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Some recent activity on Twitter got me thinking. People love to bag on BigLaw (me included). Much like taking shots at Microsoft or Blackberry, BigLaw is an easy target for many. Large firms move slow, are managed by committee too often, and appear to have an aversion to decision making (see how I did that?).
But recent comments about how BigLaw has been making too much money have struck me as odd.The crowd appears a bit fickle and hypocritical. We attack BigLaw for not acting like a business, then we turn around and attack them for acting like a business.
From my economics porthole, BigLaw has behaved quite rationally for the last 15-20 years. The market presented a scenario and BigLaw moved to maximize profits in that situation. And unlike Microsoft or Blackberry, BigLaw did not hold some monopoly, or near monopoly on the market. Admittedly, it did have a favorable market with growing demand, but no one firm was in a position to dictate terms and pricing. And based on BigLaw’s performance in this period, any other business would be jealous of its sustained growth in profits over time.
Yet now, not just based on the recent Twitter remarks, but also based on an apparent client backlash, this rational market behavior is being held up to scorn.
The market dynamic has now changed and BigLaw will adapt or it won’t. Last summer I posted on 2012 as the Year of Pain for law firms. It turned out it was less painful than I predicted. I am still reviewing year-end reports and thinking about how that played out, but the bottom-line seems to show BigLaw is not crumbling. Does this mean they are they adapting? Without enough pain it’s probably too early to tell. However, I will say there is significant and growing motivation for change and some really smart people running these firms (for the record I am not talking about me). So I wouldn’t count them out.
Unless making money suddenly becomes socially unacceptable, I expect BigLaw to continue in its rational market behavior, finding ways to maximize profits, likely with a modified business structure.