is-now Harrison Ford playing a cop who rides in flying cars and hunts robots that look like humans.
I’ve got news for you, guys: There won’t be any flying cars eight years from now. (Which is probably just as well, as people will insist on texting while flying.)
But the other reason I chose 2019 is because it will be the hundredth anniversary of something nearly every lawyer deals with all day every day.…
I’m talking of course about the billable hour. Most people don’t realize that this anachronism was launched at the start of the Prohibition Era by a tiny Boston firm called Hale and Dorr. It’s funny: most firms use a business model that was founded nearly a century before, yet they prattle on their websites about how “innovative” they are. (I think that word doesn’t mean what you think it means.)
But I’m convinced that it’s a dying business model. And the reason is because it focuses on selling the wrong thing. It focuses on selling time. But you can’t sell time. Time just passes. And no client in the history of the planet has ever wanted to buy time. Sure, they might even say, “Let me pay for an hour of your time.” But it’s not your time that they value. It’s what you can do for them during that time.
Let me put it another way: Let’s say that the solution to the biggest problem in your life was contained in a single Above the Law post. Not one of mine, of course; that’s not really my bailiwick. Maybe one of Will’s or Mark’s. What would solving that single biggest problem in your life be worth to you?
Let’s say it takes you six minutes to read this hypothetical post. (If you’re a fast reader and don’t move your lips too much, you might even have enough time to come up with a witty anonymous comment.) (Nope, you’re still moving your lips.) In other words, the post represented a point-one. Let’s say further that the post’s author billed at a comfortable $500 an hour. Is this post then worth $50. Is the solution to your biggest problem worth a single Grant?
Say the author took three hours to write the post. In other words, $1,500 of billable time. Is that the right price? Is solving your biggest problem worth a speedy new iMac?
Of course not. You see, the value of solving your problem has nothing to do with the time the lawyer spent on it. It has only to do with value the client places on zotzing his or her problem. But that’s not how our hundred-year-old business model works.
Other industries are struggling with business models that sell the wrong things. Newspapers are a dying industry, because their business model revolves around selling people actual newspapers — paper and ink. Last month, the New York Times announced its new online pricing model, which encourages people to buy more paper and ink by discounting the online offering for print subscribers. But customers don’t want paper and ink; they want information, and they want it fast.
The New York Times’s legacy business is the printed newspaper. They charge less for a print subscription than an all-inclusive digital subscription, despite the fact that all print subscriptions include an all-inclusive digital subscription. This makes no sense. You pay less but get something that intuitively bears a significant real cost: hundreds of pounds of printed newspaper delivered to your home throughout the year. The pricing steers people toward the legacy business.
The newspaper industry is now on death’s door, unless it can find a new business model.
The record industry is another example. Record companies thought they were in the business of selling records (then tapes, then CDs), when their customers just wanted to buy music. Napster and Apple came along and sold to customers what they wanted to buy. The record industry is now in shambles, and massive changes are coming.
The legal industry is not far behind. And I believe that the reason for this is that our business model focuses on selling activity. We sell representation and advocacy and drafting briefs and drafting wills and doing real-estate closings. We mistakenly focus on the activity that we’re doing. And the easiest way to measure activity is on a timesheet. Because we’re selling the wrong thing, we’re measuring the wrong thing.
But in reality, lawyers sell knowledge. We sell substantive knowledge — the “law” — which we learn in law school and for the bar exam and in legal research. We sell procedural knowledge — the rules, how to file cases, what court to go to, what the brief should look like, and so forth. And most importantly, we sell our judgment, which is the highest form of knowledge. This we don’t learn in law school; we learn from our families growing up, and from our individual personalities and backgrounds, and from our unique experiences. In fact, it is our judgment that will keep us from being replaced by Watson the computer.
And how do we price that knowledge? By finding the value of the solution to the client’s problem. Because that solution is based on the knowledge that we sell.
Once law firms start valuing lawyers for the knowledge they have and use instead of the treadmill-like activity that they generate, lawyers will be able to focus on what really matters, rather than worrying about meeting annual billable-hour requirements. And small firms will be better able to change their business models away from the 1919 version and get a jump on their BigLaw counterparts.
We might not have flying cars in 2019, but we will be practicing law differently in the future.
Jay runs Prefix, LLC, a firm that helps lawyers learn how to value and price legal services. Jay Shepherd also spent 13 years running the Boston management-side employment-law boutique Shepherd Law Group. He writes the ABA Blawg 100 honoree The Client Revolution, which focuses on reinventing the business of law, and Gruntled Employees, a workplace blog. Follow Jay on Twitter at @jayshep, or email him at [email protected].