Are alternate approaches to law practice booming?

Or is it just another fire sigh of the law practice dragon?

There was a time before Lehmann when shocking pay packages and “across the board” remuneration bumps were the sweet waterslide that law graduates fell into in large reputed corporate law firms. A collegial interview preceded an offer with a generous signing amount, followed by a sophisticated office atmosphere privileging a lifetime of billable hours combined with excess, validation and material comfort.

Much water has flown under the bridge since.

Lawyers graduating since then have been comparatively unfortunate. In real terms, pay hasn’t increased since 2009 and adjusted for inflation has reduced with pay scales only seeing some marginal uptick in the past few years. Law firms are also less collegial, and less understated, outside of a few practice areas - billable hours aren’t what they used to be. Technology and cultural changes have made law practice jobs less stable, more competitive and overall less attractive in comparison to new white collar paradises that have drawn talent away, such as coding for the Valley or moving up through a private equity fund. The latter after all offer higher chances to have your student loans paid back.

What all this has also spawned is another phenomenon. Lawyers who chose the law in the previous world for what it used to be, now found themselves drawn away from the grind of law practice that offers diminishing returns. Their movement into entrepreneurship and seeking alternate paths has resulted in the renaissance we have observed over the past few years involving new business models for the law that optimise for costs while providing alternate career paths:

1. Larger and more effective in-house legal teams;

2. Innovative legaltech startups;

3. mass-based as well as professionals focussed online legal education and training;

4. technology enabled legal services;

5. fragmentation and the rise of specialists and the boutique.

This isn’t to say that lawyers didn’t have to be entrepreneurial in their previous lives, or that they didn’t worry about keeping costs under control or having technology improve their practices or learn how to market or sell to new clients or build long lasting business relationships. They did, but within the overall framework of their 19th century business models. Operated by the big and respectable firms they joined fresh out of college, which pay more than anyone can imagine earning at that stage and where you have a personal assistant that makes personally operating Microsoft Word an indulgence you can do without. The market went for the grey hairs in the partner’s cabin while you toiled away in the old fashioned way, hoping to make it inside.

That world is no more.

Now, this is why the big increases we are seeing this year in law firm pay packages seem more mind-boggling than they should be. It also appears that the uptick in law practice pay packages is a worldwide and not only a US phenomenon. Here I am conjecturing and would love to hear your comments.

If indeed true, there could be several reasons. Some of it might have to do with “correcting” for the long pay scale winter that is catching up with itself. It also could be the hidden inflation generated by monetary policy that is affecting salaries across sectors (aka PRINTING MONEY!). Whatever be the reasons, what it does is - make it possible for law firms to draw more of the young, best and brightest back into old fashioned business models and among the more senior lawyers - make their flirtations with innovation more expensive in terms of opportunity cost.

Among the traditional enemies of innovation in legaltech is exactly this large opportunity cost for lawyers, especially those at the top of the market who are best positioned to innovate. Why take the risk of starting a legal product to serve the mass market with a 1/10 chance in becoming a millionaire if you can turn into one 10/10 just billing hours at a law firm for a few years? Then maybe after that, you can try your hand at your dreams? When you get there, it is now a million a year(!?), bigger mortgages, dream annual vacations and expensive schools. Premium law practice is structured around comfort, addiction, peer pressure and stasis with suitable infusion of balancing values such as material comparisons, artificial insecurities and induced greed.

Not exactly the petri dish for innovation.

Breaking out of the mould to serve your customers better and bigger? Who cares. How many lawyers are billionaires? Not many. Millionaires? Oh, walk down the street.

Law practice losing its way on pay scales over the past few years reduced the opportunity cost for a generation of young and mid level lawyers to go out and seek better ways to do law, technology other things. It is possibly too late now to reverse that trend. Hungry and enterprising people, whether or not lawyers have smelt blood and if lawyers don’t take the lead in innovation there are others who will. Here I wish to say that we can very well be delighted that law firms are back in the “paying handsomely” business without actually losing sight of where real value will be created in the years to come.

Law firms are here to stay but they are going to evolve, probably beyond recognition. Where and when it happens, I believe that the trend is not accelerated as much by what is happening inside law firms, but outside them - such as in legaltech startups, the customer base (inside companies) or owing to technological progress. The story is indeed being written, but elsewhere?

If I were graduating today, I would tell myself first - that I am ofcourse fortunate to have law firms making generous offers to me. Second - that while there are many good reasons to join but if money were the only one - it doesn’t make as much sense as it once used to. The post office once used to pay typists handsomely.

This is the new world.

P.S: If you liked reading this and this topic is of interest to you, my friend Ramanuj (former corporate lawyer and legal edtech entrepreneur) and I are doing a fireside on alternate career paths for lawyers on Clubhouse this Thursday (1430 GMT/2000 IST). Apart from threads touched upon here, we hope to exchange and hear more stories on innovating for the law and finding your story - whether inside or outside law practice. Do join us.