Monday, September 27, 2010

Law, Detroit, and the Gold Rush

In a comment in response to my recent post about how a law professor can feel un-rich while still making more than $250K/year, one commenter suggested that the legal industry in America is like the Detroit auto industry 30 years ago.  By this I took it to mean that the legal industry has been operating generally free of competition for decades and has grown slack, complacent, over-paid, and used to making their product their way - and in for a great fall over the next couple of decades.

That got me thinking - I can see the parallels in that both the legal industry and the auto industry are not doing well, but there are a lot of differences between the industries, too.  As I thought more about the cost structures, the products and how they are sold through dealerships, and several other factors, the analogy started to work for me less and less.  So I asked myself - what would be a better analogy to the state of the legal industry at this time, especially from the point of view of those thinking about going to law school?  Here's what I came up with:

To me the recent flood of people going to law school seems more like a modern-day gold rush.  

Today's "miners" are like yesterday's miners in that they are lured by the very infrequent, but widely reported stories of someone striking it rich (when that does not represent the experience of most of the actual miners).   Instead of the newspapers screaming about someone find a huge gold nugget, they instead trumpet a starting salary of $160K.

Today's "miners" are also like yesterday's miners because they don't do their homework and just take off for "the land of opportunity" because "everyone there gets rich."  Unfortunately, when they get there they have to spend a lot of money for mining tools at inflated prices (for today's miners, this represents the cost of law school tuition.)  However, once they buy the tools/degree, they find that all best claims are taken - and nobody is even interested in taking on a junior miner/associate.  

Consequently, many of today's "miners" are ending up like the overwhelming majority of yesterday's miners - broke and starving.  However, as we all know, the people that sold the materials to miners did very well for themselves - just like today's law schools are doing very well for themselves by selling law degrees.

Unfortunately, there are two things about this modern-day gold rush that are even worse than the original.  First, law schools are charging more than "cash on the barrel head" like the original suppliers did.  Instead, law schools are putting today's "miner" in debt to the company store for their entire lives.  If the old miners wanted a clean start, they just had to go get another job - no so with today's "miners" because the debt will follow them anywhere they go - and may even be used to reduce their Social Security benefits in old age.

Second, many of today's "miners" are pretty close to minors.  It might not matter to some that you take people who have no experience with the real world and then saddle them with debt for the rest of their lives - debt that is not even dischargable in bankruptcy - but it matters to me.  In our society, there is such a tremendous sense of "for the children" that it amazes me that people are a complacent when their children are fed to the law school mill. 

That just don't seem right, pardner.


  1. Good post, the gold rush analogy is much, much closer than the auto industry analogy.

  2. While I agree with the general tone of this article, I think there is a critical, mitigating distinction to be made: law students know what law school(s) have accepted them for admission, and so law students can and should be able to assess their ability to "strike it rich". If you go to Yale/Harvard/Stanford/Columbia, your chances of landing a big firm job, even in this economy, are very good, and therefore not comparable really to the gold rush miners, who (at least in my understanding of California 1840s-1850s history) had no reasonable basis beforehand for thinking they would strike it rich. The same holds true, to a lesser degree, at other top schools. When I applied to law school in 2001, I only applied to T-14 schools, because I had determined that law school was not worth the likely pay-out at any other school (and I was fortunate to be in a position where it was reasonably likely I could secure admission at a school no lower than a Georgetown). And it all worked out for me: I went to a top 5 school, graduated in 2005, and have worked at a big law firm making good money ever since. I was motivated by money, but I wouldn't say that I was similarly situated to a miner (although I now live in San Francisco!).

  3. 2:06 - I generally agree that the higher up you go in the rankings the better your chances. However, you assert that the chances of getting a big firm job for the top firms are "very good" - maybe we should take a look at that. I will agree with you that the chances are better (everything else being equal) if you go to a higher-ranked school. I think that you will agree with me that even at the highest ranked schools, the odds are considerably worse than they were before the crash. Is a 50% likelihood of getting a big firm job "very good" in terms of odds? I have heard estimates that place it that low at Harvard. (FYI - we passed on a lot of Harvard grads this year.)

    Also, you mention that you (wisely) looked at potential return and considered it before going to law school. Also, I would suggest that the numbers that were told to you were more accurate than the numbers being told to students today.

    Further, let me clarify - I don't think that you were operating as a miner when you made the decision to go in 2001. In 2001 it is my impression that the law school numbers were reasonably accurate and that supply and demand were relatively evenly matched. Further, I don't recall a huge increase in the number of people going to law school with a simultaneous huge decrease in the number of jobs available. In summary - times were different in 2001 (they were also different for me in the early-to-mid 1990s).

    Today, with a huge increase in admissions, a huge decrease in law jobs, and law schools promulgating placement information that seems to have an ever-lessening basis in reality, the situation is much different. Also, the law students themselves seem different - fewer seem to be making the wise consideration that you did. More of them just seem to be grabbing at a law degree without a consideration of the consequences and costs (and don't forget it is about 2-3 times more expensive to go to law school now, even considering inflation.)

    Bad opportunity, lots of hype, people committing themselves based on a dream and ending up with nothing - that seems like the situation today (not so much in 2001, admittedly) - and that seems like a goldrush mentality to me.