Reinventing The Law Business: Thoughts Inspired By Bill Gates

Altman Weil did a very interesting survey of law firms recently. I don’t think I can provide a link since it was not a public document. However, one thing I found very provocative and interesting was a quote they attributed to Bill Gates:

“We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten years.”

I found this very scary actually, because it made me really think about what the law business might look like in ten years. More importantly, it made me think – maybe for the first time – about what “my” part of the law business would look like in ten years.

As you read this, consider how this applies to you. Don’t think about the next two years but instead think of the next ten, as Gates advises.

I am a real estate lawyer. I handle real estate deals for clients. These deals involve the drafting and negotiation of documents. Of course some of the work we do is relatively simple, but the heart of our business is handling very complicated transactions that require a combination of brainpower and expertise. But let us consider the life-cycle of legal work (the “LifeCycle”).

At first the legal matter at hand, whatever it is, is very difficult to do. No one has done it before. It requires cutting-edge legal thinking to put the pieces together (which I will define as “Brain Work”). Only the highest-quality lawyers at the top law firms can do this Brain Work. If you have read my earlier articles, you will recall the phrase I have coined, “intellectually fearless,” to describe the lawyers with this capability. These lawyers are very valuable; they can charge almost whatever they like for Brain Work, and clients willingly pay.

But then, the moment the work is completed and sent out by email to the other law firms – and clients – on the deal, the law firm that created it loses ownership of it and many other law firms are capable of following in the groundbreaking firm’s footsteps and doing the legal work (which I will define as “Intermediate Work”). Before long, more and more law firms are capable of doing this Intermediate Work. It is still pretty “hard” though, and not just “anyone” can do it; however, more and more law firms are capable of pulling it off. Pricing of the work drops moderately because clients are now able to comparison shop to a moderate degree since they know that other law firms are doing this Intermediate Work so it cannot be incredibly difficult to do and, hence, not worth as much.

Then as time goes on the legal work becomes more and more mainstream. Someone writes a book with forms and templates and a “how to” guide and, alas, the work becomes subject to the dreaded “commoditization” that not only lawyers, but businesspeople too, fear (and I will define the work as “Commodity Work”). At this point, just about anyone at just about any law firm can do this Commodity Work. Comparison shopping is easy for clients and it is a quick race to the bottom of profitability for the law firms. Pretty soon almost no one is making much of a profit from the legal work.

So, now consider how the pace of change in the legal world is accelerating. One hundred years ago, the LifeCycle I describe above could itself take 100 years to complete. Thirty years ago, when I started my career, I would guess the LifeCycle was about 15 years long. Ten years ago, I bet that LifeCycle was about 5 years. And today – yikes – I bet that the LifeCycle is a year or two at most. The bottom line is that the LifeCycle of legal work – from Brain Work to Intermediate Work to Commodity Work – is shrinking in length, and probably very quickly.

So what will happen in ten years?  It makes me wonder – and worry, although maybe I might worry less since ten years from now will probably be marking the end of my legal career. This is because I bet that in ten years the LifeCycle of legal work will be truncated still further and probably dramatically so. What are the implications of this?

Of course I don’t have a crystal ball; however, I think that legal work will be of two kinds, and not three (as in my LifeCycle above). I suspect legal work will be composed solely of Brain Work and Commodity Work, with little in between, i.e., Intermediate Work will gradually disappear. And the time for the legal work to move from Brain Work to Commodity Work will be very short in length.

So now, apply my thinking to your practice. How are things going to look for you in ten years? And of critical importance, how will you be able to make a profit as a lawyer if I am right? If I am correct in my prediction, you will have to be intellectually fearless on a continuous basis in order to be able to command premium pay for Brain Work or, alternatively, you will have to be very creative about how to produce Commodity Work to be able to eke out a profit, possibly through economies of scale.

I wonder if anyone will reread this article in ten years to see if I am right…

---

Bruce Stachenfeld is the managing partner of Duval & Stachenfeld LLP, which is an approximately 70-lawyer law firm based in midtown Manhattan. The firm is known as “The Pure Play in Real Estate Law” because all of its practice areas are focused around real estate. With more than 50 full-time real estate lawyers, the firm is one of the largest real estate law practices in New York City. You can contact Bruce by email at [email protected].