In The Dot-Firm’s Dot-Bomb, writer Daniel Gross lays out more on the conventional wisdom on why Brobeck failed, and tries to generalize out to the law firm market. Here are some, um, surprising assertions:
- “During the ’90s, law firms happily rode the technology wave without fundamentally altering their business. As associates defected to dot-coms and venture capital firms, law practices raised salaries and hiked bonuses. But they didn’t seek to transform the business of law.”
Sounds good, but he misses his mark by a long shot. Technology spending in the legal market still lagged corporate America throughout the 1990s. And suggesting that they “happily rode the technology wave” is a laughable statement for anyone who’s been selling technology to lawyers. (Trust me on this one – I started my career in the 90s selling tech to lawyers. Still doing it, and it ain’t exactly a hot knife through butter.) And suggesting that the firms “didn’t seek to transform the business of law” is off by half. While it’s true that the profession as a whole has been slow to move off the billable hour, it’s by no means true that the business of law is a different landscape today from 1990. Wholly-owned subsidiaries and ancillary spin-offs are now common – for precisely the reasons Gross sets out above.
- “Most blue-chips occupy nice but not lavish offices and marketing is generally discreet – advertisements in the American Lawyer, booths at professional conferences.”
Whoa there. Has he been in a blue-chip law firm office lately? Marble floors, multi-story glass lobbies, oak paneling. “Nice but not lavish?” In that case, I’ll take a nice-but-not-lavish house, thank you very much. And the legal marketing profession blossomed in the 90s. By the end of the decade, Chief Marketing Officers at AmLaw 100 firms were making in excess of $200,000 (with some as high as $400,000 in salary) and were spending 2% of revenues on marketing. (For firms in the top 10, that’s a marketing budget of $10m to $20m.) You call that discreet? Right. Look at the airport kiosks in most major metropolitan airports – Womble Carlyle’s bulldog stares back at you in DC and other mid-Atlantic and southeast airports, Orrick’s Absolut-like “O” is in just about every major financial center in North America and Asia, and Fenwick & West was a full-page, full-color advertiser in The Industry Standard in the late 90s (and a sponsor of its tech conferences). And those are just the off-the-top-of-my head recollections. There’s more.
- “And so Brobeck began to do things that law firms didn’t do… [it] entered the venture-capital business.”
This reads as if other firms weren’t doing this. Check out this Fortune comment from last summer: “Valley law firms had long taken equity in some of their startup clients in lieu of fees, especially when the young firms had no money to spend.” Oops.
The story here (apologies for the skipping record quality of this tirade) is not that Brobeck failed. The story is why Cooley, Fenwick, Venture Law Group, Gray Cary and others are still around. What did Brobeck do that the others didn’t?Is anyone asking how a business that essentially zeroes out its balance sheet at the end of the year can amass $90m in debt?