Chen on the Legal Profession, Scalable Jobs, and Black Swans

February 26th, 2012

From my friend Dean Jim Chen, at University of Louisville:

In one of the chapters ofThe Black Swan: The Impact of the Highly Improbable, Nassim Nicholas Taleb recalls his own days at the Wharton School of Business and how one classmate urged him to pursue only those careers that were “scalable.” So began the tale of how Taleb, one of the true geniuses of our time, threw his talents into trading securities as opposed to pursuing some craft whose payout hinged on his own efforts. Whereas a single bet on the capital markets — shorting collateralized mortgage obligations, going all in on European sovereign debt on the assumption that the European Central Bank and German politicians would never permit default — can move or destroy staggering amounts of wealth with no meaningful difference in effort, almost everyone else, even in an information-based economy, earns a paycheck based on some multiple of hours expended.

Again, I will mince no words. In the terms that Taleb has described, the overwhelming majority of livelihoods in law more closely resemble those of barbers, butchers, and bakers. Government attorneys, in-house counsel, and a very significant number of lawyers in highly leveraged, multiple-partner firms derive their compensation on a basis that lends itself to accurate calculation on an hourly basis. Lawyers working on any variant of the contingency fee model, far from achieving escape velocity from nonscalable work, bear the extra burden of assessing the likelihood of getting paid by a particular client for a particular case. Only the narrow tier of equity partners have a stream of income that remotely resembles those of Taleb’s “scalable” professionals. This is no different from medicine. Most physicians belong in exactly the same category. Revenue depends on patients seen and treated. The overwhelming majority of cardiologists draw their pay from the number of hearts cured. A tiny, lucky fraction might win a product patent for a stent or a process patent for a revolutionary surgical procedure. But even in medical specialties, runaway profit on some sort of nonscalable business model is a spectacularly rare exception. Human optimism emboldens us to hope for outsized gains. Human wisdom counsels us to work for realistic goals.

And as technology progresses, many of those non-scalable legal livelihoods will disappear.

I just posted this comment:

Excellent post. I am a huge fan of Taleb and Black Swan. What are your thoughts about the future quantity of “non-scalable” legal jobs–many of which will be absorbed by outsourcing and technology? If only scalable jobs remain, and non-scalable jobs continue to vanish, how can more law school graduates pursue those golden tickets.