Monthly Archives: March 2016

THE LATEST BIG LAW FIRM STRATEGY: PERFECTING ERROR

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NOTE: Amazon is running a promotion. The KINDLE version of my novel, The Partnership, is available as a free download from March 30 through April 3, 2016.

Two months ago in “Big Law Leaders Perpetuating Mistakes,” I outlined evidence of failure that most big law firm leaders ignore. Back in December 2011, I’d covered the topic in “Fed to Death” The recently released trade paperback version of my latest book, The Lawyer Bubble – A Profession in Crisis, includes an extensive new afterword that begins, “The more things change…”

The failure is a ubiquitous strategy: aggressive inorganic growth. In response to facts and data, big law firm leaders aren’t stepping back to take a long, hard look at the wisdom of the approach. Instead, they’re tinkering at the margins in the desperate attempt to turn a loser into a winner. To help them, outside consultants — perennial enablers of big law firms’ worst impulses — have developed reassuring and superficially appealing metrics. For anyone who forgot, numbers are the answer to everything.

Broken Promises

One measure of failure is empirical. Financially, many lateral partners aren’t delivering on their promises to bring big client billings with them. Even self-reporting managing partners admit that only about half of their lateral hires are above breakeven (however they measure it), and the percentage has been dropping steadily. In “How to Hire a Home-Run Lateral? Look at Their Stats,” MP McQueen of The American Lawyer writes that the “fix” is underway: more than 20 percent of Am Law 200 firms are now using techniques made famous by the book and movie “Moneyball.”

“Using performance-oriented data, firms try to create profiles of the types of lawyers they need to hire to help boost profits, then search for candidates who fit the profile,” McQueen reports. “They may also use the tools to estimate whether a certain candidate would help the firm’s bottom line.”

There’s an old computer programmer’s maxim: “Garbage in, garbage out.”

Useless Data

Unlike baseball’s immutable data about hits, runs, strikeouts, walks, and errors, assessing attorney talent is far more complicated and far less objective. Ask a prospective lateral partner about his or her billings. Those expecting an honest answer deserve what they get. Ask the partner whether billings actually reflect clients and work that will make the move to a new firm. Even the partner doesn’t know the answer to that one.

Group Dewey Consulting’s Eric Dewey, who is appropriately skeptical about using prescriptive analytics in this process, notes, “An attorney needs to bring roughly 70 percent of their book of business with them within 12 months just to break even.” He also observes that more than one-third bring with them less than 50 percent.

Of course, there’s nothing wrong with assessing the likely value that a strategically targeted lateral hire might bring to the firm. And there’s nothing wrong with using data to inform decisions. But that’s different from using flawed numerical results to justify growth for the sake of growth.

Becoming What You Eat

Beyond the numbers is an even more important reality. Partners who might contribute to a firm’s short-term bottom line may have a more important long-term cultural impact. It might even be devastating.

Dewey & LeBoeuf — no relation to Group Dewey Consulting — learned that lesson the hard way. During the years prior to its collapse, the firm hired dozens of lateral rainmakers. But as the firm was coming apart in early 2012, chairman Steven H. Davis was wasting his breath when he told fellow partners there wasn’t enough cash to pay all of them everything they thought they deserved: “I have the sense that we have lost our focus on our culture and what it means to be a Dewey & LeBoeuf partner.”

Half of the partners he was addressing had been lateral hires over the previous five years. Most of them had joined the firm because it promised them more money. They hadn’t lost their focus on culture. They had redefined it.

A FACT-FREE DIET

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A political campaign that once looked like a reality-based television series has revealed a broader truth. It was never reality-based at all. Reality requires facts, and facts don’t matter. Not anymore.

Some people look at the Trump phenomenon and see disaffected citizens who have become alienated. The political class ignored them for years; now they think that the Donald as President won’t. Others view Trump as the repository of racists and bigots. In the past, such individuals responded to subtle dog whistles of intolerance. Now they’ve found a socially acceptable vehicle for expressing their views loudly, publicly, and sometimes violently. The list of proffered explanations for Trump’s appeal is long. Most are pretty ugly.

This is Huge!

The micro view ignores the big picture – the really, really big picture. Trump sees it: Americans have learned to dismiss facts as irrelevant. The universal phenomenon that psychologists call confirmation bias does the rest. We tend to see the world in a particular way and, when contrary facts get in the way, we ignore them. If like minded others to do the same, that’s a movement!

This problem didn’t arrive with Donald Trump. He’s just exploiting it to new heights — or depths. Consider the hand-held banners at early Tea Party rallies: “Keep the government out of my social security!”

Facts haven’t mattered to the Obama “birthers” – Trump’s signature issue in 2011 as he turned increasingly toward politics. More than four years after President Obama released a copy of his birth certificate, 20 percent of Americans still believe that he was born outside the United States. Twenty-nine percent think he is Muslim.

Trump University? No Problem

Facts haven’t mattered to the candidate’s handling of the Trump University issue. Founded in 2004, it was never a “university” under New York law. In 2010, it became the Trump Entrepreneur Initiative with a Better Business Bureau rating dropping to as low as a D-minus. According to Trump’s attorney, the program accepted no students after 2010. The BBB received few complaints thereafter.

The BBB tried to publicize the straightforward facts about all of this. When a business stops having customers, it stops generating complaints: “As a result, over time, Trump University’s BBB rating went to an A in July 2014 and then to an A+ in January 2015.”

In the March 3 debate, Trump boasted about his “A” rating from the BBB. But the Bureau responded that it “did not send a document of any kind to the Republican debate site last Thursday evening. The document presented to debate moderators did not come from BBB that night.” Since September 2015, the Trump enterprise has had no rating at all.

Undeterred, Trump tweeted a photo of a BBB report showing an “A” rating for Trump University. To that, the BBB offered more facts to be ignored:

“The document posted on social media on Thursday night was not a current BBB Business Review of Trump University.  It appeared to be part of a Business Review from 2014.”

“I Can Make That Deal”

Then there are the facts that get woven into a Trump argument that makes no sense to anyone who understands them. Trump has referred repeatedly to America’s $58 billion trade deficit with Mexico. He juxtaposes that number with his infamous “wall” to keep illegal immigrants out of the country; it would cost $10 billion.

“That’s an easy deal. $58 billion deficit; $10 billion wall, I can make that deal,” he said in the March 3 debate.

Except that the $58 billion number has nothing to do with the $10 billion potential expense of Trump’s wall. The 2015 trade deficit resulted because Americans bought $294 billion in goods from Mexican companies, while Mexicans bought $58 billion less than that from United States companies. It’s not money that went to the Mexican government. It’s not a source of funds that Trump can tap to build a wall that gets higher every time a past or present Mexican president ridicules it. There’s no “deal” for him to make on his apples-to-oranges comparison of the $58 billion trade deficit to the $10 billion cost of a “really, really big wall.”

When Truth and Reason Become Casualties, Everyone Suffers

The list of Trump non-facts goes on and on and on.

“Thousands and thousands of Muslims cheered as the World Trade Center fell!” No evidence of that. But Trump says it, so it must be true. Who would tell such a big lie?

“The Mexican government is forcing criminals, drug dealers, and rapists into the United States!” False, offensive, and divisive.

“Obama plans to admit 250,000 Syrian refuges.” The real figure was 10,000.

“Islam hates America.” Absurd on its face, but only if facts matter to the listener.

For the final six months of 2015 alone, Trump led all other political candidates in The Washington Post’s compilation of the year’s most frequent recipients of “Four Pinocchios.” He notched eleven. But the Post’s more telling observation was this:

“Most politicians drop a claim after it has been fact-checked as false. But Trump is unusual in that he always insists he is right, no matter how little evidence he has for his claim.”

There’s unfortunate historical precedent for Trump’s use of hyperbolic rhetoric to exacerbate fear and generate divisions that spin out of control. In the world of “The Big Lie,” facts don’t matter – until they catch up with all of us.

At the conclusion of the Constitutional Convention in 1787, an interested spectator asked Benjamin Franklin, “Well, Doctor, what have we got, a republic or a monarchy?”

Franklin responded immediately, “A republic, if you can keep it.”

Keeping it requires citizens willing to allow facts and reason to produce informed decisions. Donald Trump – the master salesman and showman – has found a way to short-circuit that process in too many American minds. In November, we may all find out how many.

“LET THE PEOPLE SPEAK”?

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Lawyers parse words. But sometimes, even supposedly smart lawyers misuse them.  Senator Ted Cruz’s March 7 editorial in The Wall Street Journal has examples of both phenomena.

Distinctions Without a Difference

First, the parsing.

“Seldom has a Supreme Court vacancy arisen before the election in a presidential year,” Cruz writes. “Benjamin Cardozo, whom the Senate confirmed in February 1932, was the last justice confirmed to fill such a vacancy before the election.” He then notes that Republicans controlled both the Senate and the presidency.

The parsed phrase is “vacancy arisen before the election in a presidential year.” His citation to Cardozo as “the last justice confirmed to fill such a vacancy” is accurate. But only because it excludes lots of justices whom the Senate confirmed in a presidential election year, but who filled seats that had opened earlier.

The most recent example of a presidential year confirmation is Justice Anthony Kennedy. But Cruz’s parsing eliminates that comparison because Justice Kennedy filled the seat that Justice Lewis Powell vacated in June 1987. President Reagan’s unsuccessful nominations of Robert Bork and Douglas Ginsburg in 1987 pushed Kennedy into a presidential election year — 1988.

If the point is whether the Senate should act on a President’s Supreme Court nominations, Cruz’s proffered distinction is both disingenuous and meaningless. Incidentally, a Democratic-controlled Senate approved Kennedy’s nomination — 97 to 0.

Even apart from Justice Kennedy, the facts undermine Cruz’s core argument that history is on his side of this debate. The SCOTUS blog has a factual summary leading to this conclusion: “The historical record does not reveal any instances since at least 1900 of the president failing to nominate and/or the Senate failing to confirm a nominee in a presidential election year because of the impending election. In that period, there were several nominations and confirmations of Justices during presidential election years.”

Rewriting the Constitution

The other aspect of Senator Cruz’s op-ed is more troubling. As an honors graduate of Harvard Law School, he knows what the constitution actually says about the President’s obligations and the Senate’s responsibilities:

“[H]e shall nominate, and by and with the Advice and Consent of the Senate, shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court….” (Article II, Section 2)

Senator Cruz reads the founding fathers’ command out of the document. He writes, “I believe the Senate should fulfill its constitutional duty by letting the American people be heard in selecting the next Supreme Court justice.”

The Senate has no such “constitutional duty.” The President has a duty to nominate and the Senate has a responsibility to act on that nomination. To be sure, it can vote up or down on the selection. Some states conduct popular elections for state court judges. But the “American people” don’t get to nominate or approve federal judicial appointments.

Let Your Imagination Run Wild

The irony of Senator Cruz’s argument would not be lost on Justice Scalia, who dedicated himself to originalism. Regardless of whether you agreed with him, Scalia urged an interpretation of the constitution that respected its text and meaning. Applying that philosophy, he strove for consistency in its application.

For the lawyers who appeared before the Court, Justice Scalia was also an active interrogator. Imagine the questions he might have posed to Senator Cruz:

“Show me where, in the constitution, it says the Senate has a duty to let the people select a Supreme Court justice?”

“You say the election year makes things different. Why? Where does the constitution say ‘delay, delay, delay’?”

“If I accept your argument about the election year exception — which is nowhere in the constitutional language — what’s the limiting principle? Once we move away from the command of the text — “the President shall nominate” — why not make the exception two years long? Or three?”

“Do you agree that the constitution gives the Senate a duty to act on the President’s Supreme Court nominations? If so, at what point does the Senate’s failure even to consider a nominee make it derelict in the performance of that duty?”

“In your Wall Street Journal piece, you say that the Senate should ‘not consider any Supreme Court nominee until the people have spoken and a new president is nominated.’ Please show me a single word in the United States constitution that supports your position.”

The silence in response to the last question would be deafening.

TRUMP, CHRISTIE, EDUCATION, AND STUDENT DEBT

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Did anyone else notice Governor Chris Christie’s expression as he stood behind Donald Trump on Super Tuesday evening? Perhaps he wasn’t feeling well. Or perhaps he was discovering more than he wanted to know about the man he’d endorsed for the presidency of the United States.

Monday night before the big primaries, Christie had told his New Jersey radio audience, “I am the highest level endorser that Donald Trump has had. I’m the person with the most experience in governing that is in his circle.” He said that there was “absolutely no question” that Trump listens to him.

Self-Delusion

“I’ve known him personally for 14 years,” Christie continued. If so, he should ask himself why Trump would listen to him. Now that Christie has dropped out of the primary race, why isn’t he just the latest addition to the Republican front-runner’s list of “losers”? That’s Trump’s world — winners (like him) and losers (like Sen. John McCain). Besides, Trump prides himself as an outsider who disdains almost anyone associated with government.

Maybe Christie will be an exception to Trump’s loser rule. The day after Super Tuesday, a Fairleigh Dickinson University PublicMind poll found that the dominant word that New Jersey voters used to describe their governor was “bully.” The next most frequent adjective was “arrogant.” Maybe Trump sees those as redeeming qualities. Perhaps he sees a bit of himself in the New Jersey governor.

Political Death Spiral

There’s another possible explanation for the odd look on Governor’s Christie’s face Tuesday evening: unhappy realization. The New Jersey “bully” had become a Trump “tool.” He’d played all-in with his political career and the impact was swift and certain.

Christie’s former national finance co-chair, Meg Whitman, slammed him:

“Chris Christie’s endorsement of Donald Trump is an astonishing display of political opportunism. Donald Trump is unfit to be president. He is a dishonest demagogue who plays to our worst fears. Trump would take America on a dangerous journey. Christie knows all that and indicated as much many times publicly. The governor is mistaken if he believes he can now count on my support, and I call on Christie’s donors and supporters to reject the governor and Donald Trump outright. I believe they will. For some of us, principle and country still matter.”

According to the Fairleigh Dickinson poll, after endorsing Trump, Christie’s New Jersey statewide approval rating dropped from 33 percent to 27 percent.

Desperate Measures

Christie said that he didn’t agree with Trump on everything, but he did on taxes, job creation, and strengthening America’s leadership in the world. How does he know where Trump stands on anything? The only Trump “positions” on those issues are sound bites that produce audience applause, not substantive debate. His positions change constantly — even on whether he knows certain people.

For example, on Sunday morning, he told Jake Tapper at CNN that he didn’t even know who David Duke, the grand wizard of the Ku Klux Klan, was:

“Just so you understand, I don’t know anything about David Duke…I know nothing about David Duke. I know nothing about White Supremacists. And so you’re asking me a question about people that I know nothing about….I just don’t know anything about him.”

The next day, Trump said he didn’t hear Tapper’s question: “I was sitting in a house in Florida, with a bad earpiece. I could hardly hear what he’s saying.”

Anyone who buys that explanation deserves everything that Trump is selling.

On more substantive policy issues, Trump is all over the map. He says whatever gets him through the moment. He says whatever his audience wants to hear. For Republican primary voters supporting him, substance has yielded to anger that has created a cult of celebrity. They cheer empty words.

Actions v. words

But glimmers of Trump’s real self emerge from his actions. Here’s an example of Trumpism at work. Last fall, he decried the government for making money on student loans. In a November 2915 forum in Iowa, he added that too many graduates are “borrowed up, and they can’t breathe, and they get through college and the worst thing is, they go through that whole process and they don’t have any job.” If elected, Trump said he planned “do something very big with student loans” — including providing refinancing “for people who have loans who literally can’t do anything.”

“Something very big.”

What could it be? Something “great”; something “huge.” Maybe there’s a clue in Trump University.

It used a Wall Street address that implicated New York registration requirements. As Steven Brill reported last November, “New York State law requires that anything calling itself a university must apply, be vetted, have all instructors vetted and then be certified, none of which Trump did. Despite repeated warnings from state education regulators beginning in 2005, Trump persisted in operating out of 40 Wall St. until winding down operations in 2010.”

Before folding, the “University” was renamed the “Trump Entrepreneur Initiative.” It didn’t offer degrees. The course of study began with free seminars on insider real estate moneymaking techniques. It encouraged attendees to purchase additional sessions — up to one-on-one mentoring packages costing $35,000. It left many “students” in debt.

Measuring Success

But Trump’s program made money for Trump. According to Brill’s examination of public records, “Trump University collected approximately $40 million from its students – who included veterans, retired police officers and teachers – and that Trump personally received approximately $5 million of it, despite his claim, repeated in our interview, that he started Trump University as a charitable venture.”

Trump claims to have surveys showing a 98 percent satisfaction rate — “better than Harvard” — and is confident that he will win all of the pending lawsuits involving the now defunct “university” bearing his name. But perhaps what really bothers him about the government “making money on student loans” is that the money should be going to him instead.

By the way, because Trump University and its successor Trump Enterprise Initiative failed, maybe that makes him a loser, too.