6/13/13

Adam Smith’s Pin Factory and the Law Firm

Image [cc] paojus
One of Adam Smith's great contributions to economics was his commentary on the ‘division of labor’ - explained in his pin factory example. For those of you who may have fell asleep during this part of the Econ 101 lecture, Adam Smith demonstrated how productive capacity increases with specialization.

He evaluated an artisan craftsman who makes pins with great care and quality, one at a time. The craftsman performs every function, from straightening the metal to attaching the pin head. Adam Smith then describes a factory where each function is performed by a specialist who only straightens the metal or only applies the pin heads.

He researched this to compare how many pins could be made each day per worker with each approach. His thesis was that the division of labor leads to much higher productivity. “The result of labor division in Smith’s example resulted in productivity increasing by 24,000 percent (sic), i.e. that the same number of workers made 240 times as many pins as they had been producing before the introduction of labor division.” His argument was compelling to the point that Henry Ford modeled his car factories based on these principles.

You may have already jumped ahead of me in how this applies to the practice of law, especially after I used the term “artisan craftsman.” Most lawyers are generalists / craftsmen (please excuse the sexist reference)  as it relates to their functions. They may specialize in patent litigation, but under that umbrella they perform all of the practice functions. One might argue certain functions are reserved for more experienced lawyers, however that is not specialization. That is expertise. Specialization would be document drafting, or oral arguments at hearings or prior art research or any other specific function.

Instead lawyers fancy themselves as artisans who work with clay (e.g. words) to create works of art (e.g. pleadings). In their minds specialization, and the standardization that follows, equals lower quality. In contrast, in Adam Smith’s world, specialization and standardization equal efficiency and quality.

For as smart as lawyers can be, they continue to miss some basic business lessons. In this instance, Adam Smith was proven right decades ago … repeatedly.

Add “division of labor” to the list of changes needed at law firms.

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2 comments:

Noah Kovacs said...

I love the pin factory! Great post and something that I will for sure remember in the years to come.

lasthonestlawyer said...

But those commoditized pins just can't be as high of quality as my custom made masterpiece pin, right? Granted it took me 240 hours, but it's simply the best pin money can buy. Well, actually, I had my top team of junior pin makers working on it for two weeks straight, but I made sure the whole project ran smoothly. Oh, and some of them had never made pins before, but they got up to speed quite quickly. We should have a bill out to you next quarter. So you need a new pin cushion now, do you? Let's get started!

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