Ken Allen is a partner with 25 years experience at the law firm of
Townsend and Townsend and Crew (yes, all at one firm) and as a patent prosecutor
in the electronics field, he is always looking for qualified talent to
assist him. This interview was conducted in March 2000 by Skip Horne
of the University of Santa Clara School of Law for an article in a recent
publication of the National Association for Law Placement (NALP).
In April 2000, the NASDAQ tanked.
Q.: If an associate came to you and said "I'm thinking of leaving the firm for XYZ.com," what are the top three issues you would make sure they've considered?
A: First of all, I'd say: "Go for it, if you've got the stomach!" But I'd offer a few touchstones as a reality check.
The number one consideration is impact on personal career and life. Whether a firm or a dot-com, it depends on which devil you want to make a deal with. Both can exact a heavy price in terms of personal commitment and/or time to meet the targets needed to establish and sustain a viable business. Comparing a firm to a dot-com is like comparing the commitment of the chicken and the hog. In one case it is merely time-consuming; in the other case, it involves total commitment. Do you want to produce fried eggs or bacon?
The second risk-reward consideration is the realistic prospect of success of a dot-com company. Frankly, most fail. The dot-coms are in the business of marketing ideas and vision, not profitability. Also recognize that the press is very good at hyping the apparent successes, because they are so unusual. You don't hear the news about the failed public offerings, or what happens at that magic date when the market is flooded with formerly restricted stock. There are also failures that don't even make it past the underwriters. The principals don't want the failure publicized, for obvious reasons. It is important to understand the business models of the dot-com company you have in mind. Most starry-eyed recruits are ill-equipped to do that, and many end up looking for other prospects or are knocking on the door of their old firms. Firms on the other hand must be profitable to be self-sustaining. The business model is well understood. Money in, render services, pay your bills, split the profits. In a firm you can generally risk investing without risking your livelihood. Not so in a dot-com. There is generally no profit. You are playing with other people's money.
The third risk-reward consideration is the people involved. Do
you trust the people that they can actually execute on their business model?
Do you have confidence in the integrity of the people who are running the
operation? Are the people you are going to work with competent?
Do they have a track record? Can you go home and sleep at night with
a clear conscience?
Q: What are law firms doing to try to stem the tide of attorneys leaving for dot-coms? (Or if they're not doing enough, what should they be doing?)
A: Firms are paying associates more and giving them more say in their career future. Whether it is enough is debatable. I am not sure it will stem the tide. I don't think it is in the long-term benefit of all firms or their clients to pay for talent that doesn't generate more revenue than it costs, unless the clients understand that the market for good legal talent is extremely tight and they are willing to absorb the cost increases. We could see firms fail for lack of profitability as companies take their legal work in-house, if they can, in order to control the inevitable increase in costs as the supply-demand imbalance is corrected. That is one of the reasons for the brain-drain to dot-coms. They are paying for their dreams with dreams.
I think firms should try to sell associates on the benefits of working in a firm with fine people and a wide variety challenging problems where work quality is highly valued and there is respect for a job well done. Sometimes the sense of pride in good works is worth far more than money. I would much rather die a happy Albert Schweitzer than a rich Howard Hughes.
Q: What are your thoughts on how long this trend is going to be around?
A: Psychological factors could cause the "trend" such as it is, it to end tomorrow. I hope not, but the adage is to buy on rumors and sell on news. Right now, we are living on rumors, punctuated with hopes and dreams. So long as there is true wealth creation, at least some aspects will continue. The dot-com companies are an interesting study of a micro-economy. Most other sectors are not so prosperous. Just use your favorite dot-com stock tracker to check the historical data for the industrial giants of the world.
The dot-coms are a remarkable confluence of wealth creation, optimism
and demographics. We are seeing the robustness engendered in a microeconomy
where taxes are minimal or nonexistent. Taxes could kill the boom
overnight. There are lots of baby boomers with disposable income.
Large amounts of funny-money are chasing a limited supply of investment
opportunities. The microeconomy in which we participate is also suffering
from a lack of an adequate supply of good, trained professional talent
in law, accounting and the sciences to service this microeconomy.
Salaries for such people will soar as their talent is bid up. It
doesn't take a math genius to realize that a correction in any one of these
categories will cause the proverbial bubble to burst. It's happened
before; it will happen again.