Global Trends 2030 Released by NIC

Every four or five years, the US National Intelligence Council (NIC) publishes a Global Trends report. And now Global Trends 2030 has just been released. A short (5-page) briefing can be found here. The longer (160-page) report can be downloaded in pdf, iPad and Kindle formats here.

The executive summary describes the NIC’s goals for this massive effort:

“This report is intended to stimulate thinking about the rapid and vast geopolitical changes characterizing the world today and possible global trajectories during the next 15-20 years. As with the NIC’s previous Global Trends reports, we do not seek to predict the future—which would be an impossible feat—but instead provide a framework for thinking about possible futures and their implications.”

Since the mid-1990s I’ve studied these Global Trends reports carefully, using them to ground myself about changes I see in the economy, the legal industry, and my personal investment options. Below are my very quick Cliffs Notes on this latest report.

 

Global Megatrends

The global megatrends (relative certainties) presented and discussed in the 2030 report include:

Individual empowerment

·         Rapidly expanding middle class (for the first time, most of world’s population aren’t in poverty)

·         Life expectancy increases rapidly, with deaths from communicable diseases dropping more than 40%

·         Religious, ethnic and national identities are strengthened

·         More technological breakthroughs in information, communication, manufacturing, healthcare, warcraft are great levelers for good and evil

·         Individuals and states experience greater stress levels

Diffusion of power

·         Asia surpasses North America and Europe in global economic power

·         Power/impact of Europe, Japan and Russia lessens

·         No global hegemonic political power remains – regional conflicts and regional partnerships are both possible

Demographic patterns

·         World population becomes increasingly urbanized (from 50% to 60%), and urban construction explodes

·         Economic growth may decline in demographically aging countries

·         Youthful countries are politically unstable (the “demographic arc of instability”)

·         Global migration and immigration increases

Food, water, energy nexus

·         Huge increases in demand for food (35%), water (40%) and energy (50%)

·         Addressing demands for each of these commodities is linked to supply and demand for the others

·         Severe weather patterns intensify – wet areas get wetter, dry areas get drier

Critical Game Changers

The report posits six critical variables whose trajectories are far less certain and are subject to control by state and non-state actors:

1.    Crisis-prone global economy - Will divergences and increased volatility result in more global breakdown? Or will the development of multiple growth centers lead to increased resiliency?

2.    Governance gap - Will current forms of governance and international institutions be able to adapt fast enough to harness and channel change instead of being overwhelmed by it?

3.    Potential for increased conflict - Will rapid changes and shifts in power lead to conflicts?

4.    Wider scope of regional instability - Will regional instability, especially in the Middle East and South Asia, spill over and create global insecurity?

5.    Impact of new technologies - Will technological breakthroughs occur in time to solve the problems caused by rapid urbanization, strain on natural resources, and climate change?

6.    Role of the United States - Will the US, as the leading actor on the world stage and with its new energy independence, be able to reinvent the international system, carving out potential new roles in an expanded world order?

Four Alternative Worlds / Scenarios

Like the preceding global trends reports, the 2030 report includes four different global 15-to-20-year scenarios for use by organizations that engage in scenario planning. The four Alternative Worlds posited are:

1.    Stalled Engines – In the most plausible worst-case scenario, the risks of interstate conflict increase. A pandemic hits, the US draws inward, and globalization stalls.

2.    Fusion – In the most plausible best-case outcome, China and the US collaborate on a range of issues, leading to broader global cooperation.

3.    Gini-Out-of-the-Bottle – Inequalities explode as some countries become big winners and others fail. Inequalities within countries increase social tensions. Without completely disengaging, the US is no longer the “global policeman.”

4.    Nonstate World – Driven by new technologies, nonstate actors take the lead in confronting global challenges.

What's Next?

 

I know how full the days (and nights) of law firm CI professionals can be. However, I hope you will find time to explore this new report. I also hope some of you will comment about it. I’ll soon be posting more here about 16 disruptive technologies, 8 possible black swan events, and other topics discussed in the Global Trends 2030 report.

 

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?

 

Pulling Away from the Pack – or Powering with Arithmetic?

Last Friday, The Recorder published an article about FY 2012 Am Law early results:  “Revenue Growth Modest at Many Firms, But Profits Surge.”   Bylined by Julia Love, the article discussed several ways law firms can try to improve their top line performance when revenue stalls, including thinning their ownership ranks.  Three California firms whose FY2012 equity partnership ranks contracted and whose profits per equity partner (PPEP) showed double-digit increases were highlighted. 

Shrinking law firm ownership is an old tradition

 

The arithmetic potential to improve a firm’s PPEP by reducing the number of equity partners at that firm is obvious and significant.  But it’s far from a new trend.  Firms have been thinning their ownership ranks for over 20 years.  In FY1990, Am Law 100 equity partners constituted 32.8% of all Am Law 100 lawyers.  By FY2000, that metric declined to 27.5%.  And by FY2011, it was down to 22.3%. 

As legal industry metric wonks know, Am Law’s leverage metric also measures the extent of law firm ownership, but is calculated differently – as the ratio of all non-owner lawyers to each owner lawyer (equity partner).  In FY1990, the Am Law 100 collective leverage was 2.05 to 1.  In FY2000, it was 2.63 to 1.  And in FY2011, it was 3.49 to 1. 

How low will law firm equity partnership ranks go? 

I’ll confidently predict that if nothing happens to modify this trend, by FY2020 equity partners will constitute no more than 18% of Am Law 100 lawyers.  Stated another way, in FY2020 the Am Law 100 lawyer population will have at least 4.56 non-owner lawyers for every equity partner. 

If those predictions take away your breath, consider the accounting firms:  In FY2011, leverage at the Big Four was already 10.6 to 1, as reported by Accounting News Report.

Some uses of this competitive intelligence 

As ow iHow you absorb the above information and patterns, consider their import to your firm’s and your competitors’ choices about growth, management and business development models.  For instance: 

1.       How will this continuing trend of shrinking firm ownership affect your firm? 

2.       How will this trend impact your firm’s efforts to increase equity partner diversity? 

3.       What unintended consequences might this trend precipitate? 

4.       To what extent have specific firms’ PPEP been “enhanced” through rapidly shrinking ownership ranks? 

5.       When you factor out those PPEP “enhancements,” how do you interpret individual firms’ actual performances? 

6.       Put another way, which firms are truly pulling away from the pack, and which are simply leveraging the power of arithmetic? 

7.       Between now and 2020, what new business models might your firm or some of your competitor firms create to differentiate themselves and go to market more effectively? 

8.       How could you compete effectively against those new models? 

As Am Law releases more early FY2012 firm results, I’ll be discussing them here. 

2012 InnovAction Awards

As a Fellow of the College of Law Practice Management, I am pleased to inform my blog’s readers that the College is now accepting entries for the 2012 InnovAction Awards. 

My friend and College Fellow Tim Corcoran will chair this year’s InnovAction Awards competition.  He has posted some useful information about the competition at his Web site.  

Now in its eighth year, the InnovAction Awards conduct a worldwide search for lawyers, law firms and other providers of legal services who are engaged in extraordinary, game-changing, innovative activities. The award entries are judged based on the following criteria:

• Originality: Is this a novel idea or approach, or a new twist on an existing idea or approach?
• Disruption: Does this entry change an important element of the legal services process for the better, and marketplace expectations along with it?
• Value: Is the client and/or legal industry better off because of this entry, in terms of the affordability, ease, relevance or effect of legal services?
• Effectiveness: Has this entry delivered real, demonstrable or measurable benefits, for the provider, its clients, or the marketplace generally?

Applications and more information are available at http://www.innovactionaward.com. The submission deadline is June 15, 2012.

Am Law 100 and 200 FY2011 Financial Results Rolling In

‘Tis the season again of big law firm financial reporting. Am Law Daily’s doing a great job this year of collecting and collating Am Law 100 and 200 firms’ FY 2011 financial results by maintaining an interactive chart of results as those are reported.

Thank you, Am Law Daily.

FY 2010 Update: 52 US Law Firms Report Financial Performance

Below are some preliminary basic 2010 financial performance data for 52 large US law firms, as their results have been reported in the legal and mainstream press. The firms are ordered by profits per equity partner (highest to lowest).

The American Lawyer will publish the final 2010 performance data for the Am Law 100 on May 1 and for the Am Law 200 on June 1. Before then, I will try to revise and publish here at least once more the preliminary results for as many firms as I can locate.

As always, if you find any errors in the table below or would like to add a firm’s performance data, please let me know by commenting here or at agibson@annleegibson.com.

Final point -- I realize the following table looks fuzzy, but if you click on it you will see a clearer version.  

FY 2010 U.S. Law Firm Financial Performances ... Trickling In

Like many law firm watchers, I’ve been gathering information about US law firms’ financial results from reports in the legal press. To date, I’ve collected the following info about gross firm revenue and profits per equity partner and am sharing it here with readers. The firms are ordered by profits per equity partner (highest to lowest).

If you find any errors in the table below or would like to add a firm’s performance data, please let me know by commenting here or at agibson@annleegibson.com. I will continue to review press reports and update these results from time to time.

Intelligence blind spots, failures and excuses

Twelve days ago at this blog, I said the U.S. intelligence community’s failure to predict the pan-Arab democratic rebellion was evidence of our common, human reluctance to recognize tipping points.

The ongoing public discussion about these events invites us to consider also how blind spots and cognitive biases can lead to intelligence failures in any field, including law firm intelligence work.

Today’s New York Times offers a panel of six Sunday morning intelligence quarterbacks who trot out some reasons why the U.S. intelligence community failed to predict the pan-Arab democratic movement and its recent tipping point. Their reasons for this failure and their other comments about intelligence blind spots include some I find useful to ponder about my own work in law firm CI and a few I find merely comical:

1. The intelligence community has failed to appreciate the power of social networking.

2. The intelligence community roots out analysts with good instincts.

3. The intelligence community punishes and silences those who say the unpopular.

4. Specialists find it difficult to see broader trends.

5. Immediate challenges crowd out long-range thinking.

6. Intelligence based on inputs from those in the seat of power will fail to appreciate the power of those forces that oppose seated power.

7. Some changes, no matter how large, do not require a new or immediate response.

8. It is unwise to focus only on events in those spaces where we have invested the most; events in other spaces may affect us as much or more so.

9. A single, dramatic event can quickly convert widespread, dormant awareness into widespread, sympathetic action.

10. Foreseeing events is much easier than predicting when those events will happen.

11. Intelligence never has and cannot forecast revolutions.

12. The President did not tell the intelligence community to focus on the possibility of a pan-Arab rebellion.

Yes, intelligence work is difficult. But the New York Times panelists do little more than describe some of the many blind spots that all high-end intelligence units are expected to understand and navigate. In fact, blind spots are an old and dangerous enemy to intelligence workers.

Richards (Dick) Heuer, the legendary CIA analyst, described in the now out-of-print Psychology of Intelligence several dozen biases that afflict intelligence analysts. This book’s central tenet is that “people tend to see what they expect to see, and new information is typically assimilated to existing beliefs.” Ibid. p.153.

Although Heuer learned his craft within the CIA, the insights he shares in his 1999 classic are universally relevant to business intelligence workers, including those of us who work in and for law firms. We law firm intelligence workers don’t have to predict political revolutions. But we are expected to identify and forecast many forces and movements that will affect the prospects of individual clients, client industries, labor forces, technologies, and other factors that, in turn, will affect our firms’ own prospects.

Although our blinders and biases cannot excuse intelligence failures, when failures do occur we must try to appreciate how our blinders and biases kept us from doing a better job, to reduce their negative impact in future assignments.

We can also learn from others’ intelligence successes and failures. Stay tuned.

This is not what I meant by law firm competitive intelligence

Prologue

I have long considered, lectured and written about law firm competitive intelligence from the perspective of CI prepared and used in service to the firm’s goals as a business entity. However, CI can also be conducted by law firms and its vendors in service to its clients’ goals. Today’s post addresses that use of CI by law firms.

This post also addresses the counterintelligence challenges of a post-Wikileaks world, where law firms and their vendors can be targeted by disgruntled employees, hackers and social engineers. Today’s professional culture encourages us to communicate via email, texting and social media, which are so familiar we forget they are susceptible to revelation – on purpose and through carelessness, through both legal and illegal means. Even sophisticated people ignore these dangers, as today’s post illustrates.

The events described below read like they were lifted from Stieg Larson’s “The Girl with the Dragon Tattoo” novel series. However, they were all reported during the past two weeks by the Financial Times, The New York Times, The Washington Post, The Observer, American Lawyer Media, Wired, Salon and dozens of other publications, blogs, online chat rooms and message boards.

I apologize if I have failed to insert the word “allegedly” everywhere it should appear in the following severely summarized account. Therefore, I hereby stipulate it has been alleged that …

What has been reported?

Last fall Hunton & Williams invited three data security companies (HBGary Federal, Palantir Technologies and Berico Technologies) to work with the firm to prepare a joint new business pitch for the U.S. Chamber of Commerce, a firm client. This pitch related to some of the Chamber’s political initiatives and investigations and handling of its antagonists.

H&W also invited the same three security companies to help prepare a second new business pitch for Bank of America, also a firm client. This pitch related to a BoA internal investigation into documents that Wikileaks had obtained, possibly from one or more BoA insiders, and threatened to publish on the Internet.

As these events were unfolding, HBGary Federal’s CEO, Aaron Barr, wanted to strengthen his street cred to support the H&W and other business development efforts HBGary Federal was involved in.

Barr was already hanging out online with members of Anonymous, a highly secretive, loose collective of activists and hackers. He believed he could elevate his sleuthing reputation by analyzing information on internet chat logs, Facebook, Twitter and elsewhere to identify Anonymous’s secretive leaders and key players. Barr planned to describe his unmasking methodology in a presentation at a February 2011 security conference and was able to publicize this presentation in a news story published on February 4, 2011, in the Financial Times.

For a day or so after the February 4 Financial Times story came out, Barr and Anonymous traded online insults. Anonymous then retaliated by hitting HBGary Federal’s corporate network, eventually taking down the company’s site, extracting 70,000 emails and publishing them online. To insult Barr further, Anonymous said their takedown team included a 16-year-old girl who had social engineered an HBGary Federal company IT admin into revealing another HBGary Federal admin’s logins and passwords.

Among the thousands of HBGary Federal emails that Anonymous published were those emails HBGary Federal had exchanged with H&W lawyers while the law firm and three data security companies were preparing the Chamber of Commerce and BoA pitches. Anonymous also uploaded the PowerPoint presentations the three security companies had prepared in consultation with H&W for use prior to or during H&W’s pitches.

Those PowerPoint files described the services the three companies would perform, including investigations and possible actions to be taken against lobbying groups, union employees, journalists and others whose allegiances and interests were counter to those of H&W’s clients. Those actions included developing fake personas, preparing and leaking fake information to H&W clients’ adversaries to discredit them, and discouraging commentary by journalists who are “... established professionals that have a liberal bent, but ultimately most of them if pushed will choose professional preservation over cause, such is the mentality of most business professionals.”

Where do things stand now?

1. HBGary Federal’s web site is still down.

2. Palantir and Berico have apologized for their involvement in these events and severed all ties with HBGary Federal. Palantir also suspended the 26-year-old engineer who worked on the PowerPoint presentations.

3. The Chamber of Commerce denied hiring any of the three companies or H&W.

4. Bank of America said they have never seen the presentation described in the emails, have never evaluated it, and have no interest in it.

5. H&W has refused to comment.

6. Some of those named as the Chamber’s adversaries in the hacked emails and PowerPoint files have announced their intention to file ethics charges next week with the DC bar association against three of H&W’s lawyers.

Lessons learned?

Whether the activities allegedly contemplated in the HBGary Federal hacked emails and PowerPoint files were competitive intelligence or corporate espionage or worse, they violated the Society of Competitive Intelligence Professionals’ Code of Ethics. As I have said many times before, including here, law firm competitive intelligence workers should all read that brief code of ethics, take its seven elements to heart and agree to abide by it. I now recommend that lawyers do so, too.

These events also have sobering implications for law firms’ own network security challenges. If a data security firm can be hacked and all its emails and attachments posted online, how well would most law firm networks stand up to such an assault? And if the firm’s network were breached in this way, what would be the costs to the firm and its clients and prospects? This law firm counterintelligence challenge requires not only technological safeguards, but also full recognition that lawyers and law firm employees are just as susceptible as anyone else to social engineering.

I have no doubt that everyone associated with this dog’s breakfast wishes it had never happened. Some blame the mess on security carelessness. Others see the leaked emails and PowerPoint files as evidence of ethical lapses and possibly criminal intent.

Optimistically, I view these events as an opportunity to remind ourselves, once again, of the ethical limits of competitive intelligence activities. Above all professions and industries, lawyers and law firms cannot be ignorant of or ignore these ethical limits.

Our Reluctance to Recognize Tipping Points

“The past is the best predictor of the future” is one of humankind’s most reliable decision-making aids. It’s a highly useful heuristic, except when it collides with sudden changes in the status quo – what we popularly call tipping points and which can be biological, political, cultural, technological or emotional.

Today’s New York Times offers a compelling review of the two-year pan-Arab youth movement culminating in the 18-day revolution that unseated the 30-year reign of Egyptian President Hosni Mubarak. The revolution’s outcome was a tipping point that formal intelligence channels didn’t predict. “…[T]he American intelligence community and Israel’s intelligence services had estimated that the risk to President Mubarak was low – less than 20 percent ….” But according to the Times, President Obama interpreted the information differently and acted in accordance with his own analysis of events.

Nothing goes up forever, and nothing goes down forever. A straight, uninterrupted line in any direction will fail to predict the future. The simple fact that a condition continues and continues will eventually produce new events that lead to a new condition which produces new events that … you get it.

Which leaves intelligence workers with the usual questions: What are the cycles and patterns of change? When will the tipping points happen? How and where and when can we position ourselves to benefit most from events we can never completely control?

These are also some of the most compelling questions for decision makers.

The New York Times vs. Assange

The New York Times's weekend magazine article, “Dealing with Assange and the Wikileaks Secrets,” by Bill Keller, The Times’s executive editor, is a delicious, dishy apologia for the newspaper's handling of Wikileaks information released last year about the wars in Iraq/Afghanistan and US diplomatic cables.

It is also a fascinating take (from one point of view, as all takes are) on how journalism continues to be as relevant as ever – in fact, even more necessary – to interpret the huge amount of information now available via the Internet in today’s tell-all culture.

Another observation I offer about journalism relates to its threatened future funding. I was so entertained by the Keller article that I purchased for $5.99 The Times’s e-book: Open Secrets -- WikiLeaks, War and American Diplomacy: Complete and Expanded Coverage from The New York Times.

My conclusions: Content is still king. Analyzed information (intelligence) is more valuable than information. Dishing always outdraws boring facts.

Two confessions

First confession -- My name is Ann Lee Gibson, and I am an imperfect and intermittent blogger. Work, family, life, sleep and fun all conspire to keep me from being a daily, weekly or even monthly blogger. It ain’t ever gonna happen, and I’ve now accepted it.

Second confession -- I wanted this blog to be only about law firm competitive intelligence, hence the blog title. However, sometimes I also want to talk or vent about other law firm marketing topics that are only peripherally related to law firm CI. Therefore, I’ve decided that from now on I will unleash myself here on any law firm marketing topic I find I’m obsessing about, that has raised my blood pressure, or that tickles my funny bone.

Live with it.

And now, on to the next post.