It’s Time to Shake Up the Legal Industry
Close your eyes and picture the dream industry waiting to be disrupted. What’s it look like?
It’s massively important to the functioning of society but doesn’t work for most people.
It’s dominated by old incumbents that enjoy huge profit margins.
Those incumbents don’t have much, if any, consumer brand recognition.
But this isn’t a dream. This is the law industry, and it desperately needs to be shaken up.
Law used to be a local industry. Cities and towns had lawyers who competed against each other and billed at a rate that reflected that city’s cost of living. Legal services were expensive, but inline with what the local community could afford.
That changed over the last 30 years.
Law firms consolidated, combining small local and regional firms under the umbrella of large, national firms that could pool resources. In 1980, 81% of law firms had 10 or fewer lawyers. By 2005 that was down to 69%, and has almost certainty shrunk since then. 2015 was the biggest year for law-firm consolidation ever. No U.S. law firm had more than 100 lawyers in the mid-1900s, according to Harvard Law School professor David Wilkins. There are now 400 law firms with more than 100 lawyers, and 14 firms with more than 1,000.
What happens when firms merge? Prices go up. Salaries and costs consolidate toward the higher-cost, higher-expectation, firm. Chris Petrini-Poli of HBR Consulting, which helps law firms merge, put it this way: “Firm A is getting paid more, and they’re not going to come down, so Firm B has to come up.” These are not small numbers: The average partner billing rate in 2013 was $343 at firms of 50 or fewer lawyers, but $727 at firms of 1,000 or more lawyers.
The consequence is too obvious. Consolidation has inflated legal bills, and inflated legal bills has moved law away from a local profession available to most toward a national business available to the few who can afford it – mainly corporations and high-net-worth individuals. While one survey showed 60% of small businesses experienced a significant legal event in a two-year period, 40% of them didn’t use a lawyer because of cost concerns.
This is not good. More and more small businesses and individuals sit at a disadvantage specifically because they can’t afford an expensive all-star legal team produced by today’s mega-firms, which their larger opponents often can. The rule of law is increasingly something you’re lucky enough to afford, rather than something you’re entitled to at a reasonable expense. No one should think this is OK. No one should see it as anything less than a threat to a properly functioning democracy.
But there’s a solution to this problem.
Law is one of the last major industries to be disrupted. There is so much room for a new law firm that is branded toward everyday people, affordable for individuals, with a noble enough mission to attract top legal talent.
It’s based on three ideas:
Brands turn your company into a product. Law firms have done an astoundingly bad job branding their product. Imagine if Google was named “Page, Brin, Schmidt and Associates.” Or if Facebook was called “Zuckerberg, Moskovitz, Saverin, and Hughes, LLP.” It’s unthinkable. But this is what law firms do. By naming their companies after a string of partners, law firms go out of their way to ensure they’ll never be recognized by most people. Look at what Warby Parker and Casper accomplished by bringing strong brands to boring industries. Law firms should do the same. (Some states make this difficult, but you’re lawyers; you can figure it out.)
Would lawyers want to work at this new firm, even if it meant a lower salary than big firms? I think so. Look at how much talent Teach for America has attracted. It aligned resume prestige with helping society, which for many of today’s smartest people is more valuable than money. Same thing at organizations like ACLU, Creative Commons, and Software Freedom Law Center. These places also offer employees incredible access to alumni networks – another attractive beacon. A nationwide, branded law firm whose mission is to help those with serious problems but who can’t afford today’s top-flight lawyers offers a similar calling as Teach for America.
And maybe they wouldn’t have to work for lower pay. The more you peel back the legal industry the more you see how inefficient it is. There are moral and social reasons to upend the current legal industry. But there are economic reasons, too. Access to legal information is equal to what internet search was in the 1990s. Not one person in a thousand understands the fine print they sign their name to. Is there a better way to bill for legal fees? CrowdJustice is crowdfunding legal fees. LegalZoom chipped away at the lower end of legal work through automation. UpCounsel, a company the Collaborative Fund has invested in, offers on-demand legal services. Some of the world’s greatest businesses, from Amazon to Costco to Lyft, took an existing service and created a different execution and fee structure.
This isn’t an easy problem to solve. The legal industry is highly regulated, and incumbents have deep resources.
But hard-to-tap industries offer the most opportunity. And there’s so much social upside to creating a legal industry that tips in the favor of the little guy that we know something’s going to give.