Your fancy lifestyle is killing innovation in legal services.

19th May 2017

Ski trips, gym memberships, fancy salads, a lease car, a house within a reasonable distance of a major metropolis, child care, school fees, cleaner, crisp suits and designer shoes.

These are the perks of the well-paid professional career and in this post I'm going to try to persuade you that they are also the things that kill innovation in legal services.

In the business world, giant leaps forward invariably come from entrepreneurs - those bold individuals who risk their own time and money to create something new and disruptive in search of profit. 

Such risk is an inherent part of innovation and the popular theory is that there is something in the psyche of members of the legal profession that makes them unwilling to take on risk. 

I think such arguments are pretty ridiculous and prejudicial treatment of a large category of people based on nothing more that a career choice is bordering on discrimination.

The simple fact is, that risk stakes are considerably higher for someone already in a successful legal career than they are for the population in general. 

Here's why - 

Ask the people of the Clapham omnibus to define the minimum turnover of a successful enterprise and I doubt you would hear a figure below a million pounds. I've tried this with friends and the answers is usually in the tens or hundreds of millions.

Yet according to the Office of National Statistics, the mean annual turnover of a UK company is just a little over £500 thousand pounds, which would result in a profit for its owner of somewhere around the £100k mark.

Success needs to be higher in legal services.

And there's the rub. 

There many people in the population generally - most people, i suspect, who would be very happy with a 100 grand salary and, if they had a good idea and entrepreneurial tendencies, might be willing to put all their time and money at risk in the hope of achieving it.

If the average salary is 27 thousand a year and the average business is returning 100 thousand a year, the risk is compensated four fold.

But in commercial law firms , the numbers don't stack up quite so favourably. Salaries in City law firms are so high relative to the likely rewards of starting a business, that there is a very real possibility that someone leaving the law to start an innovative new business, could make a very good go of it and still not be much better off than if they stuck with the day job and hadn't bothered taking the risk at all.

Legal start-ups need to be exponentially more successful than other businesses to be worthwhile for their founders, and the further you move away from the mean, the less likely a particular outcome becomes.

So the problem with "risk" as it applies to entrepreneurial endeavours, is not that lawyers are averse to it per se, but rather that the personal stakes are considerably higher in legal services than they are in other sectors. Individuals are making that calculation and deciding instinctively that the risk just isn't worth it for them at this time.

The opposite of this theory explains why so many very successful businesses are built under the direction of immigrants.When someone arrives in a new country, with no money, no network and no new job to lose, the balance of risk vs reward of starting a business stacks up so favourably, that nothing can hold them back from giving it their all.

It is the comfortable lifestyle that a city law career currently affords that puts the breaks on innovation, not some mythical personality trait dished out at law school on qualification. 


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