Hastening ZombieLaw’s Collapse—and Why That’s a Good Thing

Ignoring the ballyhoo about “The New Normal” and the debate about whether this is BigLaw’s end of days, most seem to agree that the US legal market is overcrowded. It suffers from too many lawyers and law firms.

Like many aspects of our industry, market overcrowding is not new. For years, we have watched some BigLaw firms stagger around zombie-like and refuse to die. They decline in vigor and resort to bottom feeding and submitting low bids on every job in town. Some of these ZombieLaws are highly leveraged affairs with shrunken equity partner castes and even smaller star chambers that oversee closed compensation systems. Other ZombieLaws are over-leveraged and offer a warm bunk to lawyers with small books of business whom no one else will hire.

The disappearance of five such firms would blow fresh wind under the wings of fifty nearby firms and lift them higher. I blogged about this in 2008 when I predicted Bay Area firms would benefit from Thelen’s and Heller’s demises. (See "It's Hard to Accept Intelligence That Breaks Your Heart.") Since then, the Boston and Atlanta legal markets have also benefitted from regional right-sizing. The New York City market is right-sizing now, albeit slowly. In several other overcrowded markets, a handful of firms are feeling and causing each other’s pain.

If I had more resources right now, I would create two online prediction markets. (See Intrade for examples of such markets.) The first market would solicit bets on which US law firms will dissolve by December 31, 2013. The second one would solicit bets on which firms will merge with one or more firms by the end of the year. On January 1, 2014, I would close those markets, open two new ones, and start all over again.

If these markets worked well—and I believe they would, by crowd-sourcing intelligence anonymously from knowledgeable persons who will never go on the record—they would quickly and accurately identify the weakest firms. And, yes, these prediction markets might hasten their deaths.

What a mean thing to do, right? Wrong. It would be a kind thing to do. Depending on your viewpoint, of course.

So how about it—would you place anonymous bets on these two markets?  Which geographic, practice and industry legal markets do you see as the most crowded? Which firms would you bet will dissolve or merge by December 31, 2013?

 

Never, ever ignore a decision-maker’s psychology

Yesterday afternoon I got lucky.

At 4:01 pm CDT yesterday, after watching Intrade’s gyrations as GOP VP predictive market investors had Romney and Pawlenty positions fighting it out for the lead, I commented on this blog that a decision-maker’s psychology is critical to their decisions:

"I am reflecting on how decisions reflect the decision-maker’s psychology. If you were McCain the Maverick, who would you choose? The market leader or an outsider / outlier surprise?”

This morning’s news that Senator McCain has chosen Alaska Governor Sarah Palin as his running mate in the upcoming Presidential election is a reminder to us all that we ignore a decision-maker’s psychology at our peril.

This reminder is especially important to law firm competitive intelligence professionals who support their firms’ business development efforts. CI professionals working in law firms should be able to develop psychological profiles of prospective clients, particularly those who make the final hiring decision.

And please don’t anybody freak out—developing psychological profiles is a common CI function. Heck, my mother and four sisters do this countless times each day. It’s also how Mrs. Marple solved all those mysteries.

More forecasting with predictive markets?

Earlier this week, I posted about the possible use of predictive markets to develop competitive intelligence, citing InTrade’s and InklingMarkets’ early warnings that Senator Biden would be the Democratic VP nominee. These tools were brought to my attention by Tom Davis at Cygnus Associates

Late last night watching the Democratic Convention, I heard CNN report that the presumptive Republican nominee, Senator John McCain, has settled on his pick for a VP running mate. So I trotted over to Intrade to look at the action on Republican VP front-runners. During the preceding 24 hours, Governor Romney’s stock had fallen $20, from $65 to $45, but had started to crawl up again. His price was almost twice that of the next-highest contender, Tim Pawlenty, who was at $24.20.

This morning at 7:30 a.m. I see that Romney’s stock continued climbing overnight and is now up $13.50 at $58.50. In other words, the market predicts there’s a 58.5% chance he will become the nominee. Since midnight, Pawlenty is down by $2.20 to $22.00.

I’m not sure if this is CI or just political obsession, but stay tuned.