Stable, transparent, not very complicated, reasonably profitable, and often quite collegial. It also has flaws.


As noted in Part I (330) of this “learning about law firms” series, it’s taken nearly two decades in the trenches, including many years doing applied work with law firms, for a very confusing and counterintuitive insight to come into focus:  Most large firms are not “firms” in the sense of conventional business theory.  Instead, they are a confederation of individual partners building and running leveraged practices in various complementary and adjacent legal specialties.

In today’s essay (Part II), I’ll add a second counterintuitive insight:  For the most part, lawyers pay little or no financial price for organizing themselves as a confederation rather than a firm.  Even in the event of spectacular collapse, as was the case with Dewey, Brobeck, Heller, Howrey, Thelen, and many other large firms, see ALM Staff, “30 Years of Law Firm Collapses: An Annotated Timeline,” Law.com, Oct 29, 2019, there’s always a large cadre of competitor firms looking to give the partners (and their fee-generating practices) a new home.  In most cases, what provides financial security and certainty to an equity partner is seldom the quality of firm-level strategy, or the ability of firm leadership to execute, but instead the health and vitality of their own practice.

This is what distinguishes law firms from conventional businesses. Like Legos blocks, individual law practices can be removed from one law firm and snapped onto another. 
Continue Reading Learning about law firms, Part II: Why confederation is our default model (332)

[click on to enlarge]

Apolitical technicians working in an ahistorical profession.  What are the odds of a happy ending?


The graphic above summarizes the U.S. top marginal income tax rate from 1913 (the year the 16th Amendment was ratified by the states) to 2021.  One clear takeaway is that for the vast bulk of the 20th century, the wealthy paid much higher taxes.

As the graphic suggests, however, that changed with the election of Ronald Reagan, whose inaugural address launched an ideological revolution with a simple and memorable message: “government is not the solution to our problem, government is the problem.”  Reagan Inaugural Address (Jan 21, 1981). Thus, with the public’s consent, top marginal tax rates were slashed throughout the 1980s.  At the 1988 Republican Convention, George H.W. Bush (Reagan’s VP) spoke the words, “read my lips: no new taxes,” which helped him defeat Michael Dukakis in the general election. See Lily Rothman, “The Story Behind George H.W. Bush’s Famous ‘Read My Lips, No New Taxes’ Promise,” Time, Dec 1, 2018.  Yet, the political mood of the late 1980s was also strongly anti-deficit. In 1990, when Congress enacted pay-as-you-go rules for federal budgeting, Bush, who was saddled with a massive Saving & Loan bailout, agreed to increase the top marginal rate from 28% to 31% — an act that arguably ended his political career.  See Howard Gleckman, “Reading President Bush’s Lips,” Tax Policy Center, Dec 5, 2018.

Since the early 1990s, much of the electorate has enjoyed the political stability and relative economic prosperity of the “End of History” era, which is a reference to Francis Fukuyama’s famous 1989 essay and 1992 book
Continue Reading The end of the “End of History” era (319)

The main residence of Veraton, Paul Cravath’s country estate, circa 1907. Source: “Veraton,” Old Long Island, Oct. 31, 2011.

Creating a baseline to measure the wealth, and building turmoil, of the current Gilded Age.


It is hard to imagine a more stark and tangible manifestation of the original Gilded Age than the large estates built along the Long Island Sound in the region that would later become known as the Gold Coast.  Yet, you may be surprised that such opulence was not limited to robber barons or captains of industry.  In fact, some of the very best real estate was owned by their lawyers.

Above is a photo of the main residence of Paul Cravath’s Veraton estate, which was built in 1905.  Shortly after completion, the lavish property was profiled in Town & Country magazine, which noted that Veraton “consists of over 600 acres of lawn, gardens, woodland, farmlands and paddocks. … The residence and outlying buildings are so placed that every advantage of beauty and utility has been obtained.”  See “One of Long Island’s Stateliest Homes,” Town & Country (Nov. 30, 1907) at 12.
Continue Reading The original Gilded Age lawyers (312)