The Number One Reason Why Lawyers Are Bad at Business

Although most lawyers probably earn a higher salary than the average person, it does not mean they are good businesspeople. When it comes to things like customer serviceleveraging technologybranding, marketing, and understanding key business metrics, a lot of law firms are behind the curve. But why is this the case? In my opinion, it boils down to one main thing. In this post, I’ll break down my thoughts on why lawyers are bad at business (it’s probably not what you’re expecting).

Why Lawyers Are Bad at Business

Don’t get me wrong. By asserting that lawyers are bad at business, I don’t mean to be insulting. It’s not that lawyers aren’t intelligent or good at what they do. In fact, it’s actually not even their fault. Essentially, what it boils down to is this:

Lawyers are bad at business because they have never really needed to be good at it.

I know you’re probably thinking, “what does that even mean?” It means literally just that. The reason why lawyers are bad at business is because there has never been a strong enough incentive for them to get better at it.

Blame It on the Guild

The legal profession is closely guarded, with a strict set of self-governing rules, a high standard for admittance, and above all, tight restrictions on outside ownership. As a result, it’s stodgy, slow moving, and resistant to change. It behaves like a guild, and despite the eradication of guilds from other industries centuries ago, the legal guild has managed to survive, even thrive.

This guild-like nature creates barriers. It makes the law inaccessible to outsiders and directly leads to the high cost of services. When you can charge any price you want and your customers have no better alternatives, there is no incentive to improve, be more efficient, or reduce prices.

The guild impedes innovation, limits the free flow of information, and is borderline monopolistic. It is precisely why lawyers are bad at business…because in the absence of normal supply and demand forces, and threats from more innovative competitors, lawyers don’t have to be good at business.

The Walls are Crumbling Down

A gradual shift is taking place in the legal marketplace, due to changing consumer sentiments and the rise of technology. The internet is essentially the antithesis of a guild, where everything is open and free. We are starting to see this openness break down some of the strong barriers of the legal guild.

There is now a wealth of legal information available for free online. Startup companies like Casetext are annotating the law and further exposing legal knowledge to the general public. Legal platforms like RocketLawyerUpCounsel and Avvo are making legal services more accessible and creating transparency in the market. With the UK leading the way, the rules against non-lawyer ownership of a law firm will eventually be overturned as well.

It’s only a matter of time until the legal guild, which has survived since the dawn of lawyers thousands of years ago, completely breaks down and goes away. It seems like a terrifying change, and the Richard Susskinds of the world have exacerbated lawyers’ fears with doom and gloom statements that “there is no future for small law.”

In my opinion, the breaking down of the legal guild will actually be a good thing, as long as we in the legal industry can embrace the change, and adapt appropriately. And the evolution begins with treating the profession more like a business, and starting to innovate!

The Future is Open Source  

If technology has taught us anything, it’s that openness is actually a key driver of innovation. Those that embrace it early on, and leverage it for their benefit, are well positioned for success in the future.

If you take a look at today’s biggest internet companies like Facebook and Twitter, you’ll notice that much of their success is driven by embracing openness. By exposing a wealth of valuable data to third party developers through APIs, these companies have built up their own technology driven ecosystems.

As each new third party company accesses the Facebook API to allow for signing in, sharing friend lists, etc., Facebook itself actually builds further network effects and becomes even more powerful. It seems counterintuitive that opening up your data and exposing it to third parties could ever be beneficial for a business, but that’s exactly what is happening.

As the guild breaks down and the legal industry opens up, I foresee a similar trend taking place. The law firms that thrive into the future will not be the ones clutching tightly to the old way of doing business. It will be the ones that innovate, the ones that adopt openness and technology, and the ones that leverage data to make better decisions for running their business.

Today, lawyers are still getting by despite being bad at business, but the time will come that won’t cut it anymore. The key to lawyers’ future success lies in the changes we make today. In order to stay ahead of the curve, lawyers need to adopt technology, embrace the movement toward openness, and start finding ways to be more innovative, kind of like a normal business.

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