By Kevin D. Williamson
Sunday, August 11, 2019
Shed a single tear, if you haven’t gone entirely dry, for
America’s beleaguered, struggling, and anxiety-ridden law-firm partners.
Sara Randazzo, writing in the Wall Street Journal, chronicles the lamentations of the lawyers:
“Being named a partner once meant joining a band of lawyers who jointly tended
to longtime clients and took home comfortable, and roughly equal, paychecks.
Job security was virtually guaranteed and partners rarely jumped ship. That
model, and the culture that grew up around it, is all but dead. Law firms are
now often partnerships in name only.” Equity-owning partners still share in the
profits of the firm, but the second-class “partners” — nominal partners — are
unpropertied salarymen, taking home a mere few hundred thousand dollars a year
or so in comparison to the millions paid out to the real partners.
You can practically hear that awful Sarah McLachlan song
wailing in the background, and one begins to glance around for Sally Struthers.
I’ll give you a second to regain your composure.
Law firms are not what they used to be. The markets in
which they play have become more competitive and more efficient, and in many
cases firms have grown more specialized. The days of long lunches and 3 p.m.
tee times are long gone. That is true of many high-paying occupations whose
practitioners once enjoyed remarkably leisurely work days. From Wall Street to
the grocery business, the high-earning high-flyers are increasingly expected to
keep up with the frantic pace of a Silicon Valley startup. It’s not that there
are no easy jobs left — it’s just that you don’t really want one of them.
As Randazzo reports, the newly demanding and data-driven
model of the law firm has changed the culture of the business entirely.
“Full-time chief executives, some without law degrees, have replaced the senior
partner running human resources and accounting,” she writes. “Law firm names
have trended toward the shorter and snappier, more befitting a tote bag than a
law library.” No more Dewey, Cheatham, & Howe.
These are frantic times. In the early 1960s, the average
“life expectancy” of a corporation on the Fortune 500 was a little over 75
years; today, it is about 15 years — and falling. Many of our fathers and
grandfathers worked for one or two companies over the whole of their working
lives; the Bureau of Labor Statistics expects that today’s workers will have
about 15 different employers over the course of a career — and ten different
ones before age 40. Americans as a whole do not move as often for work today as
they did a generation ago, but high-earning workers move relatively frequently
and change employers more frequently than do lower-earning workers.
It may be time to update “The Nature of the Firm.”
That’s the name of the famous paper by Nobel laureate
Ronald Coase, who, like a lot of geniuses, found himself obsessed by a question
so obvious that nobody had ever thought about it: “Why do corporations exist at
all?” Most businesses, he noted, have both employees and outside contractors.
But if markets are efficient, why have full-time employees at all, when it is
inevitable that a business ends up paying them for times when they are doing no
real work? Why not outsource everything?
The answer he came up with was “transaction costs.” A transaction cost is the
price you pay in time and trouble in addition to the financial cost of any
given exchange. For example, if you want to hire a lawyer, you don’t just order
one from Amazon Prime. You do some research, ask around about who is the best
specialist in the particular area you need at the moment, maybe interview three
or four firms. And you pay somebody to do that. The same thing for hiring a
receptionist: You don’t just take the first person to wander in off the street,
and once you’ve hired one, it takes time and effort to train him, to show him
where everything is, to get him used to your office procedures, etc. Once you
have one you can count on, you don’t want to go to market the next day to see
if you can get a better deal. Coase argued that transaction costs make it more
efficient for a business to have regular employees and to maintain the other
features of an ongoing enterprise because the inefficiencies inherent in that
are less costly than the transaction costs involved in bidding out everything.
But information technology and other innovations have
lowered many transaction costs. Businesses that had once employed their own
janitors and groundskeeping staff began outsourcing custodial and maintenance
work, mostly to specialized firms that came into existence to meet that need.
Many rote clerical and administrative positions were eliminated and those tasks
jobbed out. In the 1980s, a region with twelve newspapers would probably have
twelve printing presses, twelve press crews, twelve fully staffed composing
rooms, etc. By the early 21st century, they were sending out their pages
electronically to consolidated printing operations.
In manager-speak, businesses have increasingly pared down
operations to their “core competencies.” Understood from the Coasean point of
view, a firm is only a temporary partnership between and among certain kinds of
capital and labor turned toward a common end. It lasts for exactly as long as
that is the more efficient arrangement. (In theory.) When that no longer is the
case, the business dissolves, is acquired, or changes in some fundamental way.
The corporate name may survive, but the underlying enterprise is essentially a
new and different thing. As the world grows more connected, and as both markets
and supply chains grow ever more globally integrated, the lifespan of any
particular arrangement of capital and labor grows shorter. That means that the
intelligence and energy of the people who work there become more valuable in
some other configuration more quickly and more frequently. Hence the
job-hopping among the highly skilled and most in-demand workers.
(There are some exceptions to this rule: A few big
technology firms such as Google and Facebook have in effect undergone a reverse
corporate evolution, creating such gigantic streams of revenue from one core
business that they can sustain all manner of sidelines and experiments without
thinking too hard about the near-term profitability.)
As I argue in The
Smallest Minority, the thing that we call for lack of a better word
“globalization” has helped to make us the richest, healthiest, longest-lived,
best-provided-for people in the history of the human race. But like the early
stirrings of primordial capitalism at the end of the Middle Ages, the
developments that have made us richer and better off have also upset
longstanding social arrangements and put longstanding status relationships up
for renegotiation. Americans were a heck of a lot friendlier to China and India
when those countries were starving. The Brits liked the Poles a lot better when
they were languishing under Communism than now, when they are fixing British
plumbing.
Here is a thought experiment for you: What percentage of
your current income would you give up in exchange for an irrevocable guarantee
that your new salary would never go down? Do the math and you’ll have some idea
of what “job security” is really worth to you.
But some things money can’t buy, and the idea of job
security increasingly is a thing of the past. Many highly skilled and
high-earning workers are perfectly happy with that: They get to move on to
something new and challenging more frequently, and they generally earn more in
each new position than in the last one. Life is good at the top. It usually is.
But not everybody is an entrepreneur, a dealmaker, or a
mercenary tech geek happy to fly from one gig to the next. Many people would
prefer a greater degree of predictability in their lives. For them, the thought
of having to look for a new job is a nail-chewing, can’t-sleep-at-night
proposition, not an occasion for daydreaming and excitement. They are not
thinking to themselves, “I wonder what kind of apartment I’ll have in Abu
Dhabi.” They are thinking, “How am I going to pay the mortgage?”
The Tucker Carlson school of anti-capitalism gets this
much right: An economy that rewards geographic mobility, professional
flexibility, and financial risk-taking brings unintended social consequences
with it, from undermining local relationships and civil society to encouraging
norms of delayed marriage and parenthood. There is some reason to believe that
these fall most heavily on economically middling males: They have neither the
income and social status associated with high-flying careers nor the comforts
of deep community ties nor those of being a husband and father. Even church
congregations have a different character in communities in which people
relocate constantly. Even those who claw their way up through the elite
educational institutions into a partnership at a big law firm do not get the
deal they might have been hoping for. (But that $800,000 a year isn’t too bad.)
Those without that option may feel stuck, hopeless, and — perhaps worst of all
— useless. Many of the traditional
distinguishing male virtues such as physical strength and courage are passé
from the point of view of the 21st century economy.
(Nobody needs those virtues — until they do.)
But information technology is not going away. Markets are
probably going to continue to grow more integrated, more efficient, and more
competitive. The quest for returns is not going to be brought to a halt by the
desire for predictability. Partly that is a matter of pure economics, but
partly it is also a result of the fact that policy decisions are dominated by
the people who are most comfortable with a more entrepreneurial and less
predictable model of work. That is a big part of what has populists of the Left
and Right riled up at the moment, even though many of them cannot quite
articulate their complaint. The critics have a point, but what they do not have
is an alternative, at least one they are willing to publicly defend. (The
actual alternative, which dare not speak its name, is: relatively predictable
stagnation.) The Left demands a bigger and more generous welfare state in the
mistaken belief that we can socially engineer and redistribute our way out of
this particular pickle, while the populist Right has embraced a daffy form of
neo-mercantilism in the mistaken belief that the fundamental problem is
Americans’ feckless victimization at the hands of the scheming Chinese or
job-stealing immigrants. Populists Left and Right implicitly share the belief
that what’s really ailing us is a deficit of cleverness in Washington, even as they rail against the clever
people in Washington as conspirators against the public interest. But there’s
plenty of cleverness in Washington — a surplus of the stuff, in fact.
The great songwriter Steve Earle, who involves himself in
a lot of silly left-wing political activism, says that he is a “romantic,” that
he is interested in “the way the world should be, not the way the world is.”
That is a lovely and poetical sentiment, and, like most poetical sentiments, it
offers a good reminder of why it is better that we are not governed by poets.
Our policymakers must deal with the world as it is, and our schools and
families should prepare children for the world as it is, not as we might wish
it were. Imagination and creativity are necessarily to human flourishing, but
neither of those excuses a mulish refusal to consider and deal with the world
as we actually find it. And if a poetical cast of mind is no license for such a
refusal, how much less an excuse is patriotism, “nationalism,” the desire for
“economic justice,” or an unalterable commitment to one’s own particular corner
of Oklahoma or Kentucky?
“Idealism is fine,” a wise man once said, “but as it
approaches reality, the costs become prohibitive.”
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