3 Geeks and a Law Blog

image [cc] Alex Proimos

I saw mentioning of The Wall Street Journal opinion piece by Steve Barker, “In the Age of Google, Librarians Get Shelved,” this weekend, but didn’t actually read it until this morning. I found the opinion piece to be a little bit lazy, and playing up the old fear of “everything is on the Internet,” and that “the public library of the future might be a computer center, staffed by IT professionals and few books or librarians.” I usually just roll my eyes and move on about my daily business, but the fact that the WSJ would run this, and that a number of my colleagues within the legal industry would possibly read it, I thought I would chime in with some feedback.

First and foremost, I want to remind my colleagues that a public librarian plays a very different role from what a law librarian does. I’ll let public librarians defend their own, and I’ll start by stating what I see as the number one role of a law librarian, regardless of if that law librarian is in government, academia, or private legal environment:

Law Librarians manage the risk within the organization they serve, ensuring the organization’s mission is met through the acquisition, management, distribution, and analysis of legal information needed for the organization to perform its mission in a timely manner and at an appropriate cost.

Our job isn’t about pointing people to the nearest bathroom, or locating lost keys. It is about positioning lawyers, educators, judges, administrators, and the public, in the best possible position to fulfill their responsibility within the legal framework they represent. If we do help you find the bathroom or your lost keys, we do so because we tend to be nice people and want to help. Don’t view that as a weakness, view it as a strength in that we feel empathy for your current situation, not that we have nothing better to do.

It’s not about knowing how to do a Google search; it is about knowing how to interpret a Google search and the knowledge to know when that is enough, or it is time to dive deeper into specialized tools vetted, obtained, and managed by the law librarians. It’s not about understanding technology; it is about understanding how technology can be applied to increase the availability of resources and the knowledge rejecting technology when the rewards do not outweigh the risk/costs/effectiveness of that technology.

I’ve always heard that any problem can be solved given the unlimited supply of three things:

1. Time
2. People
3. Money

None of us have unlimited time, people, or resources. That’s why the law librarian is such a valuable resource, in that he or she reduces all three of these things by applying our expertise and experience of managing the risks associated with time, people, and money.

If you think that a law library is about Google and books, or even Westlaw and Lexis, then you truly do not understand what’s really going on. Thinking that just anyone can run a law library because they have technology skills is like thinking anyone can drive a Formula 1 car because they can replace the oil in their car.

Law Librarians manage risk.
Law Librarians save you time.
Law Librarians save you money.
Law Librarians reduce your headcount.

We make sure that you have the resources when you need them, and within the needs and budget of the organization. If you confuse technology for knowledge, you’ve just increased your risk substantially. Be prepared to tap into more time, money, and people.

Over the next month, members of the American Association of Law Libraries will vote on whether to change the name of the organization to the Association for Legal Information.  I will be voting yes, and I encourage all members to take the time to research and think about what the rebranding and renaming initiative means for the association, the profession, and yourself. This is important, and no member should stand on the sidelines and let others cast votes in your absence. The rebranding effort is a huge undertaking by the leadership of the association, and is step one of many in helping the association change to meet the needs of current and future members.

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Nearly six years ago, I penned a post called “This Isn’t Your Daddy’s Law Library! – Time for a Law Library Revolution.” In that post, I point out the new and creative ideas and services created by law librarians, and the desire of those who wish to steer the profession back what they believe to be the core function of law librarians in acquiring, storing, cataloging, and distributing legal information. Here is a sample of my thoughts on what happens when the library pendulum shifts toward new and progressive ideas, and the desire for some to move that pendulum back to the center.

Whenever the law library gets progressive and starts promoting new ideas, those ideas get spun off into their own departments and the creative law librarians leave the library field to join these departments. Things like Knowledge Management, Competitive Intelligence, and even some Marketing and IT ideas that were created in the library now exist outside the library. So it seems that the general direction the law firm libraries have taken in the past 15-20 years is to get us back to what we were doing in the 1980's.

My thoughts back then were focused on the moves by law firms to place library functions under the IT and/or Marketing departments. My thoughts now are that six years have nearly passed and while this is still a conversation within the industry, the next wave of change is already taking place. A new outsourcing movement is occurring in the Northeast where entire law library functions and personnel are not only removed from a Library Department, they are being removed from the law firm completely and now work for a Library Consulting company. We are still arguing about where we exist within the firm, while the leaders of the firm have moved on to deciding if we even belong in the firm at all.

The only thing harder than adjusting to change, is pretending that the change hasn’t already happened. As General Shinseki so eloquently stated, “If you don’t like change, you’re going to like irrelevance even less.” The Law Librarian profession has changed, and is continuing to change. That is not a bad thing, it is just the reality of the profession. It is up to the leaders within our profession to position the association, and prepare its members to lead and direct the changes, rather than react when it is too late.

During this decade, the corporate law firm libraries have vanished, the private law firms have undertaken massive changes in structure, and the government law libraries have transformed themselves into a new function surrounding access to justice. The academic libraries haven’t had the drastic changes in structure, but they are not immune. We saw hints of change at Harvard with John Palfrey’s brief reign, but not nearly what I envision will happen over the next ten years to what the pain of decreased admissions and the burden of student debt brings to the entire law school organizational structure.

Times for law libraries aren’t simply changing — they have already changed, and the next wave of change is already upon us. It’s time that all of us understand that, and stop thinking of ways to move the library pendulum back to center. That pendulum no longer even exists for many of us in the profession.

This brings me to why I am voting “yes” on the initial phase of rebranding AALL by changing the name to the Association for Legal Information. The profession has changed and it is time for the association to lead and prepare its members for the next round of changes, rather than lag behind and react after the fact.

The profession’s core functions are still based on acquiring, storing, cataloging, and distributing legal information. However, those functions will be more of a commodity than an added value. It’s all those other functions that we as librarians have produced over the years that will create the value the profession produces. Information to Knowledge, and Knowledge to Intelligence, and Intelligence to Experience, and Experience to Expertise are the key factors going forward. It starts, but does not end with the information we gather and maintain. The association needs to position itself to lead on developing these value added functions, while continuing to support the core functions.

The Association for Legal Information is where we start with the rebranding of our association and profession. This will be the springboard to help us leap to the next iteration of what being a law librarian and legal information professional means, and the value we bring to the legal industry as a whole. The rebranding is not about leaving law librarians behind. Far from it. It is about augmenting what we do, and bringing new ideas and new experts into the field to use as specialists, and for us to learn from them in return. It is about Law Librarians being the change and leading the way into the future.

"Nine women can't make a baby in one month."

That's good because adding headcount is not nearly as productive as it appears at first glance. Last post, I wrote about Baumol's cost disease and why labor in stagnant sectors (like law) gets more expensive over time. This post, I'm going to use Brooks' law as a starting point to discuss the fact that labor gets less productive the more of it you have.

The most cited 'law' in technology is Moore's law. In the popular consciousness, Moore's law is a stand-in for exponential growth in computing power and attendant drop in the cost of computing resources. There are complementary and related laws that speak to the growth in network utility (Metcalfe's, Reed's), connection speeds (Nielsen's, Butter's), software (Andy and Bill's, Wirth's), storage (Kryder's), and battery life (Koomey's, Dennard). In short, silicon-based performance keeps improving. Carbon-based performance (i.e., human beings), not so much. If there really is a race against the machine, one of the sides is standing still.

Those laws govern technology. Other laws (not taught in law school) govern us.* Though it comes out of the world of software development, Brooks' law is very much concerned with the human element. In his 1975 book, The Mythical Man-Month, the eponymous Fred Brooks explained how adding manpower to a late project makes it later. Adding headcount can have diminishing (even negative) returns because of:

Indivisibility. The quip about the nine women combining to produce a baby in one month gets at the limited divisibility of tasks. While multiple perspectives and fresh eyes might, for example, improve a contract, imagine the chaos of assigning each sentence thereof to a different lawyer. Many complex tasks defy divisibility and delegation. Sometimes, it really is faster and better to do it yourself. (There is a distinction between the division of labor and the division of work)

Ramp-up Time. Even when it is possible to divide a complex task, new people need to be educated before they can contribute. The time spent educating them is a cost. This dynamic is, for example, evident in trial teams who put in inhumane levels of time prepping because they do not have the bandwidth to get other lawyers sufficiently up to speed on the case.

Communications Overhead. Even when tasks are divisible and the time investment is made in properly onboarding new team members, the addition of headcount still results in coordination costs. The person working alone has no need to communicate with anyone (other than the voices in their head). The two-person operation has one communication channel (A-B). The three-person operation has three communication channels (A-B, A-C, B-C). The four-person operation has six communication channels (A-B, A-C, A-D, B-C, B-D). This combinatorial explosion means that communication channels increase at polynomial rate. Some complete graphs and a table might provide more clarity:



While the 50-person department is only 10-times the size of 5-person department, the former has 123-times the communication channels. The attendant challenge of people (not) being able to communicate with each other leads to the development of information silos. The countermeasure to silos is to create a layer of channel intermediaries to communicate on behalf of different groups. Channel intermediaries are also known as managers and frequently derided as "bureaucrats." 'Paper pushers' are one of many diseconomies of scale.

The fundamental task of management is to make people capable of joint performance through common goals, common values, the right structure, and the training and development they need to perform and to respond to change. The more people there are, the harder the task is. The task of management is especially hard when those people have the personality traits common to lawyers -- i.e., high-status professionals with an aversion to being managed (autonomy) or working with others (sociability), an extreme degree of focus on the immediate (urgency), and an innate antipathy towards experimentation (resilience) or change (skepticism).

Regardless of personality type, real collaboration is hard. Teamwork is great in theory but entails real costs in practice. Simply adding headcount is not necessarily simple. The positive impact on productivity is neither automatic nor linear.

Indeed, even if adding headcount is a net positive after accounting for hard and soft costs, it is not always the optimal use of finite resources. Opportunity costs must also be considered. At a certain scale, the ROI on increasing the productivity of existing personnel can exceed that of adding new personnel. Two charts I've used before (the first from the amazing xkcd) illustrate the returns on productivity improvement at scale:






Putting it in concrete terms, the 25-person law department is better served spending $150,000/year on technology that improves average productivity by 5% than by hiring new headcount at the same budgetary impact.

And that is before taking the 'laws' above into account. The additional labor is likely to grow in expense over time (Baumol's cost disease) and, while total productivity might increase, average productivity is likely to decline with the addition of new headcount (Brooks' law). Moreover, the $150,000/year in technology spending is likely to buy more productivity as time passes because the technology will get better and cheaper (Moore's, Kryder's, etc).

Not so fast!

The foregoing is not completely wrong. These dynamics merit serious consideration. But while the argument above highlights the barriers to productivity that reduce the gains from adding headcount, it simultaneously assumes that the introduction of technology is frictionless. This immediate, seamless transition to a technologically-enabled workflow calls to mind another 'law'. Clarke's third law: Any sufficiently advanced technology is indistinguishable from magic.

Technology is not magic. While it is a challenge to get humans to truly collaborate, it is also a challenge to get machines to work together. Time, expertise, and money are required to integrate and secure different systems from different time periods built on different platforms for different purposes. Likewise, even after installation and integration, it is a challenge to get people to use the machines properly. It doesn't matter how powerful the computer is if it is being used like a typewriter with a glowing screen.

Magical thinking about technology rests, in part, on the belief that the the biggest obstacle to silicon-based productivity improvements is finding the budget to purchase the technology. Once purchased, technology will automatically make things better--superior outputs from the same inputs thanks to the deus ex machina. We expect a solar-powered, self-driving car. We get a Toyota Corolla -- a perfectly functional vehicle that still requires precise user inputs and maintenance to serve its purpose. 

As I've discussed before, the primary prophets of the robot apocalypse are the first ones to dismiss beliefs in silicon pixie dust. The book The Second Machine Age by MIT professors Brynjolfsson and McAfee, like its predecessor, Race Against the Machine, is often cited as one of those triumphalist accounts of machine ascendence that causes "automation anxiety" among the carbon-based workforce. Yet, at the core of the book are the authors' own studies showing the real, though not insurmountable, barriers to incorporating technology into an enterprise workflow. One study suggested that every dollar invested in computer capital should be the catalyst of up to ten dollars (a 10x investment) in organizational capital--i.e., personnel, training, and process redesign. A related study found that due to the need for complementary investments in people and process, successful investment in enterprise technology typically required five to seven years before realizing the full performance benefits. Again, the successful IT projects often required 5-7 years and a 10x investment in people and process. Many of the failures never get off the ground.

Indeed, as the thrust of their research suggests, these harbingers of human obsolescence are themselves rather focused on the human element of human-machine pairings (consistent with Ryan's preference for using Augmented Human Intelligence ("AHI") in place of AI madness). While they note that machines long ago surpassed human beings in activities like chess, the authors emphasize that humans are still winning chess matches against machines. The humans are being augmented by machines (or vice versa). Human-machine teams are superior to humans or machines alone (well, maybe).

Interestingly, the quality of the machines or the humans are not the sole indicators of success. Process (i.e., how the two are integrated) is an important factor. The authors cite approvingly to a passage from Gary Kasparov (humanity's defeated chess champion):

The teams of human plus machine dominated even the strongest computers. The chess machine Hydra, which is a chess-specific supercomputer like Deep Blue, was no match for a strong human player using a relatively weak laptop. Human strategic guidance combined with the tactical acuity of a computer was overwhelming.

The surprise came at the conclusion of the event. The winner was revealed to be not a grandmaster with a state-of-the-art PC but a pair of amateur American chess players using three computers at the same time. Their skill at manipulating and “coaching” their computers to look very deeply into positions effectively counteracted the superior chess understanding of their grandmaster opponents and the greater computational power of other participants. Weak human + machine + better process was superior to a strong computer alone and, more remarkably, superior to a strong human + machine + inferior process.

Process matters. Process matters in getting humans to collaborate with each other. Process matters in getting humans to collaborate with machines. Process improvement is not organic. Status quo bias is too strong. Just as with hiring new personnel, introducing technology is a genuine management challenge that can go horribly wrong.

I will end this post, the same way I ended last post. There remains a fundamental tension between my views on the obstacles to process/technology improvement and my views on why process/technology improvement is inevitable. In my mind, this tension goes a long way towards explaining the uneven and frustratingly slow progress in using process/technology to improve legal service delivery without losing site of the fact that progress is being made.

While lawyers may feel compelled to invest in process and technology, it is still outside their wheelhouse. For most, process and technology are areas of neither personal interest nor professional training. And, regardless, lawyers are already overburdened with genuinely important work. This tension would seem to introduce a high likelihood of failure that would only create a deeper suspicion of process and technology. Yes, yes it does. It is almost as if larger law departments and law firms would be well served to have interested, trained resources dedicated to the process and technology aspects of legal service delivery. On the law department side, enter legal operations, a subject for another post.



* Other 'laws' I like (feel free to add your favorites in comments):

Parkinson's law: Work expands so as to fill the time available for its completion

Sturgeon's law: Ninety percent of everything is crap

Hofstadter's law: It always takes longer than you expect, even when you take into account Hofstadter's Law

Benford's law (of controversy): Passion is inversely proportional to the amount of real information available

Sayre's law: In any dispute the intensity of feeling is inversely proportional to the value of the issues at stake

Cunningham's law: The best way to get the right answer on the Internet is not to ask a question, it's to post the wrong answer

Clarke's (quasi) fourth law: For every expert, there is an equal and opposite expert

Amara's law: We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run

Gehm's corollary (to Clarke's third law): Any technology distinguishable from magic is insufficiently advanced

Kranzberg's law: Technology is neither good nor bad; nor is it neutral.




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Lawyers are not anti-technology. Lawyers are pro getting sh*t done. The caricature I drew of the nose-to-the-grindstone inside counsel in my last post was an attempt to illustrate how the need, predisposition, and incentives to focus on immediate, mission-critical work often dominate the competing demand to systematically integrate new process and technology to improve the delivery of legal services.

I don't blame lawyers (I don't blame anyone). As I've written about before (and will expand on again in another post), technology is not magic and lawyers are not magicians. Properly integrating process and technology takes time and investment of organizational capital. Busy inside lawyers have neither. Yet, at a certain point, they have no choice.

While inside lawyers can often wield the illusion of unpredictability as a shield from scrutiny by other departments (e.g., finance), it only goes so far. Not only are law departments finding it harder to secure exemptions from across-the-board budget cuts, but the opacity that serves them well in maintaining their autonomy also derails attempts to make a compelling business case for more budget, headcount, etc. Law departments really are being asked to do more with less. And they can no longer meet the challenge of more by throwing additional (internal or external) bodies at the problem.

People cost money. And they tend to cost more money over time. Technology trends in the opposite direction (well, most technology). Labor-intensive industries (the stagnant sector) therefore have to raise prices as time passes, while technology-intensive industries (the productive sector) are able to lower prices. Absent confounding factors, there is a gradual increase in the share of spend directed towards the stagnant sector (education, health care, performing arts, and other labor-intensive industries) with a corresponding decrease in the share of spend directed towards the productive sector (food, manufactured goods, and other areas where technology has substantially augmented human labor).

This is Baumol's cost disease, an economic phenomenon that undercuts the classical theory that wages rise with productivity. The classical theory was that the more productive you are, the more you get paid. The reality is that (across industries, as opposed to within them) the less productive you are, the more we need to pay you (unless there is a glut of qualified workers competing for your job). Unsurprisingly, Baumol himself identified "legal services" as subject to the cost disease. And recent scholarship has concluded, "Legal services are decidedly in the stagnant sector."

Throwing ever more bodies at a problem is unsustainable. If the problems to be addressed exceed the bodies available, either the problems go unresolved or you find ways to improve the productivity of the bodies you have. Lawyers cannot stand letting problems go unresolved (again, the biggest reason they don't take time for process and tech is because they are fixated on mission-critical work). So, despite many countervailing influences, inside lawyers are turning more and more to process and technology. Law is resistant, not immune, to productivity improvements.

In Altman Weil's 2015 Chief Legal Officer Survey, the CLO's (rightly) identified technology advances as the  force that will most change the legal market in the next 3 to 5 years (the combination of internal cost pressure and unsustainability of law firm pricing ranked second).



Putting their money where their mouth is, law departments also focused their management efforts on the greater use of technology tools to increase efficiency in the delivery of legal services:


The focus on technology also caught the attention of Ron Friedmann and inspired him to ask Is Software Eating Law Departments? while reading Inside Counsel's annual innovation awards issue:

The 2015 IC10: The law department of the future describes the 10 most innovative law departments of the year. It’s an annual feature. This year, 9 of 10 awards revolve around software. In years past, I recall that only 3 or 4 awards involved software....Reading IC, none of these strikes me as particularly advanced or game changing. Law departments seem to have won for automating processes that, in many other functions, likely would have been automated long ago....The good news here is that 9 of 10 awards are for tech and that law departments can still do so much more with software to improve their performance.

Along similar lines, I was recently contacted for a predictions-for-2016 piece in which the question posed was something along the lines of: what technologies will have the most impact on law firms in 2016? I cheated in responding that law firms should be most concerned with the technologies that law departments are deploying to keep work in-house or manage external work in a more sophisticated manner from multi-sourcing (e.g., involving LPO's) to matter management to pricing. While the headlines cut in both directions, and there is no immediate existential threat, I do see a continuation of the trend that the biggest law firms' biggest headaches will come from their biggest customers

Law Firms Face New Competition - Their Own Clients

Spending in Law Departments is Rising, But the Money Isn’t Going to Law Firms

As Part of ‘Pervasive Trend,’ Companies Still Moving Legal Work In-House 

Do I contradict myself? Very well, then I contradict myself. There are competing forces within law departments. In my last post, I dug into some of the reasons why inside lawyers are obstacles, rather than proponents, of innovation. In this post, I made the case that economic imperatives would drive investment in process and technology. Given the opposing pressures and constraints, it is unsurprising that progress is slow and scattershot but continues nonetheless.

Still, there remains a fundamental tension between last post and this post that is worth exploring further. While inside lawyers may feel compelled to invest in process and technology, it is still outside their wheelhouse. For most, process and technology are areas of neither personal interest nor professional training. And, regardless, inside lawyers are already overburdened with genuinely important work. This tension would seem to introduce a high likelihood of failure that would only create a deeper suspicion of process and technology. Yes, yes it does. It is almost as if larger law departments would be well served to have an interested, trained resource dedicated to the process and technology aspects of legal service delivery. Enter legal operations, a subject for another post.

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Last post, I challenged myself after seconding an observation from Toby. Toby wrote:

Discounts are the market (via specific clients) telling a firm their prices are too high for a piece of work. One might think firms should lower their prices in response to this information, however, that could be a mistake. Sometimes clients shop price by the level of discounts. They are not concerned with the actual price but instead focused on the amount of discount they are extracting. Whether this is rational behavior in an economic sense is not relevant.

My reaction:

"Whether this is rational behavior in an economic sense is not relevant." Remind me to write a post entitled What's The Matter With Inside Counsel (preview: they're human beings).

As the preview suggests, my bottom line answer is nothing. Nothing is wrong with inside counsel. In general, I think inside counsel are quite good at their jobs. The real investigation is why inside counsel sometimes do things that appear to outsiders to be illogical (e.g., the discount issue above), especially their ostensible unwillingness to impose discipline on external counsel. There are a number of interlocking explanations, most of which boil down to inside counsel being busy lawyers who also happen to be human beings.

What follows is a crude sketch. It does not describe everyone. Indeed, it does not describe anyone. The caricature highlights a number of forces that are not always obvious to people who have not sat in the chair.

They're busy

For years now, the mantra of inside house counsel has been "do more with less" (still second only to technology among forces driving change in the market). Gone are the days when moving in-house meant the 'mommy track'--the sexist description of the supposed lifestyle benefits that have fueled so many escape fantasies. Inside counsel work extremely hard on matters that are vital to the success of their companies.

How inside counsel allocate their finite time is therefore of considerable importance. In general, legal fees are a small percentage of the value of business outcomes. A lawyer who directs their efforts towards saving $10,000 out of $100,000 in legal fees on a $10,000,000 deal does not necessarily have her priorities straight. Getting the right result (the $10M) is more meaningful than 0.1% net savings (the $10K).

Inside counsel rely on outside counsel to help them get the right result. They also rely on outside counsel to relieve as much of the burden as possible. It is not that outside counsel make their life easy, but outside counsel can make inside counsel's life easier--i.e., just easy enough for inside counsel to almost have time to give proper attention to the many mission-critical matters on their plate.

You know who makes life particularly easy? Incumbent outside counsel. There are legitimate advantages associated with incumbency. Among those advantages are how much less ramp-up time and hand holding incumbents require. Incumbents know the procedures. Incumbents know the personalities. Incumbents know how to get what they need from the company in the least intrusive way. Incumbents (one hopes) have a track record of success. Moving business away from incumbents entails real costs (ramp-up) and risks (to success).

They're lawyers

It should be here reiterated by this court that the practice of law is a profession not a business or skilled trade. While the elements of gain and service are present in both, the difference between a business and a profession is essentially that while the chief end of a trade or business is personal gain, the chief end of a profession is public service. It is the obligation of lawyers to preserve the heritage which is theirs as members of a time-honored profession, and to justify the confidence which the public reposes in them. It is the duty of the lawyer to make certain that commercialism is not allowed to debase the relationship of attorney and client.

In Re Jacobson, 240 S.C. 436, 448 (1962) 

Inside lawyers are still lawyers. They went to law school to do law stuff. They were hired to do law stuff. Contracts, closings, litigation, statutory analysis....is all law stuff. Invoice review, rate negotiation, AFA's, project management, technology.....not so much. I will refer to the not-law stuff as "MacGuffins." Given the choice between law stuff and MacGuffins, lawyers will direct their finite focus towards the law stuff.

If you try to convince lawyers that the MacGuffins are also important, you are likely to trigger the distinct personality of professional issue spotters. As has been discussed in previous posts (here and here), lawyers diverge from the general population on a few key psychological traits (studies from Dr. Larry Richard). By trying to persuade lawyers to focus on MacGuffins, you may encounter:

Autonomy. Lawyers prefer to do things themselves and react poorly to being told what to do. Telling them that they should focus on something other than what they prefer/choose to focus on is a violation of their autonomy. So, too, is bringing in someone else to do it for them.

Sociability. It's not just that lawyers do not like relying on or taking direction from others, they dislike interacting with them, period. Lawyers score their lowest (12 out of 100) on the sociability measure. The new person or outsider with the new idea about how things could be done differently is going to find it hard to establish the rapport necessary to properly communicate the logic and mechanics of their MacGuffin.

Urgency. Lawyer time is valuable. Deadlines are imminent. Failure is not an option. Lawyers have an ineffable urge to get everything done now. Combine this urge with high autonomy and low sociability, and it all needs to be done now by them. They do not have time for whatever MacGuffin you've concocted to distract them from their urgent work.
Resilience. Law has a small margin for error. Lawyers therefore have a low threshold for failure. Their ability to be resilient in the face of setbacks is much lower than the general population (this is the finding that most surprised me). Apparently, the dark side of perfectionism is the paralyzing fear of imperfection. Lawyers are experts. And expertise is often a good excuse not to leave one's comfort zone. MacGuffins are outside their comfort zone, which means a high prospect for error, failure, embarrassment, etc.
Skepticism. If Moses had been a lawyer, he would have explained to Yahweh that the 10 Commandments were materially incomplete. Lawyers can find holes in anything. Part of this prowess stems from the fact that lawyers are naturally suspicious of new and different. Their innate skepticism gets put on high alert when your MacGuffin also runs afoul of their need for autonomy, demands sociability, conflicts with their sense of urgency, and poses a threat to their low resilience.

1. MacGuffins are unfamiliar and outside the areas in which the lawyer has been trained (skepticism)

2. MacGuffins are not foolproof and introduce the specter of error, failure, embarrassment, etc. (resilience)

3. Avoiding failure and embarrassment requires investing time, effort, and attention, all of which are in short supply (urgency).

4. True success probably also means asking for help (high autonomy) and getting buy-in from other stakeholders (low sociability)

5. Wait, remind me why anyone would volunteer to chase the MacGuffin?

Whether the lawyer personality is born or made remains an interesting question. The most common supposition is that people with the foregoing profile self-select for law school and, even more so, choose to remain in a profession that reinforces and amplifies their predispositions. It is not just the individual lawyers have personalities that are attracted to settled precedent and familiar patterns, but they are then shaped by institutions that are also inclined to defend entrenched paradigms. Even if the individual lawyer has a favorable view of the MacGuffin, it is logical for them to survey the institutional landscape and conclude that it will be too hard to get the necessary cooperation, participation, support, funding, etc.

Many aspects of law departments are more culturally similar to the law firms that produced the inside lawyers than they are to the companies in which they now operate. That culture is driven towards homogeneity and unpunctuated equilibrium. In a great post entitled Why things stay the same, Mark Gould shares the research on institutional isomorphism, which is defined as:

Once disparate organizations in the same line of business are structured into an actual field (as we shall argue, by competition, the state, or the professions), powerful forces emerge that lead them to become more similar to one another.

Coercive isomorphism — resulting from both formal and informal pressures exerted on organisations by other organisations on which they are dependent and by cultural expectations in the society within which they function.

Mimetic processes — in conditions of uncertainty, organisations may model themselves on other organisations.

Normative pressures — these arise from professionalisation, especially when (a) there is a common cognitive base derived from universities and professional training institutions and (b) strong professional networks arise, spanning organisations.

Check, check, and check. Individuals who are risk-/change-averse by nature and nurture are then embedded in a culture that pressures them to operate in a uniform manner. For lawyers, including in-house lawyers, it seems that “worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.”

They're human

Despite some evidence to the contrary, lawyers are human. And status quo bias is not just a lawyer thing, it is a human thing. So are loss aversion, regret avoidance, and endowment effects. These are not only cognitive biases, they are woven into the fabric of large organizations. Doing what has always been done is truly the path of least resistance.

For the most part, inside counsel has free rein (and reign) with their outside counsel as long as there are no major screwups, including something resembling adherence to budget. Internal investments in infrastructure, technology, etc. are a  different story. There are many inside counsel who have more authority to spend a $100K on legal fees and then settle the matter for $1M than they do to purchase a $200 piece of software, which raises any number of bureaucratic and procedural hurdles. Similar barriers exist when they try to negotiate alternative external arrangements (e.g., fixed fees and LPO contracts). That's a lot of work for not a lot of personal benefit.



Generally, the sole 'reward' for coming in under budget is a lower budget going forward. This only increases the probability of a major screw up (going way over budget is a different story than coming in way under). Indeed, why would an inside counsel voluntarily reduce their budget in the first place? Inside counsel's budget is, like a partner's book of business, their source of power. The bigger their budget, the more sway they have. Part of the tradeoff for earning less money than most law firm associates is that even the partners who take home 50x more than inside counsel still have to kiss inside counsel's tukhus. More budget means more smooching. It's easy to convince yourself that your jokes are funny when everyone is laughing.

And it isn't just about pomp and deference. It is pretty great for you and your friends when they can start expensing all your drinks, meals, golf, etc. Not having to pay for nice outings is one of the hidden fringe benefits of being inside counsel. Telling the person who picked up the check that you are going to start putting the screws to them and their firm is simply poor manners, especially when that person is your friend. 

Scoring low on sociability does not mean that lawyers have no friends. Rather, they have fewer, more intense friendships:

Sociability is described as a desire to interact with people, especially a comfort level in initiating new, intimate connections with others. Low scorers are not necessarily anti-social. Rather, they simply find it uncomfortable to initiate intimate relationships and so are more likely to rely on relationships that already exist, relationships in which they’ve already done the hard “getting-to-know-you” part...

The inertia of incumbency is not just professional, it's personal. Lawyers are frequently friends with other other lawyers. They bond in law school. They bond in the trenches of law firms. They bond as part of the inside/outside counsel symbiotic relationship. There is social pressure on inside lawyers to maintain the status quo.

The friendship is not always between the relationship partner and the managing inside counsel. Sometimes, the relationship is with the GC or one of the managing inside counsel's other superiors, including those on the business side (executives, board members). While it may seem like an instance of Stockholm Syndrome when an inside counsel responds to a potential savings opportunity with "my outside counsel wouldn't like that," it can indicate real personal and professional consequences for violating the 'natural' order.

Mention of the business side often brings up the 'nuclear option' of going above the GC. If the inside lawyers aren't serious about savings, surely the CEO, CFO, etc. care that Legal is wasting so much money. Not really. Earlier, when I referenced the $10K savings representing 0.1% of the $10M deal, the numbers were not arbitrary. In a mature organizations, total legal spend as a percentage of revenue is around 0.4%. Even if your MacGuffin can cut total legal spend by 25%, you are only getting at 0.1% of company revenue. This is can be real money in raw dollars, but it is not the kind of savings for which most executives are inclined to intervene, especially when the GC can list the parade of horribles that will befall the company if the executives do not let the lawyers do their job.


The GC, of course, is not the only department head who is arguing that their team needs more resources, not less (end-of-year shopping sprees are a holiday tradition). But the GC can recite the parade of horribles to great effect because law is really scary. The consequences of legal mistakes can be cataclysmic but the working of the legal system can seem inscrutable. The lawyers are often treated as clergy who can penetrate the divine mysteries and keep the company in the favor of capricious legal gods. As long as it doesn't cost too much, the lawyers should be left alone to their alchemy, augury, sortilege, vaticination, veneficium, and other numinous pursuits.

This opacity suits autonomy-seeking lawyers just fine. For all the talk of the perverse incentives that the billable hour introduces for law firms, there is scant attention paid to how the illusion of unpredictability and uncontrollability advantages inside counsel by shielding them from scrutiny. Indeed, just about every MacGuffin for holding outside counsel more accountable also creates additional accountability for inside counsel. Who volunteers for additional accountability?

Even if the MacGuffin works, there is a chance that improvement is interpreted as indictment of the past. The attempt could be seen by predecessors and their allies, many of whom may now be your superiors, as implicit attack on how matters were previously handled and, by extension, the people who handled them. Success could serve as a tacit admission that the law department has been wasting resources for years.

Plus, circumstances will eventually create an improvement imperative, and it is sensible to keep the powder dry until eventually arrives. While CEO's and CFO's are not apt to meddle in the law department's affairs (outside of helping a few of their friends at law firms), they are certainly inclined, from time to time, to announce spend reduction mandates that apply to all departments, including legal. The mandate does not care about previous cost-cutting activities. The lawyer (or law department) that has been lax about spending is in a much better position than their zealot peers. The intrinsically-motivated, technologically-enabled, automated, Lean, Six Sigma, Agile legal ninja with metrics about her metrics will have far fewer low-hanging fruits than the colleague who annually raised rates out of unthinking habit.

All of this brings us to where the column began: the (il)logic of shopping by discounts. Discounts are familiar and easy to calculate. Discounts fit within the traditional paradigm while also paying homage to the cost consciousness of the New Normal. Discounts guarantee success. Discounts deliver immediate, measurable benefits while avoiding hard conversations, tough decisions, and the real work of exploring alternatives. Discounts appeal to 'smart shoppers' who like to brag about how much they saved. Driven by anchoring effects and the dynamics of credence goods (where the inability to objectively measure quality leads to an inversion of the price/demand relationship), discounts (as opposed to less expensive alternatives) thrive based on an implicit acceptance that alternatives are not truly fungible. The $2,000 HDTV is inherently 'better' than the $500 HDTV by virtue of the price tag. And isn't it amazing that I saved $400 when purchasing the $2,000 model? 

To the extent the appearance of quality and the appearance of savings have gained currency in a law department, getting ever bigger discounts from a high-priced firm is the best of both worlds. Reprising and expanding the chart from my last post, consider how much the inside counsel is 'saving' while their budget (power) increases, their friends make more money, and they get to rely on the 'best' outside firm:



Back to Reality

Well, that was a long, casual devolution into cynicism. Not only are there conspicuous exceptions to the foregoing (we hand them awards on an annual basis), but, as I explained in the beginning, everyone is an exception to the above. No one I've ever met is all the things listed above. It is a crude sketch, a caricature that highlights pressures, constraints, and influences that are not always obvious from the outside.

I still think the first factor has the most explanatory power. Inside counsel are really busy doing work that is mission critical to the enterprises they serve. They are overburdened and do not have the time or other resources to pursue transformative change within or outside the law department. But I also think the first explanation is the most obvious. While not nearly as crucial, psychology and incentives have an impact at the margins. They are also at odds with what seems to be a common view of inside counsel as crusaders consumed with lowering legal spend. There are good reasons why things do not change nearly as fast as the bombastic headlines would seem to suggest.

And, yet, things are changing. The picture painted above would seem to argue that the status quo will persist. But status is not nearly as quo as it used to be. It is almost as if the above is not a complete picture. More on that in a later post.