text:
Sunday, March 2, 2014
DECLINING ENROLLMENT – Between fall 2012 and fall 2013, the 199 law schools in the 48 contiguous states and Hawaii (excluding the Puerto Rican schools) accredited by the ABA's Section for Legal Education and Admissions to the Bar, experienced the following first-year enrollment changes:
25 schools had a decline in first-year enrollment of 25% or more,
34 schools had a decline in first-year enrollment of 15%-24.99%,
44 schools had a decline in first-year enrollment of 5% to 14.99%,
62 schools had "flat" first-year enrollment of -4.99% to 4.99%,
19 schools had an increase in first-year enrollment of 5% and 14.99%, and
15 schools had an increase in first-year enrollment of 15% or more.
Overall, more than half (103) had a decrease in first-year enrollment of at least 5%, while roughly 17% (34) had an increase in first-year enrollment of at least 5%.
Across these 199 schools, first-year enrollment declined from 42,590 to 39,109, a decrease of 8.2%. The average decline in first-year enrollment across U.S. News "tiers" of law schools was 2.6% among top 50 schools, 8.2% among schools ranked 51-99, 7.7% among schools ranked 100-144 and 7.9% among schools ranked alphabetically.
Between fall 2010 and fall 2013, the 195 law schools in the 48 contiguous states and Hawaii fully-accredited by the ABA's Section for Legal Education and Admissions to the Bar as of 2010 (excluding Belmont, LaVerne, California-Irvine, and Massachusetts-Dartmouth), experienced the following first-year enrollment changes:
28 schools had a decline in first-year enrollment of 40% or more,
29 schools had a decline in first-year enrollment of 30% to 39.99%
43 schools had a decline in first-year enrollment of 20% to 29.99%
43 schools had a decline in first-year enrollment of 10% to 19.99%
36 schools had a decline in first-year enrollment of 0% to 9.99%
10 schools had an increase in first-year enrollment of 0.01%to 9.99%
6 schools had an increase in first-year enrollment of 10% or more.
Overall, more than half (100) had a decrease in first-year enrollment of at least 20%, while only roughly 8% (16) had any increase in first-year enrollment.
Across these 195 schools, first-year enrollment declined from 50,408 to 38,773, a drop of 23.1%. The average decline in first-year enrollment across U.S. News "tiers" of law schools was 14.7% among top 50 schools, 22.5% among schools ranked 51-99, 22.8% among schools ranked 100-144, and 26.8% among schools ranked alphabetically.
DECLINING PROFILES -- Across the 195 law schools in the 48 contiguous states and Hawaii fully-accredited by the ABA's Section for Legal Education and Admissions to the Bar as of 2010 (thus excluding Belmont, LaVerne, California-Irvine, and Massachusetts-Dartmouth) the entering first-year class average LSAT profile fell one point at all three measures between 2012 and 2013, from 159.6/157/153.5 to 158.6/156/152.5. The entering first-year class average LSAT profile fell roughly two points at all three measures between 2010 and 2013, from 160.5/158.1/155.2 to 158.6/156/152.5.
The average decline in median LSAT scores between 2012 and 2013 across U.S. News "tiers" of law schools was .98 among top 50 schools, 1.18 among schools ranked 51-99, .72 among schools ranked 100-144, and 1.13 among schools ranked alphabetically.
Notably, 133 law schools saw a decline in their median LSAT between 2012 and 2013, with 80 down one point, 38 down two points, 12 down three points, one down four points, one down five points and one down six points, while 54 law schools were flat and 7 saw an increase in their median LSAT.
In terms of schools experiencing "larger" declines in median LSAT scores between 2012 and 2013, five schools in the top 50 saw a three point decline in their median LSAT, five schools ranked 51-99 saw at least a three point decline (of which one was down four points), three schools ranked 100-144 saw a three point decline, and two schools ranked alphabetically saw large declines – one of five points and one of six points.
The average decline in median LSAT scores between 2010 and 2013 across U.S. News "tiers" of law schools was 1.54 among top 50 schools, 2.27 among schools ranked 51-99, 2.11 among schools ranked 100-144, and 2.79 among schools ranked alphabetically. If one were to unpack the top 50 schools a little more, however, one would discover that the top 20 schools saw an average decline in their median LSAT of 1.05 between 2010 and 2013, while the bottom 15 schools in the top 50 saw an average decline in their median LSAT of 2.53.
In terms of schools experiencing "larger" declines in median LSAT scores between 2010 and 2013, three schools in the top 50 have seen declines of four or more points, nine schools ranked 51-99 have seen declines of four or more points, 11 schools ranked 100-144 have seen declines of four or more points and 17 schools ranked alphabetically have seen declines of four or more points.
When looking at the 2012-13 data in comparison with the 2010-2013 data, one sees that lower ranked schools have had more of a sustained challenge in terms of managing profile over the last few years, while schools ranked in the top 50 or top 100 had been managing profile fairly well until fall 2013 when the decreased number of high LSAT applicants really began to manifest itself in terms of impacting the LSAT profiles of highly ranked schools.
The overall decline in the LSAT profile of first-year students also can be demonstrated with two other reference points. In 2010, there were 74 law schools with a median LSAT of 160; in 2013, that number has fallen to 56. At the other end of the spectrum, in 2010, there were only 9 schools with a median LSAT of less than 150 and only one with a median LSAT of 145. In 2013, the number of law schools with a median LSAT of less than 150 has more than tripled to 32, while the number of law schools with a median LSAT of 145 or less now numbers 9 (with the low now being a 143).
CONCLUDING THOUGHTS – Over the last three years, few schools have had the luxury of being able to hold enrollment (or come close to holding enrollment) and being able to hold profile (or come close to holding profile). Many schools have found themselves in a "pick your poison" scenario. A number of schools have picked profile and made an effort to hold profile or come close to holding profile by absorbing significant declines in first-year enrollment (and the corresponding loss of revenue). By contrast, a number of schools have picked enrollment and made an effort to hold enrollment or come close to holding enrollment (and maintaining revenue) but at the expense of absorbing a significant decline in LSAT profile. Some schools, however, haven't even been able to pick their poison. For these schools, the last three years have presented something of a double whammy, as the schools have experienced both significant declines in first-year enrollment (and the corresponding loss of revenue) and significant declines in profile.
March 2, 2014 in Data on legal education, Scholarship on legal education, Structural change | Permalink | Comments (0)
Saturday, March 1, 2014
Is the Employment Market for Law Graduates Going to be Improving?
Last fall, while making a presentation at the Midwest Association of Pre-Law Advisors Conference in St. Louis, I had the opportunity to respond to the question that is the title of this blog posting.
Is the employment market for law graduates going to be improving? My answer was, and is, almost certainly yes, although perhaps not immediately.
I write this to offer my perspective on the employment market for law graduates in the coming years. A number of people have written on this topic in recent weeks and months. Bernie Burk has a very thoughtful piece analyzing the changing job market over the last three decades. In his concluding thoughts he suggests that the decline in the number of law students will mean that the job market will be improving. Paula Young, Debby Merritt, Matt Leichter, and The National Jurist, also have weighed in on this issue with some disagreement about how to understand the "market" for law graduates in the coming years. Whether and how to include JD Advantage jobs in the analysis is something that is frequently contested. Bernie Burk does a thorough job analyzing the challenges of assessing whether JD Advantage jobs should be included within his definition of "law jobs" – "placements for which a law degree is typically a necessary or extremely valuable substantive preparation; or put slightly differently, jobs that a law degree typically makes a truly substantial and significant difference in obtaining or performing."
To avoid some of these definitional challenges, this post will focus solely on the market for full-time, long-term Bar Passage Required jobs. Initially, it will analyze those jobs in relation to all graduates; then it will look more specifically at the percentage of graduates who are likely to be eligible for Bar Passage Required jobs for whom full-time, long-term Bar Passage Required jobs likely will be available, a point on which few others appear to have focused up until now.
Class of 2013 – Little if Any Good News is Likely
In the short term, for the Class of 2013, for which job results will be reported in the coming weeks, it would not be at all surprising to see little, if any, improvement in the employment results in terms of the percentage of graduates finding jobs classified as full-time, long-term Bar Passage Required jobs.
According to NALP's data, there were 29,978 full-time, long-term Bar Passage Required jobs for 2007 graduates, a number which fell to 24,902 for 2011 graduates, and then rebounded to 26,876 for 2012 graduates, an increase of 1,974. According to the ABA's Employment Outcomes data, between 2011 and 2012, the number of full-time, long-term Bar Passage Required jobs grew from 24,149 to 26,066, an increase of 1,917. (For this blog posting, I am not going to try to reconcile the slight differences in data between NALP and the ABA's Employment Outcomes data.)
Unfortunately, however, according to the ABA's Employment Outcomes data, this growth in full-time, long-term Bar Passage Required jobs between 2011 and 2012 corresponded with a growth in the number of law graduates, from 43,979 to 46,364, an increase of 2,385. Thus, even though the number of full-time, long-term Bar Passage Required jobs grew by 7.9%, the percentage of graduates in full-time, long-term Bar Passage Required jobs grew only slightly, from 54.9% to 56.2%.
Between 2012 and 2013 the number of full-time, long-term Bar Passage Required jobs may increase again, but the number of graduates also will be increasing, likely from 46,364 to roughly 47,250. (For the last few years, the number of law school graduates has averaged roughly 90% of the number of first-year students who started law school three years previously. With 52,500 first-year students in Fall 2010, there likely were roughly 47,250 May 2013 graduates on whom employment will be reported in the coming weeks.)
If the number of full-time, long-term Bar Passage Required jobs for the 2013 graduates reported in the ABA Employment Outcomes data grows by roughly 1,000 to 27,000, an increase of nearly 4%, the percentage of graduates with such jobs would increase only slightly to 57.1%. If the number of full-time, long-term Bar Passage Required jobs for the 2013 graduates grows only slightly, by roughly 500, to 26,500 (an increase of less than 2%), the percentage of graduates with such jobs will drop slightly, to 56.1%. If the number of Bar Passage Required jobs is flat, at 26,000, the percentage of graduates with such jobs will drop a little more to 55%. Between 2011 and 2013, the market might see graduates finding roughly 2,000 to 2,500 new full-time, long-term Bar Passage Required jobs, and yet still see only 55% to 57% of graduates in such jobs because of the growth in the number of graduates between 2011 and 2013.
Classes of 2014, 2015, 2016, 2017 – An Improving Dynamic
What are the employment prospects for those currently in law school or considering starting law school in the fall of 2014? They almost certainly will be getting better – not necessarily because there will be more jobs, but because there will be fewer graduates.
Indeed, to make this point, let's assume that there is actually no further growth in full-time, long-term Bar Passage Required jobs between 2012 and 2017. Assume the number of such jobs plateaus at 26,000 for graduates of the Class of 2013 and then stays at that level each year through 2017. What percentage of law graduates over the next four years will have such jobs?
According to the LSAC, "ABA First-Year Enrollment" has declined steadily from 2010 to the present, from 52,500 in 2010, to 48,700 in Fall 2011, to 44,500 in Fall 2012. The ABA recently released the Fall 2013 enrollment summary noting that it had fallen to 39,675. The LSAC's most recent Current Volume Summary, from February 21, 2014, indicates that applicants to law school are down roughly 11% compared to last year. Thus, it seems reasonable to project that first-year matriculants will decline again in Fall 2014. If first-year enrollment falls by 5%, that would give us roughly 37,700 first-years. If it falls by 10% once again, that would give us roughly 35,700 first-years.
With these estimates for the number of first-years, we can estimate the number of graduates (which, as noted above, has averaged roughly 90% of first-years for the last few years). Even if the number of full-time, long-term Bar Passage Required jobs does not continue to rebound, but plateaus at 26,000, as the number of graduates declines over the next few years, the percentage of law graduates obtaining a full-time, long-term Bar Passage Required job, as shown in Table 1, will grow to between 77% and 84% by 2017 (depending upon first-year enrollment in fall 2014).
Analysis of the Estimated Number of Full-Time, Long-Term Bar Passage Required Jobs as a Percentage of the Estimated Number of Law Graduates from 2012-2017
Grad. Year
(5% Dec.)
(10% Dec.)
(1st Yrs 3 Yrs Prior)
Grads (90% of 1st Yrs.)
FT/LT BPR Jobs
% of Grads in FT/LT BPR Jobs
*Denotes estimated value.
An improvement in the number of law school graduates getting full-time, long-term Bar Passage Required jobs, from roughly 55% to between 77% and 84% is indicative of an improving employment market for law school graduates. Indeed, according to Bernie Burk's analysis of the employment market over the last few decades, this rate of employment in full-time, long-term Bar Passage Required jobs would rival or exceed the high water mark for "Law Jobs" of roughly 77% that he identified as having been experienced by the graduates from 2005 to 2007. (And for his purposes, "Law Jobs" included some JD Advantage jobs.) Moreover, this assumes no growth in the number of full-time, long-term Bar Passage Required jobs; if there is even modest growth in the number of full-time, long-term Bar Passage Required jobs over the next few years, the percentages of grads in these jobs would be even higher than reflected in this chart.
Full-Time, Long-Term Bar Passage Required Jobs as a Percentage of Those Eligible for Such Positions by Virtue of Having Passed a Bar Exam
Even so, many may look at this and suggest the market remains less than robust given that perhaps 16%-23% of graduates in this "improved" market in 2017 will not obtain full-time, long-term Bar Passage Required jobs. While some compare the number of full-time, long-term Bar Passage Required jobs to the number of law school graduates to demonstrate why the employment market for law school graduates remains unsatisfactory, this may not be the most accurate way of thinking about the market for full-time, long-term Bar Passage Required jobs as not all graduates are going to be eligible for Bar Passage Required jobs.
Among those graduating from law schools accredited by the Section of Legal Education and Admissions to the Bar and taking a bar exam upon graduation, the National Conference of Bar Examiners indicates that over the last several years, on average, roughly 83% of graduates of ABA-accredited law schools pass the bar exam on their first attempt.
To calculate the employment market for law graduates in the coming years who are eligible for full-time, long-term Bar Passage Required jobs, let's assume that all law graduates actually want a full-time, long-term Bar Passage Required job and therefore take a July bar exam, and let's assume that 83% of them pass the bar exam on their first attempt. This should give us the maximum number of graduates eligible for full-time, long-term Bar Passage Required jobs 10 months after graduation (which will be the measuring point starting with the Class of 2014).
Even if we assume no growth in the number of full-time, long-term Bar Passage Required jobs in the coming years and simply hold the number of such jobs at a constant 26,000, the decreasing number of law graduates will mean an even more improved employment market for those seeking full-time, long-term Bar Passage Required jobs who will be eligible for those jobs by virtue of having passed the bar exam on their first attempt, increasing from nearly 70% in 2012 and 2013 to nearly 90% by 2016 and over 90% by 2017.
Analysis of the Estimated Number of Full-Time, Long-Term Bar Passage Required Jobs as a Percentage of the Estimated Number of Law Graduates Eligible for Bar Passage Required Jobs from 2012-2017
Graduating Year
First Year Enrollment
(5% Dec.)
(10% Dec.)
Graduates (90% of First Year Enrollment)
83% of Graduates (NCBE Avg. for First-Time Takers)
FT/LT Bar Passage Jobs
Percentage of Graduates Who Might Pass the Bar for whom FT/LT Bar Passage Jobs Likely Would be Available
*Denotes estimated value.
Notably, these estimates probably overstate the number of graduates who will be eligible for Bar Passage Required jobs. First, not all law school graduates want to take a bar exam as some conclude that they are not interested in practicing law as a licensed attorney. Second, given the increasing number of law school matriculants with LSATs less than 150, one could anticipate a slightly higher rate of attrition such that fewer than 90% of matriculants graduate after three years. Third, given the increasing number of law school matriculants with LSATs less than 150, one also could anticipate that the historical average bar passage rate of 83% might be too generous. All of these points suggest that the number of graduates eligible for full-time, long-term Bar Passage Required jobs may decline between now and 2017 even more than is indicated in Table 2.
Between 2012 and 2013 to 2016 and 2017, we will have gone from having nearly seven full-time, long-term Bar Passage Required jobs for every ten graduates eligible for such positions by virtue of having passed a bar exam to having nine or more full-time, long-term Bar Passage Required jobs for every ten graduates eligible for such positions by virtue of having passed a bar exam. That strikes me as an improving employment market.
Of course, this may not be good news for those who graduated in the last few years into one of the toughest markets in history. It is not clear that this improving market will be improving for them. But it also is not clear that this "excess capacity" will unduly constrain the opportunities available to law school graduates in the coming years. This excess capacity already has been impacting the market, yet the number of full-time, long-term Bar Passage Required jobs obtained within nine months of graduation grew by nearly 2000 between 2011 and 2012. That is one reason I think the assumption of no further growth in full-time, long-term Bar Passage Required jobs is probably fairly conservative.
In addition, this may not be good news for those who fail to pass the bar exam on their first try and may have to look for jobs that do not require bar passage. While a significant percentage of these graduates will pass the bar exam on their second attempt and may eventually find employment in full-time, long-term Bar Passage Required positions, it may take several months longer than they had desired and may require that they pursue other employment, perhaps JD Advantage employment, during the intervening months.
Even assuming a flat market for full-time, long-term Bar Passage Required jobs, as a result of significant declines in first-year enrollment that will mean a significant decline in the number of law school graduates in 2016 and 2017, we should be moving from having slightly more than three of ten graduates who were eligible for Bar Passage Required jobs in 2012 who could not find them to having less than one of ten graduates in 2017 who likely will be eligible for Bar Passage Required jobs who cannot find them. While individual schools and local or regional markets may have more varied results on a "micro level," on a "macro level" this should be good news for current first-year students and students considering starting law school in the fall of 2014.
Whether this improving employment situation will be enough to change the trend in terms of declining number of applicants to law school remains to be seen. While the future may be brightening, the "news" in the coming weeks will be the report on employment outcomes for 2013 graduates nine months after graduation. As noted above, that may be somewhat uninspiring because any increase in the number of full-time, long-term Bar Passage Required jobs may be masked by the larger number of graduates in 2013 compared to 2012. As a result, potential law school applicants may remain reluctant to make the commitment of time and money that law school requires because the "good news" message regarding future employment prospects for law graduates may fail to gain traction if the messages about employment outcomes for recent law school graduates continue to be less than encouraging.
March 1, 2014 in Data on legal education, Data on the profession, Structural change | Permalink | Comments (8)
Sunday, December 8, 2013
Did the Market for Law Firm Associates Peak 25 Years Ago?
Based on the chart below, which reflects 35 years of large law firm data, the answer appears to be yes. The chart enables us to compare two very simple trendlines: the percentage of lawyers in NLJ 250 law firms who have the title of Associates versus the percentage with the title of Partner.
The chart above was generated by my colleague, Evan Parker-Stephen, who is Director of Analytics at Lawyer Metrics. I asked Evan to crunch these data after some of research I was working on revealed a 50% decline in Summer Associate hiring between 2002 and 2012 at the ~600 law firms listed in the NALP Directory (11,302 to 5,584). In other words, 2008 is the wrong reference point. See Sea Change, NALP Bulletin (Aug 2013). Something more substantial was (is) happening.
Indeed, the 35-year graphic above provides a true wide-angle view, which in turn reveals an absolutely remarkable story. Associates were most integral to the large law firm model over 25 years ago. Although large law firms went on a hirng spree at various points during the 1990s and 2000s, the firms themselves were simultaneously adding a new layer of human capital that was neither associate or partner/owner. And in the process, associates were gradually being marginalized. The graph below (also NLJ 250 data) reveals the growing middle section of the so-called Diamond Model:
So what does all this mean?
My best analysis is set forth in a short research monograph I wrote with Evan, entitled "The Diamond Law Firm: A New Model or the Pyramid Unraveling?" The punchline is that large law firms appear to be chasing short-term profits at the expense of longer-term sustainability. It would not be the first industry sector to lose its competitive advantage through myopic strategy -- as the saying goes, nothing fails like success. See Henderson, Three Generations of U.S. Lawyers: Generalist, Specialist, Project Manager. Large firms are not going extinct. But as a matter of demographics, they are greying. If BigLaw were trading on the Nasdaq, the analysts would be very critical of this trend.
December 8, 2013 in Blog posts worth reading, Data on the profession, Important research, Law Firms, New and Noteworthy, Scholarship on the legal profession, Structural change | Permalink | Comments (9)
Sunday, December 1, 2013
From Big Law to Lean Law
In 2012, Bruce Kobayashi and the George Mason Law & Economics Center organized an ambitious conference series entitled, "Unlocking the Law: Building on the Work of Professor Larry Ribstein." The collective work product has recently been published in the International Review of Law & Economics.
My contribution was an essay entitled "From Big Law to Lean Law." It is a review of Larry's seminal "The Death of Big Law" article, with the benefit of three years of data and the gradual realization that the entire legal profession is on the brink of a major structural transformation.
The "Death of Big Law" first appeared on SSRN in the fall of 2009. The following spring, I attended the annual Georgetown Center on the Legal Profession conference, where Larry's analysis and conclusions were presented to a large audience of Big Law partners, including managing partner commentators. Suffice to say, the reaction was one of polite bafflement.
"From Big Law to Lean Law" was my best attempt to serve as a translator, albeit with the benefit of three years of market data and hindsight. Here is the abstract
In a provocative 2009 essay entitled The Death of Big Law, the late Larry Ribstein predicted the shrinkage, devolution, and ultimate demise of the traditional large law firm. At the time virtually no practicing lawyer took Larry seriously. The nation's large firms were only one year removed from record revenues and profits. Several decades of relentless growth had conditioned all of us to expect the inevitable rebound. Similarly, few law professors (including me) grasped the full reach of Larry's analysis. His essay was not just another academic analysis. Rather, he was describing a seismic paradigm shift that would profoundly disrupt the economics of legal education and cast into doubt nearly a century of academic conventions. Suffice to say, the events of the last three years have made us humbler and wiser.
This essay revisits Larry's seminal essay. Its primary goal is to make Larry's original thesis much more tractable and concrete. It consists of three main pillars: (1) the organizational mindset and incentive structures that blinds large law partners to the gravity of their long-term business problems; (2) a specific rather than abstract description of the technologies and entrepreneurs that are gradually eating away at the work that has traditionally belonged to Big Law; and (3) the economics of the coming "Lean Law" era. With these data in hand, we can begin the difficult process of letting go of old ideas and architecting new institutions that better fit the needs of a 21st century economy.
(SSRN link.) In the service of explaining these complex market dynamics to lawyers, legal educators, and law students, I am posting the figures used in the paper, which can be downloaded from Slideshare.
December 1, 2013 in Data on the profession, Important research, Law Firms, Scholarship on the legal profession, Structural change | Permalink | Comments (0)
Wednesday, November 27, 2013
The Sleeping Giant -- Hope and Purpose for Law Students
If you have the courage and curiosity to understand the breadth and depth of the changes taking shape in the legal market, then I would encourage you to use some of your Thanksgiving break to read "Recalculate the Future of Law," which is Insight Lab's interview with MSU Law Professor Dan Katz.
It is all-too-easy to believe that innovation occurs in the wake of a great idea, but that is not quite right. Innovation is also about timing and understanding how human institutions are held together and change and evolve. If the innovator has the benefit of timing and understands how human institutions actually work, an effective adoption strategy is possible.
Fortunately, for Dan Katz, all of these factors appear to be in alignment. Katz is acutely aware of his timing and the myriad of factors that enable innovation to take hold. He is also young (35 years old) and has the courage to place very large bets -- the largest bet being that he is not waiting to get tenure before starting his life's work. He is doing it now in his third year of teaching.
But to mind, there is some additional secret sauce. What makes Katz so disruptive is his 100% personal commitment to the growth and potential of his students. He is awaking the sleeping giant -- hope and a sense of purpose for young people. Specificially law students. If you are in his ReInvent Law Labratory, you see a different legal landscape with a whole lot more options. But to tap into that hope, Dan makes you do the work. You have to challenge yourself. And you have to shed the bullshit phobia over basic math. He is building a community of interest that has the potential to morph into a movement driven by young lawyers and law graduates. For more on Katz's unusual bio, see "This is just an education design problem," LWB, Sept 23, 2013.
The interviewer over at Insight Labs got pretty close to the full, uneditted Dan. If you want to learn about the underinvestment problem that is undermining BigLaw, the crucial role of start-ups in the emerging field of legal R&D, how the next generation of law students can do well and do good, or the real hazards of the $1 Million JD debate, give it a full read.
November 27, 2013 in Blog posts worth reading, Current events, Fun and Learning in the classroom, Innovations in law, Innovations in legal education, New and Noteworthy, Structural change | Permalink | Comments (2)
Sunday, November 24, 2013
"Ten Years After—Where We Have Been and Where We Are Going"
That is the title of a panel at the Annual Georgetown Advanced E-Discovery Institute conference. In an article in Law Technology News, Monica Bay does a wonderful job summarizing what appears to have been a lively, thought-provoking discussion. I can't do better than Monica, but I so want to highlight some of quotes that really caught my eye:
[DC Federal Magistrate Judge] Facciola served as moderator, and threw the first question at Butterfield [partner at Hausfeld], who dove right into a discussion of the explosion of data creation, citing a laundry list of impressive facts, including that "every minute of every day Google receives two million queries ... 571 websites are created every minute ... and more than 200 million emails are sent every minute. We are communicating in ways that didn't exist 20 years ago," he said. ...
Facciola asked Butterfield if he was troubled by the outsourcing of e-discovery to nonlawyers and/or machines. "I do see the tension because lawyers must certify the work," Butterfield acknowledged. ...
Facciola then turned to [SDNY District Court Judge Shria] Scheindlin, who shifted the focus to the courts. "All cases are now e-discovery cases," she asserted. "Even the littlest cases have e-discovery, everyone has to know how to do it," she said. ...
Scheindlin said we are entering an era of a divide between the "technology haves and technology have-nots," and noted that small firms may not be able to afford the start-up costs that e-discovery requires. She reminded the audience that not every litigant can afford a lawyer. "Twenty-five percent of my cases are pro se," she said. ...
Facciola then posed the question of whether lawyers as a group welcome technology and change.
"I think the reality is that most lawyers are not innovators and are afraid of technology," offered Redgrave. "There is a reality that to have continued value, lawyers need to understand technology. ... "
Asked Facciola: "Is this 'Star Trek'?" Scheindlin jumped in: "Of course trials will change—the question is, will we have trials anymore?" Scheindlin noted that routine technology, such as GPS, cellphones, Facebook and other location tools are changing our daily reality to the point where it's increasingly easy to prove facts. "There are no conversations any more, it's emails and texts. We will know where folks are," she said. ... Technology is making it so we always know where people are; thus no need for alibi witnesses." ...
Finally, lawyers need to abandon the "gladiator" role that is imprinted in law school, the panelists asserted, taking strong pokes at the current status of law schools.
"Do I think legal education is keeping up [with technology and cooperation]? Absolutely not....
Scheindlin warned academia that they need to get with the reality. "I think the notion of a two-year law school is coming, with the third year clerking." But, she qualified, "I wouldn't be surprised if law schools turn around. The younger generation is more tech savvy than we are. Many lawyers are technophobic, but the next generation is growing up with technology."
That was quite a provocative exchange, and not by legal futurists, but judges and practicing lawyers presiding over cases in federal court.
Related post:
- How Do Law Professors Learn About the Intersection of Law and Technology?, LWB, Dec. 29, 2012.
November 24, 2013 in Blog posts worth reading, Current events, New and Noteworthy, Structural change | Permalink | Comments (0)
Saturday, November 23, 2013
Bringing the Disruption of the Legal Services Market into the Law School Classroom
Is it important to help law students understand the disruptions that are now occurring in the legal industry? Well, let me ask a more fundamental question. How can a law professor efficiently obtain better information on these complex and diffuse changes? None of us legal academics are experts in this area, and that's a problem in and of itself.
In the process of struggling with these questions, I decided to carve out 15% of the grade in my Corporations class for team-based profiles of NewLaw companies. Here is how I described the conundrum in my syllabus:
The legal industry is changing in dramatic ways, including the creation of new legal businesses that rely upon technology and process design to solve legal problems that have traditionally been handled by lawyers. These businesses are often financed and managed by nonlawyers, which some of you may find surprising. ...
Remarkably, very few practicing lawyers grasp the type of industry context described above ... Yet, the influx of financiers and technologists is likely going to have a dramatic effect on your future legal careers. These changes are extremely foreign to the substance of traditional legal education – we (the legal professoriate) just don't understand the breadth and depth of the changes that are now occurring. Rather than sweep this uncomfortable fact under the rug, let's do what great lawyers do with their clients. Let's learn about the business and the industry so that we understand the context. Armed with this information, we can make better decisions with regard to our own careers.
Two months ago, I circulated the full assignment to the class, divided the class into teams, and gave students two weeks to select a company. The only restrictions were no duplicates, so first-come first-serve, and the company had to be a non-law firm business operating, partially or entirely, in the legal industry. (BTW, JB Ruhl's Law Practice 2050 course at Vanderbilt Law tackles this topic head-on.)
Students made their presentations this past Monday evening (Nov. 18) in Indiana Law's Moot Courtroom. It was a marathon session that ran nearly four hours. Because of the novel content, several practicing lawyers showed up to see the presentations. The following companies where profiled:
- AdvanceLaw. Privately held company that operates a closed community of legal departments who share information on law firms and individual lawyers in order obtain better quality at a lower cost. Discussed on the LWB here.
- Axiom Law. Venture and private equity-based company that helps legal departments more efficiently manage and source their legal needs. Discussed on the LWB here.
- Black Hills IP. Privately held onshoring company that does highly specialized IP-related paralegal work -- their internal motto is "innovate and automate." Founders were involved in an earlier LPO that sold to CPA Global a few year ago. Discussed on the LWB here.
- Datacert. An e-billing platform for legal departments that has added on a large overlay of data analytics so legal departments can more aggressively benchmark and monitor their expenses to outside counsel.
- Ernst & Young. Big Four accounting firm that hires an enormous number of law grads each year for its tax and consulting practices. Very much set up for the tastes and preferences of Millenial professionals including training, work space, and work-life balance.
- Exemplify. Start-up company founded by Professor Robert Anderson at Pepperdine Law and his student. Used super computer technology and inductive computational linguistics to identify the market standard language in a myriad of forms found in the SEC Edgar database. Will speed up negotiations on what is "market"; setting stage for eventual market convergence on standards.
- Huron Consulting. Publicly held consulting firm that formed out of the ashes of Arthur Anderson's post-Enron collapse. Although a business consulting organization, a surprisingly large part of their business is e-discovery through attorneys in U.S. and India. This group trudged through the company's 10Ks, which was a great educational experiemce for them. Discussed on the LWB here.
- Integreon. Venture- and private equity-based LPO that has tried to distinguish itself with its global platform and language capabilities. The company recently cut a deal with Microsoft to handle a large tranche of their patent portfolio work.
- KM Standards. Privately held legal knowledge management company that is trying to deconstruct the logic of contracts into standardized terms to enable autonmation and reduce ambiguity (and thus litigation). Potentially very disruptive.
- LegalForce. Privately held company hoping to recapture the lost consumer and start-up market through a novel storefront strategy. Financed at least initially through LegalForce's enormously successful online trademark practice run by the company's founder, Raj Abhjanker. More trademarks granted by PTO than any other law firm.
- Manzama. Privately held company in Bend, Oregon that scrapes the Internet with machine learning technology to filter business intelligence for law firms and other professional service firms track. Enormously scalable. Daily results presented through a dashboard technology.
- Modria. Online dispute resolution system that enables businesses and governments (mostly municipalities) to avoid costly, in-person legal proceedings to resolve a steady stream of similar disputes that are part of running a business or government. Discussed on the LWB here.
- Neota Logic. Privately held company founded by former Davis Polk partner and CIO Michael Mills. The company specializes in the creation of expert systems that can improve the quality and efficiency of many transactional and compliance related activities.
- Pangea3. LPO with substantial operations in India. Initially back by venture capital in 2004 but subsequently sold to Thomas Reuters in 2010. Employs roughly 1,000 lawyers in the US and India. Discussed on the LWB here.
- Recommind. Privately held company that specialized in predictive coding for use in document review and e-discovery. Founders were graduate students in Artificial Intelligence programs at Stanford and UC Berkeley in early 1990s. Discussed on the LWB here.
- Stewart Richardson. A privately held Indianapolis-based deposition services company that has gradually and successfully expanded into a broader array of law firm support services. Very focused on technology to make the job of clients easier.
The assignment was an experiment, albeit one that worked very well. Both students and the visiting lawyers reported surprise at the depth and breadth of the innovations taking holding the legal market.
Although some of the innovations where clearly eroding the need for traditional legal service jobs, the profiles also revealed the tremendous opportunities for those willing to stretch into the law and technology space. Many students commented that the evening drove home the point that they need to proactively obtain new skills and knowledge. Why? Because the emerging market has no secure place for the complacent or mediocre. Better for them to discover it in the course of an assignment than for me to say and have it fall on deaf ears.
Many thanks to the profiled company, who exhibited enormous generosity in helping my students complete this assignment. Remarkably, most groups had the benefit of a lengthy conference call with senior leadership. My only regret is that more practicing lawyers did not attend. My students, who have have 1L team and presentation experience, brought their "A" game. I will fix that in the next class, as there is no shortage of NewLaw companies to be profiled.
November 23, 2013 in Current events, Data on the profession, Fun and Learning in the classroom, Important research, Innovations in legal education, Structural change | Permalink | Comments (1)
Sunday, November 10, 2013
Is Axiom the Bellwether for Disruption in the Legal Industry?
I think the answer is yes. For the last several years, I have been an avid watcher of Axiom's growth, but this article in Friday's Houston Business Journal finally convinced me that the top-end of the legal industry is changing and that Axiom is setting the standard for disruption.
On a surface level, many of the facts in the HBJ article are unremarkable. Axiom opened its Houston office back in May 2012. Since then, it has grown to 30 lawyers and expects to add another 15 over the next 12 months. Yet, during this same period, the boom in the energy sector has caused several national and international law firms to also open offices in Houston, including Reed Smith, Dentons, Katten Muchin, and K&L Gates,
Axiom and large law firms are definitely targeting and servicing the same clientele -- Fortune 100 legal departments. The substance of their work is also very similar -- sophisticated, complex legal work related to disputes, transactions, and compliance. But in many cases, the solutions offered by Axiom are radically different.
Okay, now a reasonable expectation of any reader is likely to be, "Now explain that difference." Back in 2010, Axiom's CEO Mark Harris told Law Practice magazine that Axiom was "trying to invent a whole new category of law firm. When you're doing that there is no vocabulary [to describe your business model]."
In my experience, the opaqueness of Axiom's business model actually works to its advantage. Specifically, it encourages Axiom's primary competitors (large law firms) to put Axiom in a box based on an outdated caricature. That, in turn, gives Axiom more running room to fully implement the "whole new model." Let me start with the caricature; then I will do my best to explain what the company actually does.
The Inaccurate Axiom Caricature
In its early years, Axiom was described by many as a high-end "temp" service for legal departments. See, e.g., Peter Lattman, Axiom: A Different Kind of Legal Practice? WSJ Law Blog, Nov. 27, 2007 (describing Axiom as having developed "a niche as a provider of high-end temp services to blue-chip corporate clients").
The simplified version runs like this. Lawyers working in large law firms trade-in their partner status, or shot at partnership, for more autonomy and a better work-life balance. By brokering relationships between legal departments and skilled but disaffected lawyers, Axiom ditches the "class A" overhead and reduces the allocation of legal fees that would otherwise support record law firm profits.
Under this caricatured model, all parties are made better off -- the client (who gets the same quality work, but cheaper), the lawyers (who get off the billable hour trend mill and are able take vacations again), and Axiom (which collects a fee). The caricatured model also enables large law firms to dismiss the Axiom model on the belief that only a small tranche of legal work is at risk of being siphoned away. And that work is lower margin and price sensitive -- so-called "commodity" legal work. Finally, the lawyers leaving for Axiom are not the heavy-hitter equity partners who control client relationships. Hence, the analysis is complete: Axiom represents zero threat to the BigLaw model.
Yet, if brokering lawyer services was originally the core of Axiom's business, they have subsequently expanded their offerings. Back in 2007, Axiom was #73 on Inc magazine's list of fastest growing companies, with revenues of $17 million per year and 1000%-plus growth over three years. Since then, its revenues have grown another ten-fold. Earlier this year, Axiom took $28 million in outside investment, which it plans to invest in technology. See Mark Harris of Axiom Answers Hard Questions, Legal Whiteboard, Sept. 25, 2013.
With this kind of growth, and the backing of very serious venture capital funds, perhaps its time to check the assumptions surrounding the Axiom caricature.
The "Managed Services" Business Model
Based on my own discussions with Axiom management and several articles on the topic, see, e.g., Adam Smith, ABA Journal, Strategic Legal Technology Blog, the fastest growing part of Axiom's business is its "Managed Services" practice.
Part of the managed services practice is analyzing and redesigning workflows so that in-house lawyers have the cost and quality information needed to make better sourcing decisions. Because Axiom is helping to redesign the workflows, including the specifications for sourcing decisions, it is well-positioned to do much of the resulting work -- indeed, unless it can manage both the design and execution of the work flow, Axiom can't warranty the results.
What is the goal of the workflow redesigns? To reduce legal risk and legal cost at the same time, primarily through process, measurement, and feedback loops. Virtually the entire law firm and law school universe is stuck in a mental frame that believes that better, faster, and cheaper are in permanent tension with each other. This is because our mental frame of reference is based on artisan-trained lawyers working in a traditional office environment with Word, email, and a searchable bank of forms and briefs.
Yet, when systems engineers, information technologists, and project managers because equal members of the team, "better, faster, cheaper" becomes a straightforward problem that can be solved through a four-part continuous process: design, execute, measure, repeat.
Much of the key design and execution work at Axiom is done by nonlawyers who formerly worked for global consulting businesses. See, e.g., this opening in Axiom (Chicago) for Project Management Director of Managed Contracts.
Indeed, the head of Axiom's Houston office is Brian Bayne, a business development professional with an MBA from the University of Dallas. Before joining Axiom, Bayne worked for IBM. Here is how Bayne described Axiom to the HBJ:
"The heart of what motivates us as a company is to be seen as an agent of change ... . We want to be a leading voice for transition in the industry. It really is a new way of doing business and offers a completely different value proposition that most law firms are not in a position to do."
Is Axiom a Law Firm?
Over at the E-Lawyering Blog back in April, Richard Granat did a very careful job trying to answer this question, and concluded that the answer was "no." In fact, Axiom is a Delaware C-Corp with nonlawyer investors as equity shareholders.
So, how is Axiom getting around the Rule 5.4 ban on fee-splitting with nonlawyers? The answer to this question has a lot to do with the nature of outsourcing and managed services within legal departments. A general counsel for a corporation controls the legal functions of the company. Because he or she can't do all the work themselves, they hire in-house legal staff and outside counsel. In recent years, legal departments have also contracted directly with LPOs, particularly on matters related to e-discovery and M&A due diligence. When it comes to non-law firm options, such as LPOs, the general counsel and his or her staff are "supervising" the work within the meaning of the legal ethics rules.
When a general counsel of a corporation uses a managed service provider, such a Axiom, they are diverting a tranche of work they control. The value of the managed service provider is process expertise plus economies of scale and scope. Axiom, through a contract with the legal department, manages some of that legal workflow that supports in-house lawyers in their counseling and compliance roles. Yet, the buyer of the managed services is himself a lawyer, and that lawyer is ultimately responsible for advising the corporation on legal risk.
On one level, Axiom is a niche business. As Granat notes, "If you don't have an in-house counsel, then you can't use Axiom's services. Not being a law firm, Axiom cannot provide services to the public (individuals or organizations) directly." Yet, this niche accounts for a huge proportion of the entire legal services market. In this American Lawyer article, one of Axiom's venture capital investors, opined "With a worldwide legal market that is a trillion dollars each year, there is plenty of running room to build a successful business."
Ultimately, the value proposition very simple. As an in-house lawyer, you can educate yourself on the Axiom managed services approach and be comfortable that, through process and measurement, you have a solid handle on this tranche of the company's legal work, likely within budget. Or you can have the CYA coverage of a brand name law firm and continue to do battle with your CFO over rising legal fees. If you were an investor, which approach you would bet on?
So Axiom can't help you with your divorce, will, or personal injury case. Don't worry, Jacoby & Meyers, Legal Zoom, Legal Rocket, and others are trying to tap into that market. See Legal Futures, Nov 8, 2013. In the meantime, Axiom may be gunning to be a service provider to your large corporate employer.
The Last Days of a Bloodless Revolution
I am sure that a state bar regulator, taking a very formalistic approach, can take issue with Axiom's construction of Rule 5.4, which prohibits profit-sharing between lawyers and nonlawyers from income generated from the practice of law. But the purpose behind Rule 5.4 is to preserve lawyer independence so that the quality of the underlying legal advice won't be compromised by the nonlawyer's pursuit of profit.
In the case of Axiom, however, the person making the buying decision is a highly sophisticated lawyer who is struggling to manage his or her organization's legal needs within a budget. Stated bluntly, the GC of a multinational corporation does not want the kind of consumer protection that a formalistic construction of Rule 5.4 would provide.
A betting person, such as a nonlawyer Axiom investor, would likely conclude that the bar regulators are not going to pick a fight with the largest corporations headquartered in their jurisdiction. Why would they? The subtext of economic protectionism would set them up for ridicule in the legal and mainstream press--who, exactly, is being harmed besides the law firms who are losing market share? And is there a principled basis to distinguish LPOs from managed services?
Expect to read more about state regulators in the "risk factors" section of Axiom's S-1 registration statement if and when Axiom decides go public. I think these risks will likely remain hypothetical, but as my friend Ed Reeser is known to say, "That is just my opinion. I could be wrong."
Truth be told, the nonlawyer revolution in U.S. legal services is occurring right now. And there is a good possibility that the whole revolution will take place without a single shot ever being fired.
Back to Houston
The HBJ reporter asked a local Houston legal recruiter about the future prospects for Axiom. The recruiter commented that he was "[n]ot sure how well they will do in Texas, given the conservative nature of the legal business here."
In my own experience, general counsel in Texas are among the most innovative and entrepreneurial in the country. The General Counsel Forum was originally founded in Texas as a state-level organization, and it is now rivalling the Association of Corporate Counsel (ACC) in terms of eduational programming for in-house lawyers and sharing best practices and benchmarking.
Lawyers as a group may be conservative, but within that distribution there is a small cadre of innovators and early adopters. Although most people don't change their behavior in response to abstract ideas, innovators and early adopters are at least drawn to the possibility. Not every idea will be successful -- indeed, the trial and error of the innovators is often a basis for dismssing them as fringe players. Yet, when an innovation produces a significant leap forward, the resulting success eventually sets off a widespread diffusion among the broader population.
There is a rich sociological literature on this topic, which was pioneered by Everett Rogers in his 1962 book, Diffusion of Innovation. It turns out that self-interest is often inadequate to overcome inertia and prejudice, at least in the short- to medium-term. The classic example is hybrid seeds, which have a host of advantages for producing more bountiful, disease-free crops. Yet, that innovation took decades to take hold among farmers.
Looking for another example? In the early 1980s, Bill James was publicizing the benefits of his stats-driven approach to baseball. The advertised benefits were clear -- "you can win more baseball games." Isn't that what every baseball team wants? But what's the cost? "Well, you'll have to change the way your evaluate talent." For nearly twenty years, the implicit answer of the baseball establishment was "no, that price is too high." Within the last decade, however, the stats-driven appoach has become commonplace in baseball and in other sports as well. The innovation has become diffuse.
I suspect that Axiom's senior management fully understands these dyanmics. Looking at the distribution model from Everett Roger's book, if you are trying to sell your unproven innovation, you are literally wasting your time trying to sell to your wares to 85% of the market. Indeed, if you are in the very early stages of innovation, 98% of the potential buyers are likely to be resistant to your pitch.
The problem here is not economics -- its human nature. This may be hard for many lawyers to believe, but lawyers, including general counsel, are human beings. And human beings are prone to a series of predictable reactions when presented with various stimuli, such as new ways to perform their work. Rather than process the merits of the idea, many human beings, including lawyers, will instead gauge the reactions of the market leaders. If the market leaders react with approbation, the early and late majority become willing to actually engage with the idea.
What this means is that the merits of a good idea are not enough to ensure its success, at least immediately. This is a key practical insight that the reformer/innovator class seldom grasps. Without understanding Roger's Diffusion of Innovation curve, an innovator's success becomes a function of timing and luck -- that is the story of Bill James.
But if you understand the diffusion process, it is possible to construct a filter that locates the innovator/early adopter class. And if you study their beliefs and problems, you can more effectively tailor your pitch. This approach saves time and money and holds the team together in the belief that they will ultimately be successful.
So, where is Axiom on the Rogers Diffusion Curve?
My best guess is the "early adopters" stage, as Axiom has relationships with roughly half of the Fortune 100 and is working hard to widen those relationships with more ambitious projects. Their goal, as best as I can tell, is to generate a clear proof-of-concept that they have solutions to the risk/cost conundrum that plagues so many legal departments and causes them to blow their budgets. With sufficient market testimonials, and as in-house lawyers with exposure to Axiom migrate to other legal departments, the broader legal market will begin to tip.
I find the Axiom story refreshing, primarily because the legal market has fallen under the spell of the fast follower strategy. In my travels, I often encounter the attitude "Let someone else prove that it can be done differently and better and then we will follow." When virtually the entire market adopts this worldview, incumbent institutions begin to relish the false starts of others and a general sense of complacency begins to set in. Frankly, I find this whole dynamic unprofessional is the classical sense of that word -- i.e., at variance with professional standards and conduct.
Axiom, in contrast, is on the brink of demonstrating the benefits of the first mover advantage in law. This is bound to have the beneficial, balancing effect on the rest of us.
Related posts:
- "LPOs Stealing Deal Work from Law Firms", Feb 6, 2013.
- Mark Harris of Axiom Answers Hard Questions, Sept 25, 2013.
November 10, 2013 in Blog posts worth reading, Current events, Data on the profession, Innovations in law, Law Firms, Legal Departments, New and Noteworthy, Structural change | Permalink | Comments (0)
Friday, November 8, 2013
Clayton Christensen Explains How Disruption Will Occur in Higher Education
Clayton Christensen is the Harvard Business School professor who wrote The Innovator's Dilemma, the seminal book on why successful businesses so rarely stay on top over the long term. Although focused on the tech industry -- where product cycles are very short -- Christensen's framework has a much wider application, including legacy industrial enterprises and countries. In 2011, Christensen published a book called The Innovative University, which applied the Innovator's Dilemma framework to higher education.
Below is a YouTube video of Christensen explaining his thesis to a conference in Dallas organized around the future of public universities. His talk is very long by online video standards (80 minutes) but worth the time of anyone who wants to understand the Christensen framework and its application to higher ed. At approximately minute 45, Christensen specifically mentions law schools. Below the video is some additional context on Christensen.
Remember that near presidential coup at University of Virginia, which was reported in the New York Times Magazine last fall (link)? Well, Christensen's ideas had begun to propagate within the university trustee community, thanks in part to a letter than Christensen and Henry Eyring had recently written to the American Council of Trustees and Alumni (ACTA).
As discussed in the New York Times article, the coalition that was animated by Christensen's ideas was ultimately defeated by the palace guards. But that was the first attempted coup at a major research university, not the last. As Christensen points out in the video, universities are feeling pressure from innovative models that "compete against nonconsumption." In other words, lots of people would like the knowledge taught in the great universities, but that demand goes unsatisfied because of selective admissions requirements, tuition, and geography.
MOACs are the first volley in figuring out this untapped market. Those that dismiss MOACs as irrelevant are missing the bigger picture of what early stage disruption looks like.
Specifically, according to Christensen, here is the recurring dynamic: the new entrants siphon off work from the bottom-end -- work that the high-end says it does not want anyway. The cycle repeats itself a few times until, much to the incumbents' surprise, the bottom-end becomes more economically relevant and powerful. Why does top-end let this happen? Because the incumbents have come to view success as elite status and high margins, which is an unrealistically high long-term bar unless you are continuously innovating. Eventually, the so-called high-margin niche becomes insufficient to sustain the enterprise, and giants fall -- see the automotive industry, steel, computer hardware, televisions, consumer electronics, etc.
That said, does the university model of education have a life cycle, or is it above these coarse market considerations? I think it probably does.
In the year 2013, lots of knowledge is free or incredibly cheap. Next year, even more, and so on for the foreseeable future. As a result, many people are able to become astonishingly knowledgable and skilled because of the sheer joy of learning and becoming more competent. It turns out that university credentials are a pretty noisy signal for knowledge and competence -- a small positive correlation, yes, but not much more. This is an information gap problem.
In terms of sheer productitivity, most employers would prefer the folks who are driven to learn and continuously improve. Google has already figured this out, as a substantial portion of their high-end workforce has never completed college. Google employs them for their abilities, not their degrees.
When opportunity is unbundled from university credentials -- i.e., the information gap problem described above becomes cost-effective to solve -- the demand for university education as it currently exists (expensive and in limited supply) will go down. From a social perspective, this is a good thing. But it means that universities will have to innovate in the years to come in order to justify our tuition and fees.
November 8, 2013 in Blog posts worth reading, Cross industry comparisons, Current events, Important research, New and Noteworthy, Structural change, Video interviews | Permalink | Comments (1)
Sunday, October 20, 2013
Would you bet on the future of Online Dispute Resolution (ODR)?
I would. The best example of ODR I have come across is Modria, who's tagline is "Any issue, resolved."
Before dismissing Modria as a trivial Internet parlor game, consider this: The technology and process at work here got its start at Paypal and Ebay. Why did Paypal and Ebay become so good at dispute resolution? Because their goal of becoming mega-volume businesses depended on it. If you have millions of transactions daily, a huge volume of low-stakes complaints is inevitable. If dissatisfied customers stay dissatisfied, they don't come back. Worse, they'll talk to their friends.
Now watch is video. Note that the target audience is businesses who (a) feel disputes are a drain on their time and energy, and (b) want happy, loyal customers who vouch for them to friends and family. A prompt, fair resolution to a dispute actually deepens the trust relationship. That's not speculation. That's science. And Modria, and it investors, know that.
In this book, Tommorrow's Lawyers, Richard Susskind talks about ODR as a highly disruptive innovation that will fundamentally alter the legal landscape. It is hard to fully appreciate that claim without seeing concrete example, like the Modria business model, up and running. Many businesses could be drawn to Modria, but so could/would many smaller governmental units. Indeed, several (progressive) county governments have become clients (e.g., on property assessment appeals).
Modria is disruptive because so many forums for resolving disputes, such as courts, repeat-player arbitrations, and various government boards, are not perceived as prompt, fair, and/or just, often times because costs of dispute resolution are so high. So even if the dispute is resolved correctly on the merits--for the subset who can pay the cost--there remains a large residue of dissatisfaction.
This is fundamentally a problem of institutional design. (The ReInvent Law folks understanding this.) The goal, or ought to be, a speedy, low-cost, resolution that is maximizes on the uumber of user who perceived the outcome as fair. Does any state or federal court think this way? In Tomorrow's Lawyers, Susskind asks whether "court is a service or a place" (p. 99). Alas, this is a staggeringly very large market.
Check out the management team of Modia. These folks come primarily from the dispute resolution programs in business and public policy schools. It is worth noting, however, that Modria's Board and its big-time investors include several lawyers, including Jason Mendelsohn, a former lawyer at Cooley who now works as a venture capitalist. Jason has invested in other businesses in the emerging legal vendor space.
Times are changing. And the pace of that change is picking up.
October 20, 2013 in Cross industry comparisons, Current events, Data on the profession, Important research, Innovations in law, New and Noteworthy, Structural change, Video interviews | Permalink | Comments (4)
Thursday, October 17, 2013
Understanding Trends in Demographics of Law Students -- Part Two
Trends in LSAT Profiles of Applicants and Matriculants
In looking at trends over the last 12 years, there are two relevant time frames due to changes in how LSAC reported data. Between 2002 and 2009, the LSAC's annual National Decision Profiles were based on the average LSAT scores of applicants and matriculants. From 2010 to the present, the National Decision Profiles were based on the highest LSAT scores of applicants and matriculants. This post compares trends in LSAT profiles between 2002 and 2009 with trends between 2010 and 2013, noting that the latter period not only has seen a decline in enrollment but also has seen a significant weakening of the overall LSAT profile of first-years.
Changes in LSAT Profiles from 2002-2009 Using Average LSAT
The following chart shows the difference in LSAT composition of first-years in three cycles between 2001-02 and 2008-09.
Matriculants by LSAT Category (Reflecting Average LSAT) 2002-2009
165+ 150-164 <150 Total
2001-02 5,889 30,100 9,097 45,086
2004-05 7,447 32,007 6,036 45,490
2008-09 7,652 31,991 8,943 48,586
In the three years between 2002 and 2005, applications grew by roughly 5,000, to roughly 95,000, with growth among those with an average LSAT of 165+ and an average LSAT of 150-164, and a modest decline among those with an average LSAT of <150. Law schools matriculated only 400 more first-years in 2005 than in 2002, but there were roughly 3,050 fewer first-year students with average LSATs <150, with 1,900 more first years with average LSATs of 150-164 and roughly 1,550 more with average LSATs of 165+. This three-year period saw strengthening of the LSAT profile of first-year students.
Four years later, with an applicant pool that had declined to nearly 87,000, however, law schools enrolled over 3,000 additional first-year students, 2,900 of whom had average LSATs of <150. Virtually all of the growth in first-years between 2005 and 2009, therefore, was comprised of students at the lower end of the LSAT profile.
Nonetheless, in comparison with the 2002 first-years, the 2009 first-years included slightly fewer students with an average LSAT of <150 (down 154 – 1.7%) and larger populations of students with average LSATs of 165+ (up 1,763 – nearly 30% more) and with average LSATs of 150-164 (up 1,891 – or roughly 6.3% more). In 2009, therefore, the average LSAT profile of all first-years, while less robust than in 2005, was still more robust than in 2002.
Between 2004 and 2008, the ABA approved nine new law schools (with fall 2009 first-year enrollment in parentheses) – Atlanta's John Marshall (211) and Western State (188) in 2005, Liberty (119), Faulkner (150) and Charleston (241) in 2006, Phoenix (272) in 2007, and Elon (121), Drexel (156) and Charlotte (276) in 2008. The first-year enrollment of these nine schools in Fall 2009 totaled 1,734, roughly 60% of the growth in matriculants with average LSATs of < 150 between 2005 and 2009. While many of the first-year students at these schools had LSATs of greater than 150, these schools took students who might have gone to other schools and increased the overall demand for applicants with average LSATs of <150.
Changes in LSAT Profiles from 2010-2013
The following chart focuses on the last three admissions cycles and the current admission cycle, covering the period in which the LSAC National Decision Profiles were based on each applicant's highest LSAT score.
Applicants and Matriculants Across Three LSAT Categories Based on Highest LSAT from 2010 to 2013
Adm. Cycle Total Total Apps. Mat. Apps. Mat. Apps. Mat.
Apps. Mat.* 165+ 165+ 150-164 150-164 <150 <150
Fall 2010 87912 49719 12177 9477 47722 32862 26548 7013
Fall 2011 78474 45616 11190 8952 41435 29220 24396 7101
Fall 2012 67925 41422 9196 7571 34653 25425 22089 7906
Fall 2013** 59426 38900 7496 6300 30263 24000 20569 8200
*Note that the total matriculants number is greater than the sum of the matriculants across the three categories in any given year because the total matriculants number includes non-standard test-takers and those without an LSAT.
**The Fall 2013 numbers represent estimates based on the number of applicants in each category and an assumption that 2013 saw another slight increase in the percentage of applicants from each LSAT category who matriculated (consistent with increases in the two previous years in response to the decreasing applicant pool).
During this period, the number of applicants declined by 28,000, or over 32%, but the number of applicants with a highest LSAT of 165+ declined by 38%, and the number with a highest LSAT of 150-164 declined by 36.5%, while the number with a highest LSAT of <150 declined by only 22.5%. Thus, the pool of applicants is not only smaller in the 2012-13 admissions cycle as compared to 2009-10, but it is "weaker" in terms of the LSAT profile.
The number of matriculants in the top two LSAT categories also declined significantly between Fall 2010 and Fall 2012, while the number of matriculants in the bottom LSAT category actually grew.
The number of matriculants whose highest LSAT score was 165+ fell from 9,477 in 2010 to 7,571 in 2012, a decline of over 20%, while the percentage of applicants in this category who became matriculants increased from 78% to 80% to 82% over that period. If we estimate that 84% of the 2013 applicants with a highest LSAT of 165+ matriculate, then we can anticipate roughly 6300 matriculants for Fall 2013 with a highest LSAT of 165+, a drop of nearly 33% since 2010.
The number of matriculants whose highest LSAT score was 150-164 fell from 32,862 in 2010 to 25,425 in 2012, a decline of nearly 23%, while the percentage of applicants in this category who became matriculants increased from 69% to 70.5% to 73% over that period. If we estimate that roughly 79% of the applicants with a highest LSAT of 150-164 matriculate, then we can anticipate roughly 24,000 matriculants for Fall 2013 with an LSAT of 150-164, a decline of roughly 27% since Fall 2010.
Meanwhile, the number of matriculants whose highest LSAT score was <150 grew from roughly 7,000 to over 7,900, an increase of roughly 13%, while the percentage of applicants in this category who became matriculants increased from 26% to 29% to 36% over that period. If we estimate that roughly 40% of the applicants with a highest LSAT of <150 matriculate, then we can anticipate roughly 8,200 matriculants with an LSAT of <150 for Fall 2013, an increase of roughly 17% since Fall 2010.
Percentage of First-Years from Each LSAT Category Using Highest LSAT-- 2010-2013*
165+ 150-164 <150
2010 0.191 0.661 0.141
2011 0.196 0.641 0.156
2012 0.183 0.614 0.191
2013 0.162 0.617 0.211
*The sum of the percentages in any given year will be slightly less than 1.00 because the denominator -- total matriculants -- includes matriculants with non-standard LSAT and those with no LSAT.
This table shows that if my estimates for 2013 are roughly accurate, while the percentage of matriculants whose highest LSAT score was 165+ in the first-year class has declined between Fall 2010 and Fall 2013 by roughly 16% (from 19% to 16%) and the percentage of matriculants whose highest LSAT was 150-164 has declined by roughly 6% (from 66% to 62%) the percentage of matriculants whose highest LSAT was <150 has increased 50% (from 14% to 21%).
Adjusting from Highest LSAT to Average LSAT to Compare 2002 and 2013
The change in the 2009-10 admissions cycle to using highest LSAT rather than average LSAT resulted in an increase in matriculants with scores of 165+ of roughly 1,800 between Fall 2009 and Fall 2010. Given that there had been a modest increase in the number of matriculants with an average LSAT of 165+ between 2008 and 2009 (an increase of roughly 600, from 7,023 to 7,652), it might be fair to assume that there would have been another modest increase in the number of matriculants with an average LSAT of 165+ between 2009 and 2010 given the challenging economic environment at the time and the continued growth in applications between 2009 and 2010. Assume then that of the 1,800 additional matriculants with scores of 165+, 400 would have been included in the category if we were still using an average LSAT of 165+ rather than the highest LSAT of 165+. That would suggest that to estimate the number of matriculants with an average LSAT of 165+ in 2010, it might make sense to subtract 1,400 matriculants from the number of matriculants with a highest LSAT of 165+ in 2010 and then for the next three years apply the same percentage reduction as reflected in the number of those with a highest LSAT of 165+ over those three years.
The change to highest LSAT rather than average LSAT also resulted in a drop in the number of matriculants with an LSAT <150 between 2009 and 2010 of roughly 1,900 matriculants. Notably, the number of applicants and matriculants with an average LSAT <150 had grown slightly between 2007 and 2009 (applicants from 29,123 to 29,926, matriculants from 7,013 to 7,906). Nonetheless, to err on the conservative side, assume that the number of matriculants with an average LSAT <150 actually may have declined in Fall 2010 from Fall 2009 rather than continuing to increase modestly. Assume it would have declined by roughly 5% or 400 (rather than 1,900). That would mean that to estimate the number of matriculants with an average LSAT of <150 in Fall 2010, we would need to add to the number with a highest LSAT of <150 roughly 1,500 more matriculants and then for the next three years apply the same percentage increase as reflected in the number of those with a highest LSAT of <150 over those three years.
Using these assumptions, the estimated number of first-years with an average LSAT of 165+ would fall to roughly 5,400 as of Fall 2013, while the estimated number of first-years with an average LSAT of <150 would rise to over 9,800 in Fall 2013.
If the estimates above are close to accurate, then the number of Fall 2013 matriculants with an average LSAT score of 165+ represents roughly 14% of Fall 2013 matriculants (a slightly higher percentage than in Fall 2002), while the number of Fall 2013 matriculants with an average LSAT of <150 represents over 25% of Fall 2013 matriculants (a much higher percentage than in Fall 2002). The following chart shows the percentage of matriculants for the period from 2002-2013 taking into account the estimates set forth in the preceding paragraph regarding the number of matriculants with an average LSAT in each range over the period from 2010-2013.
This graph shows that the percentage of matriculants with an average LSAT of 165+ has varied between roughly 13% and roughly 17% percent over the period from 2002-2013, and appears to have returned in Fall 2013 to a percentage only slightly higher than where it was in Fall 2002. By contrast, this chart also shows that the percentage of matriculants with an average LSAT of <150 had varied between roughly 19% and roughly 13% until the Fall 2012 and Fall 2013 groups of matriculants, when the percentages increased to roughly 22% (in 2012) and over 25% (in 2013). While this graph does not include the percentage of matriculants with average LSATs of 150-164, one can infer that percentage as the difference between 100% and the sum of the 165+ percentage and the <150 percentage. For the period between 2002 and 2011, this generally hovered between 65% and 70%, but in the last two years it has fallen closer to 60%.
This shift in LSAT profile is further evidenced by changes in LSAT profiles among first-year entering classes between 2010 and 2013. For Fall 2010, there were only nine law schools with a median LSAT of 149 or lower (using highest LSAT for reporting purposes). For Fall 2011, there were 14 law schools with a median LSAT of 149 or lower. For Fall 2012, there were 21 law schools with a median LSAT of 149 or lower. That number may grow to nearly 30 when official data is published next spring on the Fall 2013 entering class.
If one uses the LSAT profile as an indicator of the "strength" of a given class of first-year students, and uses the framework set forth above for looking at the LSAT profile, then in the last three years we not only have seen first-year enrollment shrink by roughly 10,000 students, but also have seen a significant "weakening" of the LSAT profile. In terms of LSAT profile, the Fall 2013 entering class is almost certainly the weakest of any class going back to Fall 2002. This may impact the classroom experience at some law schools and may impact bar passage results when the Fall 2013 entering class graduates in 2016.
Why the Differential Response to Market Signals by Different Populations of Prospective Law Students?
What might explain the extent to which different populations of prospective law students have responded to market signals in such different ways, with those from elite college and universities and those with higher LSATs turning away from law school more than those from less elite colleges and universities and those with lower LSATs? In Part Three I will explore some possible explanations.
October 17, 2013 in Data on legal education, Scholarship on legal education, Structural change | Permalink | Comments (0)
Tuesday, October 15, 2013
What Does a JD-Advantaged Job Look Like? Job Posting for a "Legal Solutions Architect"
Below is job posting for a new type of job called a "legal solutions architect."
The job post just appeared on the website of Seyfarth Shaw, a large law firm based in Chicago. Seyfarth was one of the first to embrace the movement toward technology and process. See Six Sigma at Seyfarth Shaw, Legal Professions Blog, April 14, 2010.
Before getting to the text of the ad, a few of observations for what this posting is telling us about legal education and the emerging legal job market:
- This is a pure JD advantaged job. "Juris Doctor or MBA with legal industry experience strongly preferred job" (emphasis in original). It is full-time, long-term job in downtown Chicago. it is not reviewing documents. This is a good professional job doing very sophisticated and challenging work.
- The job is not partner-track. But it terms of economic potential and job security, does that matter? In the years to come, folks that understand the overlay between law, technology, and process are going to be great demand and have a lot of options.
- Undergraduate education matters, but the majors are far from typical among traditional law students: finance, business administration, computer science, or "other technical discipline."
- It is easier to get this job if an applicant has familiarity with "extranets, intranets, document assembly, enterprise search, relational databases and workflow." Also, it is "a plus" to have "familiarity with Agile and Scrum [two software development tools]." We don't teach any of this stuff in law school. Perhaps we should.
- The required skills are an blend of technical skills and knowledge plus higher order professional abilities that, frankly, are not explicitly taught in law school. Law schools need to take notice, as this an order any decent professional school should be able to fill.
Now the actual job posting:
Requisition Number
Post Date
Legal Solutions Architect
Seyfarth Shaw is one of the most progressive, forward-thinking law firms in the world. Seyfarth's commitment to delivering legal services in a new way through its SeyfarthLean program - with an emphasis on value and continuous improvement - has been praised by the Association of Corporate Counsel (ACC) as being "five years ahead of every other AmLaw 200 firm."
Legal Solutions Architects anticipate, identify, sell and drive innovative business solutions. Through an understanding of technology, knowledge management, business analysis, process improvement and project management, this role provides solutions that enhance the client experience. These multidisciplinary resources are aligned with Firm strategy and play an important role in driving the Firm's innovative approach to the practice of law and the delivery of legal services.
This position will report to the Director of the Legal Technology Innovations Office. Seyfarth Shaw recently received awards for 2013 Innovative Law Firm of the Year and Innovative Project of the Year, and the efforts of the Legal Technology Innovations Office played a significant role in earning those recognitions.
Essential Functions
- Partner with clients, Seyfarth legal teams and legal project managers to enhance the delivery and effectiveness of services provided within legal engagements
- Translate stated and inferred needs of clients and attorneys into specific technologies and methods
- Synthesize the needs of multiple engagements and create requirements for systematic solutions that underpin Seyfarth's varied legal practices
- Team with the Application Development Group to design and plan for custom solutions and oversee the construction and implementation of these systems
- Manage multiple projects concurrently, juggling priorities, deadlines and essential duties for each project
- Collaborate with other Firm departments, including Legal Project Management Office, Practice Management, Finance, Marketing and Professional Development to provide comprehensive solutions
- Act as an effective change manager – keeping client and Firm culture, group behavior and individual habits in mind in order to best circumnavigate roadblocks and pitfalls for solution adoption
- Provide presentations to individuals, small groups and large audiences of clients and Seyfarth attorneys in a persuasive and encouraging manner
- Contribute to continuous improvement, promote the use of technology solutions and help improve the awareness of the impact of the solutions on the business
- Perform vendor due diligence and serve as a point of contact for third-party technologies leveraged by the Firm
- Conduct market, external and internal research and convey results to forward assigned projects and to aid projects lead by teammates, other groups and other departments
- Proactively research and maintain knowledge of emerging technologies and service delivery models and possible applications to the business
- Highly motivated self-starter with an entrepreneurial bent
- Uses intelligence, creativity and persistence to solve varied, non-routine problems
- Possesses an understanding of knowledge management, process improvement and legal project management and an appreciation of the benefits to law firms employing these approaches
- Passion for legal technology, including technical platforms, specific technical applications and their impact on the practice of law
- Keen grasp of project management, flexible in project execution and able to meet aggressive deadlines
- Strong business analysis approach
- Visualizes how raw data can be converted into useful information for client and Firm decision-makers
- Pays attention to detail but still maintains focus on the bigger picture
- Comfortable working both independently and in diverse teams
- Excellent written and verbal communicator that is able to distill complex concepts into simple messages
- Familiar with the software development cycle
- Capable of managing and motivating up, down and across the organization
- Appreciation for user interface and user experience design
- Embraces change and seeks to create order from chaos
- Bachelor's degree, preferably in finance, business administration, computer science or other technical discipline
- Juris Doctor or MBA with legal industry experience strongly
- Experience working within a large law firm preferred but not required
- Familiarity with extranets, intranets, document assembly, enterprise search, relational databases and workflow preferred
- Familiarity with Agile and Scrum a plus
Seyfarth Shaw is committed to working with and providing reasonable accommodation to individuals with disabilities. If, because of a medical condition or disability, you need a reasonable accommodation for any part of the employment process, please call (312) 460-6545 and let us know the nature of your request and your contact information. We offer an outstanding benefit package which includes: medical/dental, 401k with employer contribution; life insurance; transportation fringe benefit program; generous paid time off policy; and long-term and short-term disability policies. Equal Opportunity Employer M/F/D/V
October 15, 2013 in Current events, Data on legal education, Innovations in law, Law Firms, New and Noteworthy, Structural change | Permalink | Comments (0)
Sunday, October 13, 2013
Measuring the Value of Law Firm Pedigree
General counsel from large legal departments are becoming increasingly skeptical of the value provided by leading brand-name law firms, such as the AmLaw 20 or the Magic Circle. That is the conclusion of some compelling research just posted on the HBR Blog Network, the online idea forum run by Harvard Business Review.
The research was conducted by AdvanceLaw, which is a company that vets law firms and lawyers on an as-requested basis on behalf of legal departments. Some of AdvanceLaw's clients include Google, Nike, Sherwin-Williams, Lenovo, Towers Watson, Mastercard, Panasonic, eBay, Mastercard, Deutsche Bank, McDonald's, Molson Coors, Nestle, Heinz, Clorox, Unilever, CSS, Starwood Hotels, etc.
AdvanceLaw is a good example of what Richard Susskind calls a "closed legal community." See Tomorrow's Lawyers, chapter 5. Some essential background on AdvanceLaw is discussed below. But I am sure readers want to see the data first. The reported research was based on responses from 88 general counsel, who answered two questions:
- How does law firm pedigree affect their buy decision for a high-stakes matter?
- Is law firm pedigree associated with more or less client responsiveness?
Below are the results posted on the HBR Blog Network:
Readers are probably wondering, "Who is AdvanceLaw and why are they asking these types of questions?" I have some intel on this topic.
AdvanceLaw was formed four years ago by Firoz Dattu, a Harvard-trained lawyer who spent time in BigLaw (Paul Weiss). Firoz eventually found his way to the Corporate Executive Board, which a publicly traded company (NYSE: CEB) that specializes in subscription-based research organized by industry and function. CEB uses the aggregated research for value-add services such as benchmarking and best practices.
Because they specialize in factgathering for strategy and management, CEB has a long history of employees leaving to start niche businesses. That is what happened here. Firoz helped launch, and ultimately ran, the General Counsel Roundtable (GCR), which is a CEB functional group that cuts across industries. I have been to a GCR meeting (it is invitation-only for outsiders). Suffice to say that a persistent theme of conversation was controlling legal costs without compromising quality. A seemingly tall order, right?
Firoz started AdvanceLaw because of perceptions by general counsel that they were being overcharged and underserved by large firms in the major markets. Any GC who has reviewed data from TyMetrix would quickly draw the same conclusion, as a large firm lawyer with 20-years experience in, say, Minneapolis often has a lower billing rate than a second-year at a mega-firm in NYC. AdvanceLaw has positioned itself as a trusted advisor that can provide reliable guidance in shopping for value outside the big brand-name firms.
So how does this service work? As noted earlier, AdvanceLaw is an example of a closed legal community. To get into the AdvanceLaw network, prospective law firms are run through a rigorous RFP process that evaluates things like expertise, innovation, quality, compensation systems, and track record on diversity.
If a firm makes the AdvanceLaw cut, they start getting assignments from participating legal departments. But here is the enormous differientator. Feedback is collected by AdvanceLaw and shared with the law firm and other AdvanceLaw legal departments. What is the effect?
- For law firms, changing their behavior to (a) protect their reputations, and (b) get more work.
- For legal departments, to the extent they are getting value, migration of their legal work out of pedigreed law firms in the major markets to lower cost yet high quality regional and super-regional firms. The savings are roughly 30-40% with no loss in quality and better responsiveness. Some of the winners in the AdvanceLaw tournament are listed here.
AdvanceLaw also has a globalization overlay, which has been created with GC assistance. For instance, in Argentina and India, AdvanceLaw works with quite prominent firms who also exhibit efficiency. In the UK and Canada, the firms are substantial players, but are slightly less pedigreed than the Magic Circle and Seven Sisters, respectively.
So let's boil down AdvanceLaw's business model into its simplest terms: It gathers information so they legal departments don't pay excessive prices for the CYA (cover-your-ass) benefits of hiring high-prestige Big Law.
CYA still matters, of course. But through AdvanceLaw, pedigree is being given a more accurate valuation. A likely large second-order effect of AdvanceLaw is the acceleration of AFAs through AdvanceLaw firms, as feedback (on quality) and publicity (to drive volume) is what is needed to make that transition.
Susskind is right. Closed legal communities are going to be major disruptors in the legal marketplace.
October 13, 2013 in Blog posts worth reading, Cross industry comparisons, Important research, Innovations in law, Legal Departments, New and Noteworthy, Structural change | Permalink | Comments (0)
Tuesday, October 1, 2013
A Podcast Conversation on the Rise of the Legal Tech Sector
The Legal Whiteboard was created to focus on "facts, trends, and ideas on law and legal education." Well, nothing is more salient these days than the rise of the legal tech sector which -- trust me here -- is growing rapidly and will soon hit a tipping point. What happens at the tipping point? The tastes of clients and highly talented workers shift, leaving old institutions very vulnerable.
If you are interested in this topic and want a time-efficient primer, check out this ABA Journal podcast, which went live yesterday. It is 15 minutes long and can be downloaded. Thanks to good questions from ABA editor Reg Davis, and some editing magic, the interview is a pretty good starting place for the uninitiated -- the only downside is that you have to listen to me, as interview keys off the "Who's Eating Law Firms' Lunch" story (Oct ABA Journal).
Our conversation is also transcribed.
October 1, 2013 in Current events, New and Noteworthy, Structural change | Permalink | Comments (0)
Wednesday, September 25, 2013
Mark Harris of Axiom Answers Hard Questions
Somehow I missed this interesting Bloomberg Law interview of Mark Harris, CEO of Axiom Law. Anyone interested in the future of the legal industry ought to be watching and listening to Mark. Why? Because his company -- which now grosses north of $150 million per year -- has the ear and the pocketbook attention of the general counsel of the world's largest companies.
In the 15 minute video interview below, Mark answers several hard questions:
- Is Axiom Law a law firm? No. That is why it can take outside non-lawyer investment.
- Is Axiom Law competing with BigLaw? In some contexts, the answer is clearly yes.
- Is Axiom Law considering an IPO? Not now, but perhaps someday in the future. "There would be some advantages to being a public company."
All of this adds up to a lot of potential disruption. Mark uses that very word. For additional background on Axiom Law, see American Lawyer story, "Disruptive Innovation."
September 25, 2013 in Cross industry comparisons, Innovations in law, Structural change, Video interviews | Permalink | Comments (0)
Monday, September 23, 2013
"This is just an education design problem"
A few years ago I had the good fortune of teaming up with Rachel Zahorsky for a series of feature stories in the ABA Journal, including "Paradigm Shift" (July 2011), "The Law School Bubble" (Jan 2012), and "The Pedigree Problem" (July 2012). The fourth article, "Who's Eating Law Firms Lunch," is now online; and without a doubt it is my favorite.
Why? Because of the final vignette in the story, which features Dan Katz of ReInvent Law fame. We were sitting at the bar at the January 2013 AALS Conference in New Orleans when Dan told me this story. My jaw just dropped. Dan has faith in his students, just like Bellotti had faith in him. Dan believes, so Dan just does. No fear. No bullshit. It was, suffice to say, quite refreshing.
I am reposting the whole vignette in the hope that a few more academics, lawyers, and law students will read it. The title of the post is the last line in the story. To my mind, that Dan Katz line sums up the next ten years of innovation in legal education. Please keep reading until you get to that final line. The insight is worth the effort.
For the past two years, MSU's Katz was the only full-time law professor who spoke at the LegalTech conference. Katz and Knake are creating a curriculum relevant to the emerging law and technology sector, albeit primarily for companies like Novus Law and Recommind, whose competitive advantage is rooted in process and technology.
Within the legal academy, Katz is an anomaly. Aside from his JD, he has a PhD in political science and public policy from the University of Michigan. However, he focused almost all of his graduate study on complex systems. It's a relatively new scientific field that uses mathematical modeling to understand how a multitude of human and nonhuman factors interact and influence one another. Human society and the human brain are two examples of complex systems. Neither can be effectively modeled by conventional math or statistics.
The late Larry Ribstein at the University of Illinois was one of Katz's early mentors. When he went into teaching a few years ago, Katz says, Ribstein told him: "I bet you must feel like an alien. I greatly admire your work. You are definitely on the right track. But the rest of the legal academy is just not ready for you."
In June 2011, Katz joined the faculty at MSU Law. Michigan State partnered with the Detroit College of Law in 1995 and moved the law college into a building in East Lansing two years later. Though the school's rebranding efforts did raise its profile, to most of the profession, MSU Law remains a nonprestigious regional law school located in the heart of the Rust Belt.
None of this dissuades Katz from his sincere belief that it is possible to turn any institution into the preferred recruiting grounds for the nation's emerging law-and-tech industry.
"When I was 18 years old," explains Katz, "I had the privilege of joining a transformative organization"— as a kicker for the University of Oregon football team, the Ducks. "We were in the Pac-10, but it's in Eugene, Ore., where it is often cloudy and raining. We had no shot at all with the top recruits from Southern California. So coach Mike Bellotti had to figure out ways to stretch and optimize what some might call second-tier talent.
"Oregon is now a national powerhouse, but the seeds of that success were sown much earlier. It was difficult to be bigger or faster than USC or UCLA. So Coach Bellotti decided we would be better on the details of the game. We would be better conditioned and we would pay significant attention to special teams. Our emphasis on special teams got us better field position. And by the third or fourth quarters, our opponents would have their hands on their burning legs. But because of our conditioning regimen, we had more stamina. Our success became contagious. Over time, we were able to get prized recruits. It was a culture of innovation."
During Bellotti's tenure at Oregon, from 1995 to 2008, the Ducks had only one losing season, blotting out decades of mediocre performance. The year that Katz graduated, the Ducks were co-champions of the Pac-10, a feat that makes him beam with pride.
Katz's "secret sauce" for ReInvent Law is arguably much more important than a degree in complex systems. He looks at the 25 students entering the ReInvent Law Laboratory as raw human potential. Katz also actively recruits potential law school applicants to his program, though he declines to discuss his strategy.
Katz understands that the most attractive candidates for the law and technology sector are those with special skills that are often obtained through prelaw work experience. "But there is no reason why some of those key skills and experiences cannot be learned and obtained right here," Katz says of the MSU program.
He notes that virtually all law students have high cognitive ability. He feels the key to their future success is mastery of domain-specific knowledge—often in areas that are complementary to law—and the ability to collaborate across disciplines. This requires engagement and an immense amount of time spent on the task. So how does one develop the educational program that will prepare the law student for legal-tech jobs—some that may not yet exist?
"This," Katz says, "is just an education design problem."
September 23, 2013 in Blog posts worth reading, Current events, Innovations in legal education, New and Noteworthy, Structural change | Permalink | Comments (0)
"Big Data is the Big Opportunity" for Legal
So says a just published article in the Global Legal Post by Sandeep Sacheti, an executive with Wolters Kluwer Corporate Legal Services. The article is called "The legal industry's new reality."
Perhaps the key insight is that "data by itself is useless. To extract value from it, you need the 'three Ts': talent, technique and transformation.
- Talent. "When you start out, you don't need the top experts to start making sense of your data. You may just need people with curiosity, good statistical skills and a desire to learn. These are the kind of people who will quickly see how data can be managed and packaged to solve problems. And once they do, they will want to get better at it."
- Technique. "Big Data needn't mean Big Complexity. ... [A]nalytical techniques can be sophisticated, but it's also possible to keep it simple – especially at the start of the journey. Get the basics right first, and then you can become more advanced as you get better at it."
- Transformation. "Becoming a data-driven legal team – law firm or corporate – is a journey. Change is slow, so don't expect an overnight transformation. The best approach is to bring the whole organisation with you - if everyone from the partners and CEOs to the interns buy into your data strategy, it will start delivering returns faster."
So who will be the big winners when it comes to Big Data? Definitely some start-ups become they they don't have to transform -- it's a clean sheet operation from the very beginning; they also have more patience and tolerance for trial and error. Yet, BigLaw is sitting on top of a lot of the essential data, so there will be some winners there too. To my mind, it will turn on the ability of some BigLaw shops to leverage talent and technique into some early victories that will aid the tranformation project. If it works, it will be a case study in strategic leadership and effective change management.
By the way, Wolters Kluwer Corporate Legal Services is a sophisticated place. They own TyMetrix, which is the perhaps the best current example of BigData operating in the BigLaw ecosystem. TyMetrix's Real Rate Report is being used to agressively control lawyer billing rates.
September 23, 2013 in Cross industry comparisons, Current events, Innovations in law, Law Firms, Legal Departments, New and Noteworthy, Structural change | Permalink | Comments (0)
Sunday, September 22, 2013
Revolving Door Among First Generation Legal Innovators
Disruption in the legal industry appears to be crossing an important milestone -- the emergence of the revolving door among the first generation innovators. Evidence comes from this press release published on the Wall Street Journal website.
In 2010, a BigLaw partner leaves BigLaw (DLA Piper) to take a high-level job at Axiom, the most well-known disruptor in the legal industry. Then, 2.5 years later, he leaves to run the Discovery Services practice at Huron Consulting Group. Huron Consulting, by the way, is a publicly traded company (NASDAQ: HURN) with $626 million in revenues in 2012. Legal is one of Huron's core industries. It currently has 1,500 "seats" for conducting 24/7 document review services in the U.S., Europe, and India.
Let's summarize: BigLaw to legal start-up to publicly held company trying to expand its wedge in the legal industry. Granted, career moves are motivated by a wide range of factors, not just a string of successes that create better oppportunities. Outsiders can only speculate why someone changes jobs. That said, in a start-up environment where the market opportunity is large but the know-how to tap into it has to be developed through trial and error, false starts are just part of the learning curve -- the building block of future success. Indeed, there are books and articles on this topic.
What is revealed by the emergence of the revolving door among legal innovators is that there is tremendous opportunity to make traditional legal services better, faster, and cheaper. Talented people are persisting and betting their careers on it. The biggest unknown is timing -- it is risky to get there too early, and disastrous to get there too late. Alas, it is better to wrestle directly with the issue of timing than to deny that the change is real.
September 22, 2013 in Cross industry comparisons, Current events, New and Noteworthy, Structural change | Permalink | Comments (0)
Saturday, September 21, 2013
A Clockworks Approach to Lawyer Development
Lawyers can successfully adapt to the disruption of the Information Age just like we adapted to the legal challenges of the industrial era -- build a system to create the human capital that is in short supply. This was original logic of the Cravath System, which created teams of specialized business lawyers who could handle the legal needs of rapidly growing industrial and financial clients in the early 20th century. This Clockworks approach still works, but the specifications of the system need to be updated. At the end of this presentation, I offer a prototype of what we might include in a 21st century Clockworks approach to lawyer development.
Presented at the "Innovations in the Law: Science and Technology" Conference, Oregon District of the Federal Bar Association (Sept 20, 2013)
September 21, 2013 in Current events, Innovations in legal education, Law Firms, Structural change | Permalink | Comments (0)
Tuesday, September 17, 2013
Dan Katz on Legal Prediction and Legal Metrics
This presentation by Dan Katz is worth reviewing.
posted by Bill Henderson
September 17, 2013 in Blog posts worth reading, Cross industry comparisons, Current events, Innovations in law, New and Noteworthy, Scholarship on the legal profession, Structural change | Permalink | Comments (0)