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The traditional law firm pattern is that the Partners at the top are “rain makers”, and its their job to find and bring in new business. That’s it. In the midd

The traditional law firm pattern is that the Partners at the top are “rain makers”, and its their job to find and bring in new business. That’s it. In the middle layer, we have Associates. The senior Associates work closest with the Partners, and supervise the junior Associates. But they’re too busy learning how to “make it rain” and supervising clueless junior Associates to do any real work. The junior Associates do most of the real work that involves stuff where a law degree would help. Below that, you have legal secretaries, etc... In essence, the amount of real legal work you do goes up as you go further down the stack, but also you get lower pay. All the money the Partners make has to be paid for somehow! In essence, it’s a Ponzi scheme. And you know who the only people are who make any real money in a Ponzi scheme, right? There are law firms that get rid of the unnecessary overhead, and where you have Partners doing real legal work, but charging the same rate as the larger firms do for their junior Associates. And those Partners are still taking home a much higher percentage of what they bring in, because the firm has much lower overhead. Those Partners choose to work this way because it gives them more control over their work-life balance. They’re done being the General Counsel of some financial services company with over 22 trillion Euros of assets under management, and want to have some time they can spend at home on occasion with their spouse and their cats. Or travel for pleasure, or any of those other things “normal” people might want to do. Get rid of the Ponzi Scheme law firms. Find one of the smaller firms with a high concentration of very talented lawyers who don’t want to have to deal with the “big law firm” kind of shit.

grenoire 7y ago
In all fairness, big or small, that's firm hierarchy in law, finance, and accounting and control. The fairness of pay and average competency might be better in smaller ones, but it's just what it is (as unfortunate as that is). I deliberately chose a small financial consulting firm, and my experience has been really good for now, contrary to my friends', but the pay structuring is just the same everywhere.
AmericanChopper 7y ago
I know it’s a bit of a meme to call things a Ponzi scheme on HN, but what you’ve described isn’t even close to being a Ponzi scheme. If a big legal firm stops hiring associates, it’s not going to run out of money, it’s just going to stop growing. It’s also not an especially accurate description of how they work. Business development takes up proportionally more time for senior partners, but you have to have a lot of other management responsibilities before billables stop mattering. Juniors will generally be more concerned utilization, but they’ll also be billing for a lot less.
- close04 7y ago
  Maybe he meant a Multi-Level-Marketing (MLM)?
arethuza 7y ago
Speaking of "clueless" - I introduced my partner, who is a lawyer, to the loser|clueless|sociopath categorisation which seems particularly useful in the legal world!
afarrell 7y ago
> In essence, it’s a Ponzi scheme. Calling it a ponzi scheme is a distraction to your point because you're mistaken about the essence of a ponzi scheme. The key element of a ponzi scheme is that it captures resources primarily by in the process of new people being recruited to join. But junior associates don't need to "buy in" to a law firm when they get hired. They get paid a salary. The firm captures resources by getting paid by clients. It just seems that their salespeople are also former junior associates. Your argument has nothing to do with ponzi schemes. It has much more to do with the efficiency of hierarchies. This point becomes more clear if you think about your use of the phrase "real legal work": - How much code is written by the CTO of a company with 120 engineers? - How many burgers are flipped by the owner of a restaurant with 12 locations? - How much coal is shoveled by owner of a coal mine? You can argue that because the manager of a mine isn't gathering resources at the coalface, he's not creating value. But that is a different argument than saying the coal mine is a ponzi scheme.
- vidarh 7y ago
  Top law firms are somewhat special, though. I agree it is not a precise fit for a ponzi scheme, but I can see where the comparison came from. My ex worked for one of the largest law firms in the world in London. She was billed out at 200 pounds+ and hour fresh after qualifying, but her hourly salary accounting for unpaid overtime was lower than that of her secretary, because graduates to top law firms "buy in" by quietly accepting accepting working conditions that at least in the UK means meeting expected billable hours that are close to physically impossible without violating working time regulations, even after signing a "voluntary" opt out of the parts that can be opted out of. These companies are only able to post the profits per partner they do because graduates work at well below their market hourly rate for years as a "buy in" in the hope of making it back as partner years down the line. The vast majority never make it, of course. Someone who is capable of getting a graduate position in one of the Magic Circle firms in London for example, can earn far more per hour worked elsewhere, but at a lower yearly salary. For starters they could get a job as a secretary or other support staff in a Magic Circle firm... It takes years before the effective hourly salary of lawyers in those firms outpace the hourly rates of support staff or lawyers at many less aggressive firms. These graduates are not directly buying in by paying the firm, but they are indirectly buying in by accepting those reduced hourly rates in the hope of that future payoff that most of them will never see. This kind of milking salaried employees to boost payoff at the top certainly happens in other business too, but the big law firms have elevated it to an art. I've never had a tech company try to sell me on what my salary will be 10 years down the road to get me to work massive amounts of overtime, for example. Some do try to play up their expected value of stock options, though, which is somewhat similar, but where in tech it tends to be startups that can't afford to pay high salaries now, in law it tends to be the big firms that are paying out high profit shares to partners now, which feels distinctly different.

grenoire 7y ago

In all fairness, big or small, that's firm hierarchy in law, finance, and accounting and control. The fairness of pay and average competency might be better in smaller ones, but it's just what it is (as unfortunate as that is). I deliberately chose a small financial consulting firm, and my experience has been really good for now, contrary to my friends', but the pay structuring is just the same everywhere.

AmericanChopper 7y ago

I know it’s a bit of a meme to call things a Ponzi scheme on HN, but what you’ve described isn’t even close to being a Ponzi scheme. If a big legal firm stops hiring associates, it’s not going to run out of money, it’s just going to stop growing. It’s also not an especially accurate description of how they work. Business development takes up proportionally more time for senior partners, but you have to have a lot of other management responsibilities before billables stop mattering. Juniors will generally be more concerned utilization, but they’ll also be billing for a lot less.

close04 7y ago
Maybe he meant a Multi-Level-Marketing (MLM)?

arethuza 7y ago

Speaking of "clueless" - I introduced my partner, who is a lawyer, to the loser|clueless|sociopath categorisation which seems particularly useful in the legal world!

afarrell 7y ago

> In essence, it’s a Ponzi scheme. Calling it a ponzi scheme is a distraction to your point because you're mistaken about the essence of a ponzi scheme. The key element of a ponzi scheme is that it captures resources primarily by in the process of new people being recruited to join. But junior associates don't need to "buy in" to a law firm when they get hired. They get paid a salary. The firm captures resources by getting paid by clients. It just seems that their salespeople are also former junior associates. Your argument has nothing to do with ponzi schemes. It has much more to do with the efficiency of hierarchies. This point becomes more clear if you think about your use of the phrase "real legal work": - How much code is written by the CTO of a company with 120 engineers? - How many burgers are flipped by the owner of a restaurant with 12 locations? - How much coal is shoveled by owner of a coal mine? You can argue that because the manager of a mine isn't gathering resources at the coalface, he's not creating value. But that is a different argument than saying the coal mine is a ponzi scheme.

vidarh 7y ago
Top law firms are somewhat special, though. I agree it is not a precise fit for a ponzi scheme, but I can see where the comparison came from. My ex worked for one of the largest law firms in the world in London. She was billed out at 200 pounds+ and hour fresh after qualifying, but her hourly salary accounting for unpaid overtime was lower than that of her secretary, because graduates to top law firms "buy in" by quietly accepting accepting working conditions that at least in the UK means meeting expected billable hours that are close to physically impossible without violating working time regulations, even after signing a "voluntary" opt out of the parts that can be opted out of. These companies are only able to post the profits per partner they do because graduates work at well below their market hourly rate for years as a "buy in" in the hope of making it back as partner years down the line. The vast majority never make it, of course. Someone who is capable of getting a graduate position in one of the Magic Circle firms in London for example, can earn far more per hour worked elsewhere, but at a lower yearly salary. For starters they could get a job as a secretary or other support staff in a Magic Circle firm... It takes years before the effective hourly salary of lawyers in those firms outpace the hourly rates of support staff or lawyers at many less aggressive firms. These graduates are not directly buying in by paying the firm, but they are indirectly buying in by accepting those reduced hourly rates in the hope of that future payoff that most of them will never see. This kind of milking salaried employees to boost payoff at the top certainly happens in other business too, but the big law firms have elevated it to an art. I've never had a tech company try to sell me on what my salary will be 10 years down the road to get me to work massive amounts of overtime, for example. Some do try to play up their expected value of stock options, though, which is somewhat similar, but where in tech it tends to be startups that can't afford to pay high salaries now, in law it tends to be the big firms that are paying out high profit shares to partners now, which feels distinctly different.