Bill Henderson on The Business of Law

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I interviewed Bill Henderson | Professor and Stephen F. Burns Chair on the Legal Profession at Indiana University on Wednesday, August 21st, 2019.
We started the episode by hearing how Bill went from firefighter to law professor. He shared about the market collapse in 2008 and how law schools had to change their tactics surrounding enrollment. We discussed a curriculum he is building that helps attorneys be more productive using data analytics. We then moved into a conversation about the Legal Evolution blog’s hottest topics. We then discussed his take on the Big Four and vulnerable law firms.  We discussed how some influential states are moving towards non-attorney investment in law firms and his predictions for the future. We discussed a law student residency idea. He shared about his family and some bucket list travel items. We then discussed his book recommendations and a must-listen speech by Charlie Munger. We finished things out with some law student advice.

Here are some highlights of my interview with Bill Henderson:

The legal field is going to be more multidisciplinary.

We need to redesign how attorneys approach data.

One of the huge issues we have is $600 – $800 an hour lawyers that don’t understand there’s a better way to do something and the value it delivers to clients. 

If you’re a midsize law firm, you have something to worry about if you want to stay an independent entity. 

Law firms have to invest if they want to go toe-to-toe with the Big Four. You’ll either get your paycheck from a PWC or you will get it from Baker McKenzie or Latham, etc. At some point or another, your lawyers can vote with their feet and go to your competitor that’s made bigger investments. 

If you’re a law firm managing partner, it’s time to wake up. You’re in a game of strategy and the old model is not going to last.

Big, sophisticated law firms are eyeing how to take the middle market and starting to make big investments in talent, big investments in technology, and big investments in process.  

I was a disbeliever until I got called up to draft California’s landscape report relating to allowing non-attorney investment in law firms.

As a law student, you need to use your reasoning ability to think independently and you have to be comfortable reaching your own conclusions and testing them against other points of reality. You’ve got to learn to think for yourself.


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Links referred to in this episode:

Bill Henderson | LinkedIn Profile

Institute for the Future of Law Practice

Legal Evolution Blog

Diffusion of Innovations | Theory Definition

Association of Professional Responsibility Lawyers

Richard Susskind | Tomorrow’s Lawyers: An Introduction to Your Future

Daniel Kahneman | Thinking, Fast and Slow

Chris Argyris | Teaching Smart People How to Learn

Carol S. Dweck | Mindset: The New Psychology of Success

Peter Thiel | Zero to One: Notes on Startups, or How to Build the Future

Cal Newport | Deep Work: Rules for Focused Success in a Distracted World

Robert Wright | Why Buddhism is True: The Science and Philosophy of Meditation and Enlightenment

Ray Dalio | Principles: Life and Work

Charlie Munger’s Speech | The Psychology of Human Misjudgement

Bertrand Russell | A History of Western Philosophy

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Audio Transcription 

To Download the PDF Transcript, click here. (Look in the top right corner and click on the three dots to download.)
Greetings friends, this is Chris Batz, your host of the Law Firm Leadership podcast. In today’s episode, I spoke with a former firefighter and paramedic turned attorney who is now a highly-regarded US law professor. You don’t want to miss this.      
Just a reminder, the PDF transcript of this audio is available to download. Go to LionGroupRecruiting.com/podcast. 
As many of you know, we interview corporate defense, law firm leaders, partners, general counsel, and legal consultants. You are listening to episode thirty-seven of the Law Firm Leadership podcast.
Chris:  Welcome to the Law Firm Leadership podcast. I’m your host, Chris Batz with the Lion Group. Today I have the pleasure of speaking with Bill Henderson, a law professor and the Stephen F. Burns Chair on the legal profession at Indiana University Maurer School of Law. As a law professor, Bill instructs students on business law, project management and the economics and structure of the legal profession. 
Bill is also a master plate spinner, having influenced or cofounded many ventures, such as the Institute for the Future of Law Practice or also known as IFLP, which creates curriculum and organizes paid internships for T-shaped legal professionals. He is also the founder and primary editor of Legal Evolution, an online publication focused on solving very difficult legal industry problems. Bill received a double bachelor’s degree in economics and history from Case Western and his law degree from the University of Chicago. Welcome, Bill, to the Law Firm Leadership podcast. It’s great to have you on the show. 
Bill: Wonderful, Chris. Thanks for having me. 
Chris: Bill, you really are an influencer of the entire law profession. Thank you, again, for your time. I really appreciate it. 
Bill: My pleasure. Thanks, Chris. 
Chris: Let’s just jump in with what got you into the legal profession.

Firefighter and Paramedic First

Bill: I went to law school later in life. I was 35 when I started law school. To go back to my undergraduate days, I did my first years at Case Western Reserve. Then I went and did my junior abroad. The zeitgeist of the 1990s was the Reagan Revolution. I didn’t want to be a part of the Reagan Revolution during my time at the Lund School of Economics, so I dropped out, came back to Cleveland and ran a small business and eventually got a job as a firefighter/paramedic. 
It was only as a union rep that I began negotiating contracts and doing grievances, where I was working across the table from attorneys. I found I was highly engaged in that, so I got pulled back in. You can’t go to law school unless you finish college, so I finished my undergraduate degree and with some mentorship ended up going to law school at the University of Chicago. 
Chris: Did you begin teaching then or did you practice law?
Bill: At Case Western Reserve there was a law professor that made me think that that may be what I wanted to do. I started producing scholarship while I was in law school that would build my academic file. I had a couple of mentors at the University of Chicago that said, “Look, if you can get a teaching position because you’re a little bit older, you should go for it.” After my time at the Court of Appeals for the Seventh Circuit Chicago – Chicago gave me a visiting position. I got a grant to do some research, so I built my scholarship file even more. Then, Indiana offered me a job. That was a tier-one law school, so I took it. 

Teaching The Business of Law

Chris: Can you share the course curriculum that has made you put your stake in the ground for who you are as a law professor?
Bill: Going back to my University of Chicago days, one of the most memorable experiences was my classmates doing on-campus interviews. They were frantically trying to decide between all these different law firms. The firms were more alike than they were different. One critique I had of my classmates was that they were really choosing among firms that came to campus and they weren’t pulling back and seeing how they could use their gifts to drive a satisfying career. It seemed like they were adopting the values perspective of the herd as opposed to thinking about themselves as individuals. 
Anyway, I created a course at Indiana called How Law Firms are Businesses because I wanted my students to have time to reflect upon the career. From teaching that course, I started pulling data sets from American Lawyer and started writing articles based upon stuff that I was discovering by teaching this class in Indiana. Nobody had ever built a specialty on the business of law. I fell into it by accident because my students were interested. I was enjoying teaching. I liked writing these articles. Then the world started to shift in 2007 – 2008, first the market overheated and then it collapsed, so I was the right person at the right time. That launched my career in terms of doing empirical research on the legal industry and legal education. 
Chris: Give us a perspective of what has happened to the business of educating lawyers. What’s changed over the years?
Bill: Between 2003 and 2007, the market overheated and entry-level salaries went from $95k and grew to $160k. There was so much demand for corporate legal services that it was escalating. In 2008, with the financial crisis, it went from about 25% of Indiana law students getting jobs in large law firms to the whole market collapsing.
If you entered law school in 2010, you graduated in 2013 and the market was terrible. Since then, law school enrollment has fallen by almost 30%. The word innovation began to be used by law schools because the world had changed and in order to have people enroll in law school, we had to figure out what’s going on in the market. We’re in the early stages of sorting out a 100-year flood paradigm shift. It’s not settled how things have changed except that things have changed. 

Teaching Attorneys be More Productive with Data Analytics

Chris: Please share with us what’s going on with the Institute of the Future Law Practice. 
Bill: The institute builds curricula related to what we call T-shaped legal professions. Law school provides deep substantive knowledge. That’s the bottom of the T, but the horizontal portion of the T at the top is data analytics, process project management, technology, design thinking, and business operations. We need to redesign how attorneys approach data for ordinary people in the state court as well as redesigning how an attorney approaches the most complex corporations with work in 100 different countries and a variety of regulations to comply with. It’s the full spectrum. 
For every hour of legal professional effort, we need to get more done by increasing productivity. The only way that’s going to happen is to combine law with allied disciplines like the top of the T. We’re not the founders of this. We just think the legal academy is not well situated to adapt in a timely fashion to build out that curricula, so we’re building that curricula outside of the academy. We’re arranging for students to get jobs that go through our program. We’ll eventually bolt this back on to the traditional law school curriculum, but we want to prove the concepts that these curricula get students on the tremendous upward mobile paths in the legal industry building upon these skills. 
We’re a 501(c)(3) nonprofit founded in 2018 after a four-year pilot at Colorado Law School. We started with one boot camp in Chicago in 2018 and now we’ve got three boot camps in Colorado, Chicago, and Toronto. We’re out there raising money so we can build these curricula that will eventually be used to up-skill the legal profession. 
Chris: Describe the attorneys being produced from these curricula you’re developing. 
Bill: With the way the world is heading, the legal field is going to be much more multidisciplinary. We’re trying to set people up so they have enough foundational knowledge to collaborate effectively in these organizations and to understand what’s possible. If you’re a fifth-eighth year attorney but you have never been exposed to any kind of data visualization, data analytics, or the power of process, you don’t know much about business operations principles or design thinking and you become too expensive to train. You become a bottleneck in change efforts. 
The idea is to give people exposure to these disciplines enough to be fairly conversant at them so they become part of the coalition of the willing when clients push for different ways of solving legal problems.  One of the huge issues we have is $600 – $800 an hour lawyers that don’t understand that there’s a better way to do what they’re doing and it can give clients more value. They’ve never been educated on it. Part of this is to install it in young lawyers early in their career, but another possibility is to create a mid-career professional program – super time-efficient, fun, low-per-unit cost, very relevant, so what you do on Monday and Tuesday, you can use at your job on Wednesday. 

Disseminating Knowledge via an E-Learning Platform and Classrooms

Chris: When do you see the more veteran attorneys tapping into that e-learning platform?
Bill: You always go with the coalition of the willing, the people that are young at heart, and the people that are curious. We’re hoping to build out these offerings in the course of the next one to two years. We’ve got to raise the money to do it. You can take a subject matter expert and have them give a lecture. The only problem with that is you can’t scale it. That person who is giving a lecture should be doing other work, so it’s not efficient over time to have them repeat themselves over and over again. 
An alternative is to take that intellectual know-how, do it once and then put it into something that can be scaled and delivered to thousands of people at a very high-quality level. Then, everybody wins here, but it’s capital intensive. You have to choreograph the lecture. You have to put it on an e-learning platform that is fun and easy to use and add in some assessments and some annotated checklists and learning aids. With this option, when an attorney says, “My clients ask me about data analytics. I don’t know much about it,” within two hours they actually can learn quite a bit. They can do it at their own desk and at their own pace. That’s the vision that we’re moving toward. 
Chris: Bill, will these training sessions be licensed to law schools or will attorneys come directly to you for it?
Bill: We hope that this will migrate into the second and third year of law school so it gets installed early. I don’t know exactly how that business model is going to play out with this. We want to build it and we want to recoup the cost of building it, so there’s a variety of different ways we could do that. It will most likely be a certification program. Parts of it will be through e-learning and other parts will be live. You can learn knowledge asynchronously, but you can’t learn skills and judgment asynchronously. You have to learn that in context, so it’s going to be a mix of live and e-learning. The goal is not to make a profit but to disseminate knowledge. 
Chris: Are these training sessions also applicable to corporate legal departments and their attorneys?
Bill: There are now as many lawyers working in-house in US companies as there are lawyers working at the Am Law 200 domestically. If you look at some of the bigger legal departments, they’re really law firms embedded inside corporations. They’re starting to be broken down by different practice groups. If you could get a headcount of lawyers, they’d be Am Law 200 easily. 
We’re trying to create training that is on both sides of buy and sell. A lot of this taps into the field of legal operations. Legal operations has been viewed by many as a role inside a legal department, but actually it’s a role inside any legal service organization. You see the term legal operation showing up a lot in law firms these days, so there’s a lot of innovation. That’s the space we’re playing in. 
Chris: Can you share about your blog, Legal Evolution, and any specific topics that are being hotly read, commented on, or debated/discussed? 
Bill: Legal Evolution was formed in 2017. There was a need to cover innovation on a deeper dive. More than a newspaper article, but less of an academic article and written in a more accessible way, but still analytically rigorous and with citations to data and theory, etc. The main thing that I’ve written about on Legal Evolution is applying diffusion theory to different examples of legal technology, legal startups, and some innovations taking place in either legal departments or law firms. If you hit the About page on Legal Evolution, it cites a bunch of serial foundational posts. The Diffusion Theory is a well-developed theory in the social sciences for how innovation gets adopted. I just apply it to law and you’ll find many articles on that subject.
What gets a lot of traffic is anything related to law firm competitive strategy. There’s a fair amount of information related to legal education. Jae Um, who’s a thought-leader in that space, writes a lot about legal tech and she gets a ton of traffic-related to that. I’ve got a couple of legal technologists that have written for us and they explain things like platform as a subscription as opposed to software as a subscription. We’ve written about Microsoft a lot and the stuff they’re doing with their Trusted Advisor program. 

Vulnerable Law Firms and The Big Four 

Chris: In addressing competition of law firms, what’s your perspective on the Big Four as they begin to encroach on the world of law competitively in the United States?
Bill: It may be perceived as a threat to law firms, but it’s not a threat to lawyers because the Big Four hires lawyers. A lot of my students work for Deloitte, PWC, EY, and KPMG. Is a lawyer’s job going to go away? No, you join these great global professional service organizations. Is it a threat to lawyers? No, it’s an employer for lawyers. What it really is is a threat to lawyers guarding their pie who want to own everything. The Big Four are getting into that space. They’re starting a more operational commodity-type legal work. They’re doing a lot in Europe. They’re selling to general counsel, so legal work is being done, but being sold into a lawyer-to-lawyer business. I think it’s really overblown. 
If you’re a midsize firm, you have something to worry about if you want to stay an independent entity. But the thing is that at some point or another, your lawyers can vote with their feet and they may go to your competitor that’s made bigger investments. These law firms have practice expertise or specializations that they’re known for. The Big Four don’t have the leading M&A practice or regulatory practice. They can’t do that, so they’re doing more operational and commodity type of work. Firms have got a strong hand to play, but they need to invest in the kind of stuff that the Big Four have invested in.
I think this is going to play out, but, to me, it’s overblown. Firms are going to have to invest if they want to go toe-to-toe, but lawyers will make a living. You’ll either get your paycheck from PWC or you get it from Baker McKenzie or Latham, etc. If you’re a law firm managing partner, it’s time to wake up. You’re in a game of strategy. Are you going to make strategic investments? Your old model is not going to last. 
Chris: Bill, define for us midsize firms and the firms that you would perceive as vulnerable. 
Bill: Regional firms that aren’t making investments in process and find that they really have a difficult time tracking the best in class people will have continued difficulty as some law firms make a play for what is called the middle market.  Big, sophisticated law firms are eyeing how to take the middle market, some of which become bigger companies later on. They’re starting to make big investments in talent, big investments in technology, and big investments in process. They have a global footprint. 
The super-regionals are going to have to make investments. I won’t name names, but any firm that’s in the National Law Journal between 50 – 350 are all somewhat vulnerable. To be a fairly general service and to not make these investments, that’s going to make you vulnerable. 

Permitting Non-Lawyer Investment in Law Firms

Chris: Let’s talk about law firms taking on non-attorney ownership. What is your prediction, Bill, to the ABA eventually caving and allowing this to occur in the United States? 
Bill: The ABA serves only in an advisory role by promulgating the model rules. The model rules are influential with the state bars and state supreme courts to get adopted because a lot of thought goes into drafting that. Right now we have states out west like Arizona, California and Utah that are thinking about modifying rule 5.4 to permit non-lawyer investment in businesses that practice law. There are going to be jurisdictions that begin to say, “Hey, for access to justice reasons, we can’t abide by the status quo,” because there’s too much self-represented litigation going on at state courts. Some states are going to go first and change the rules. 
Nobody’s bound by the ABA. There are groups of lawyers like the Association of Professional Responsibility Lawyers. They’re pretty influential and trying to move the states and the ABA along to modifying rule 5.4. I think it’s going to change. It provides the capital that’s necessary to begin to speed up the innovation process. Even if we change the rule, it doesn’t change things dramatically. 
Chris: Would you say it’s a matter of when versus if?
Bill: Yes. Richard Susskind went on record in his recent book Tomorrow’s Lawyers that over the next 20 years, the entire global profession will be liberalized. He’s been right about so much already and I think he’s right about this. California started moving pretty rapidly recently. I was a disbeliever until I got called up to draft California’s landscape report. That was the precursor research that went into a new task force thinking through changes with the rule in California. It turned me into more of a believer. I was more skeptical that the rules would ever change, but now I see a lot of movement. 
Chris: How long do you think it will take for all fifty states to adopt this?
Bill: Some jurisdictions will go first. If California goes first, then New York has to think about it. There are some people that are agitating the federal government to get involved because legal services are some of where the American economy dominates and you don’t want them to be disadvantaged compared to the UK or Australia. I don’t know enough to predict how it’s going to play out, but if California goes, that’s a game-changer because that’s an economy bigger than the UK. 

Residency for Law Students

Chris: Let’s pivot to a notion by James Fisher, co-managing partner of FisherBroyles in which he shared that they look at the training and education of a lawyer from an apprentice approach, similar to what doctors go through. What are your thoughts on that?
Bill: We favor that. The Institute for the Future of Law Practice has one program we put in place that we hope more law schools will adopt in the fifth semester of law school. So in your third year, you’re on a paid placement, where you get academic credit. We’ve got students now at Perkins Coie, Chapman and Cutler, and Cisco that are making a pretty good apprentice wage and getting academic credit. We call that part of your law degree a residency of sorts. The apprentice wage is a lot less than the extravagant summer associate salaries, but it’s a way that you can train people. 

What’s Not Changing in the Next 10 Years?

Chris: What’s not going to change for the next ten years in the legal industry?
Bill: The importance of relationships will not change. They’ll become more important although it’s harder to maintain relationships in this sound bite world. I think we will rediscover thoughtful communication and realize it’s a worthy investment.  I think that we’re going to rediscover the value of culture in the workplace because culture speeds things up and culture enriches our lives. These are not new ideas. These are old ideas, but we’re going to rediscover them and reinvest in them.
Chris: Bill, what books should be written that are not written yet for the legal industry, the legal executive industry?
Bill: Well, I’m writing a case study on the Cisco legal department that I want to turn into a short book. I’ve learned that busy executives like to learn through example and narratives, so you’ve got to bake in the learning into a story format. That’s one that I’m trying to fill. I’m not sure of the other gaps to fill. There are many great books out there. I have no shortage of books that I should be reading. The one gap I’ve identified, I’m trying to fill. 

Family, Summer, and Travel Plans

Chris: Let’s dive into a bit more of your own personal life. I understand you’re married and you have a daughter. Is that correct?
Bill: Yeah, married for 26 years to my wife, Mary and we’ve got a 22-year-old daughter that will be graduating from the University of British Columbia – University of Vancouver this year. She’s an anthropology major and she does work for me at Legal Evolution too, so I’ve got an excellent legal researcher in my anthropology daughter. 
Chris: How do you and your wife and daughter enjoy your summer?
Bill: My daughter’s in Vancouver, where the weather is perfect. She seems to be spending time outdoors and hiking and doing things like that. We live in Chicago in the summer, so my wife and I enjoy biking together. We cookout in our backyard and spend time with our pets. We like to explore the city of Chicago and we hope to do a little bit more traveling. 
We went to Italy for our 25th wedding anniversary and it was a spectacular trip. My wife has Greece on her bucket list and we want to get to Ireland. That’s on her list so far and anything that’s got a beach. She’s not been to Hawaii yet, so we have to do that. 

Recommended Books

Chris: What books do you recommend for my listeners? 
Bill: A lot of things related to psychology, decision making, Dan Kahneman’s Thinking Fast and Slow, Chris Argyris’s Teaching Smart People How to Learn, Carol Dweck’s Mindset. I read a lot of business books. Peter Thiel’s Zero to One was a classic. I have a book called Deep Work by Cal Newport. It basically is the theory behind the knowledge worker of the future.
A book that I sent to my friends last year that had a big influence on me was Robert Wright’s Why Buddhism is True. I got onto that book because I read Ray Dalio’s book Principles and one of the principles that Ray Dalio talked about was 40 years of meditation. Robert Wright, who is a secular humanist, wanted to understand the science behind Buddhist meditation. Anyway, the short version of it was that he went on this journey and he got tremendous benefit out of meditation, so I read the book and was astonished by how much I learned from it. I gave it away to everybody who would read it. I heartily recommend that book. 

Charlie Munger’s Speech on Avoiding Mistakes

Chris: We both have a fondness for Charlie Munger. What was the video you described that everyone must listen to or watch?
Bill: There’s an mp3 version, but it’s also on YouTube, and it’s a speech by Charlie Munger called 24 Causes of Human Misjudgment that he gave at Harvard in 1995. Twenty-four ways in which we can make decisions with errors and how to correct them. They were things that are very practical that any professional that has to deploy judgment in their job would want to be aware of. It’s basically how to avoid mistakes. I make a lot of errors, but I want to make fewer of them. 

Law Student Advice

Chris: With your perspective on the legal industry, what advice would you give students? 
Bill: Well, it’s good that we just talked about Munger because the most important thing is that you have to learn to think for yourself and you have to learn to trust your own reasoning ability. So much of what we do, we do because other people are doing it. If you got into law school, you’re pretty smart. You need to use that reasoning ability to think independently and you have to be comfortable reaching your own conclusions and testing them against other points of reality. The most important thing is you have to learn that independent judgment because people are dependent upon you to think independently. That’s the number one thing here. You’ve got to learn to think for yourself. 
Chris: What is the one book you would have with you on an island?
Bill: I’d have to say that it would have to be some sort of a storytelling book. It would be Bertrand Russell’s book. It’s kind of a philosophical history of all the great philosophers of all time all told in a narrative format. I read a lot of existential philosophy early in my life.  
Chris: That’s excellent. Bill, it’s been an honor and a pleasure. Thank you for your time on the show today. 
Bill: Hey, Chris, it’s been a pleasure. Thank you for the opportunity. 
Thank you to everyone who listened to this episode of the Law Firm Leadership podcast. 
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