Has the traditional law firm reached its high water mark?

By William Henderson: The major theme of history is upheaval and change.  Within this recurring cycle, some generations enjoy long periods of calm and prosperity. Yet, when change rears its head, those who prospered under the old system react with a mixture of disbelief and hostility. And because they are reluctant to adapt, their institutions get swept away.

By William Henderson, Professor of Law at Indiana University Maurer School of Law—Bloomington and Director, Law Firms Working Group

 

The U.S. legal profession is now exiting a period of remarkable stability. Many of us were drawn to the profession because it offered interesting work and a seemingly stable pathway to success. These assumptions are now in doubt, thus creating a serious conundrum for young lawyers. Do we invest all our energy in our pursuit of the brand name employers, despite evidence that those jobs are shrinking in number? Or do we look beyond traditional pathways to try to catch the next wave of innovation, thus creating a whole new category of success?

History provides some clues on how to make these tradeoffs. One of the best examples is the case of the riverboat pilots, told by Mark Twain in this book, “Life on the Mississippi.”

During the mid 1800s, as the country migrated to the west and south, the riverboat pilot emerged as a new and important profession. The pilots, who were licensed by the federal government, were responsible for safe steamboat travel along the nation’s major waterways. In exchange for their skill, pilots were given high wages and absolute authority over their crew and vessels.

To become a riverboat pilot, two licensed pilots needed to vouch to the U.S. Inspector that a candidate possessed the requisite skills and abilities. This process turned piloting into a profession that ran in families. As sons and nephews apprenticed on the river, the supply of river pilots expanded in a manner unconnected to underlying demand. On a family level, this practice made sense. But on a macro-level, it was a disaster because it caused wages to plummet.

In an attempt to restore the profession, a small contingent petitioned the legislature and successfully formed the Pilot’s Benevolent Association. Their initiatives included a pension and a minimum monthly wage of $250. Boat owners responded by firing Association members. A rise in demand for river travel, however, eventually required that boat owners to hire at least some Association members. When that happened, Association members executed a brilliant strategy to make themselves indispensable.

The cornerstone was an information sharing system in which pilots documented the prevailing river conditions and passed along reports to their brethren headed in the opposite direction. To convey the import of the task, the Association printed blank report forms on elegant paper. The completed reports were then deposited in safe boxes installed along the river; and only Association members were given the requisite keys. 

Having improved the standard of safety along the Mississippi River, accidents among Association pilots became rare. The insurance companies eventually took note and required Association pilots as a condition for issuing a policy. Although the Association doubled its minimum wage to $500 per month (and eventually higher), the pilots remained a bargain.

According to Twain, “the organization seemed indestructible. It was the tightest monopoly in the world.” Yet, within a few short years, technology did them in, as railroads diverted substantial portions of the passenger business and barges pulled by tugboats took over the cargo trade.

Is it possible that the traditional law firm — a similarly imposing monolith — has reached its high water mark? For decades, these organizations grew and prospered because their clients needed their help adapting to a bewildering array of litigation, regulation, and business combinations. Law firms were the riverboat pilots. Now many clients view the firms as costs to be avoided or controlled.

The riverboat pilots prospered because they solved an important problem — lost lives and cargo along the Mississippi. Similarly, a host of new companies are cutting into the work of traditional law firms because they are solving problems affecting clients, lawyers, or the general public. Axiom offers high quality legal work to corporate clients and work-life balance to lawyers. Novus Law uses process engineering to reduce the cost and improve the accuracy of e-discovery. Visa and Mastercard have developed a cheap, quick and effective dispute resolution system for consumers and merchants. Legal Zoom offers high quality form documents to the masses.

Looking for security and prestige in the legal profession — or, more significantly, happiness in life?  The solution is to devote your time, attention, and resources to solving other people’s problems. You go even farther if you can inspire your fellow travelers — in business, government, and nonprofits — to lend you a hand. Let’s hope this formula never changes.

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Comments

Excellent hostorical perspective.

We all see a new model for law firms emerging in the light of new demands, new technologies and altrnatives to the traditional law firm. A number of scholars have, as you know, written on the subject, but not quite with your pithy, punchy style and eloquence:

http://kowalskiandassociatesblog.com/2010/10/31/the-law-firm-of-the-twen...