This has only the vaguest of baseball connections — the oh-so-common Moneyball analogy — but I know a lot of lawyers read this blog, so I offer it up anyway:

When asked whether his firm might reduce prices in light of the meltdown, Linklaters senior partner David Cheyne replied, “[Clients] might have doubts as to whether a firm is really able to deliver quality at a suicide rate.”

I’m sure Mr. Cheyne is a supremely capable person, and perhaps he was misquoted, but he appears to be saying: quality = cost.

So can Linklaters deliver quality at $900/hour, but not at $700? Does that even begin to make any sense? Of course, if Linklaters can find enough clients who will buy their hours at $900 instead of $700, they will sell their hours for $900–that’s how markets set prices. But what does that have to do with quality? If clients will only agree to buy hours at $700, will the firm’s lawyers go on a quality sit-down strike? The banks that lost nearly a trillion dollars, were they using the $700 lawyers; and did the banks that avoided losses use the $900 lawyers?
Or does equating quality with cost just obscure our understanding of quality? . . .

. . . In nearly every field our understanding of quality has moved from capabilities to outcomes, from generalities to specifics, from one-shot to systemic, from lore to metrics, from entitlement to performance. As in so many other areas, law is behind this evolution, and now must catch up.

Baseball sometimes gets criticized for being hopelessly behind the times when it comes to business efficiency — there’s a reason why a business writer like Lewis was able to see what was going on in baseball before most people in baseball did — but it has nothin’ on the private practice of law. Thankfully for consumers of legal services, there are some Billy Beanes out there trying to exploit the inefficiencies.

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  1. Jason @ IIATMS said...

    Sounds like they think legals fees are “Giffen Goods”:

    In economics and consumer theory, a Giffen good is that which people consume more of as price rises, violating the law of demand. In normal situations, as the price of such a good rises, the substitution effect causes people to purchase less of it and more of substitute goods. In the Giffen good situation, cheaper close substitutes are not available. Because of the lack of substitutes, the income effect dominates, leading people to buy more of the good, even as its price rises.


  2. Jason @ IIATMS said...

    or Veblen Goods:
    Some types of premium goods (such as expensive French wines, or celebrity-endorsed perfumes) are sometimes claimed to be Giffen goods. It is claimed that lowering the price of these high status goods can decrease demand because they are no longer perceived as exclusive or high status products. However, the perceived nature of such high status goods changes significantly with a substantial price drop. This disqualifies them from being considered as Giffen goods, because the Giffen goods analysis assumes that only the consumer’s income or the relative price level changes, not the nature of the good itself. If a price change modifies consumers’ perception of the good, they should be analysed as Veblen goods.

  3. Kevin said...

    Legal outsourcing is really closer to getting Steven Spielberg’s nonunion Mexican equivalent than it is to exploiting a market inefficiency. Some clients like outsourcing, some don’t, but wait until a privileged document gets produced by someone in Bangalore and all the clients come running back to the US.

  4. dlf said...

    After years as a practing attorney in law firms and corporate legal departments, I now work for a LSO headquartered in Bangalore.  Having seen the colosal discovery screw-ups in practices in Atlanta, Boston, Charlotte, Denver, combined with billing practices that would make a whore blush and trial strategy designed not to optimize results but optimize attorney retirement packages … I am not particularly worried about clients going running back to the US over a privileged document being improperly revealed.  Faster, better, cheaper.  It works in baseball.  It works in legal services outsourcing.

  5. Roger Moore said...

    Baseball sometimes gets criticized for being hopelessly behind the times when it comes to business efficiency

    I sometimes wonder if this isn’t because baseball is really less efficient, but because it’s more transparent.  We can make informed criticisms of baseball player moves precisely because we know a lot about projecting player performance and we know about the available alternatives.  We don’t know nearly as much about the decisions and alternatives available to other companies, so we’re simply less able to point out their mistakes.

  6. Jason B said...

    “Legal outsourcing is really closer to getting Steven Spielberg’s nonunion Mexican equivalent than it is to exploiting a market inefficiency.”

    Senor Spielbergo?!?

  7. VanderBirch said...


    I think baseball has more inefficiency because there is a tremendous amount of satisficing taking place (something Boras is the unquestioned master of exploiting). Dredging out every last ounce of efficiency is a lot easier when a company deals with cordless phones or frying pans than baseball- there is a much less significant chance of emotion clouding rationality. Zito type contracts don’t happen as much in these markets.

  8. Grant said...

    This works in regards to education, too. By raising tuition you can attract better applicants, since people equate price with quality. Thus the smart thing to do is raise prices and provide a lot of financial aid, essentially offsetting the difference in real CoA.

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