Archive for July, 2014

The emperor’s new clothes

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Remember analogy questions? The kind that were dropped from college entrance tests years ago, because the questions required incisive reasoning. Clever analysis must have been getting harder to find—let alone test—in American teenagers. So, to save embarrassment, they just disappeared one year. The analogy questions, I mean.

The test problems are gone, but nostalgia pokes my synapses to offer one final analogy question worth puzzling over:

Living the high life as the emperor <is to> donning the invisible new pantaloons and silk blouse
Laboring in the big shot law firm <is to> ___________?”

You got it: “Billing hours.”

Billed hours, like analogy questions and the emperor’s new clothes, have a storied history.

If memory serves, it was during the Middle Ages when lawyers got the idea to charge by the hour. Or was it the Mycenaean era? I can’t recall for sure. Let’s just say it was long ago. You can probably find the answer in volume two of the six-volume set, Tedious Anecdotes in the pre-Renaissance History of Law. Let me know if you need to borrow mine.

Never mind. I admit it. The notion of charging someone for the length of time spent is not that ancient.

Really, billing hours for law work only got popular after Dan Bricklin and Bob Frankston invented the spreadsheet. (Not too many people remember Dan and Bob, but it’s useful to have their names at hand. Every new idea needs to be fronted by the name of the person who invented it. The light bulb—Edison. The radio vacuum tube—deForest. Spread spectrum communication—Hedy Lamarr. Banner ads on search engines—Give me the name; I’d love to get my hands on that guy.)

Anyway, the brilliant scheme that Bricklin and Frankston invented promised to reinvigorate the practice of law. Sure, their spreadsheet contraption was complicated and mathematical. But you had to have it if you entertained any hope of tracking important financial stuff. Like whether the 9.2 hours of time that you spent at $25 an hour doing a lot of not-too-useful work on a brief had actually been cut in half when the bill went out. Or had instead been mistakenly billed and paid in full by an unknowing client.

Before spreadsheets, these law fee calculations were done on the backs of beer glass coasters using half-eaten pencils. The coasters often would get lost or tattered. So refunding the $115 overcharge wasn’t all that likely. Which may have seemed just as well to the eyeshade guys in the back room at Brent’s Brewhouse.

Getting back to billed hours, that invention predated the spreadsheet by a few years. Billed hours were the brainchild of a young office boy named Clipston Hunter, back in the 30s. Clip had been laboring at the high art of sorting paperclips on his desk in the back hall of Lake & Lake, a big white-shoe law firm in Chicago. Under his meticulous touch, the clips fell correctly into four bins: big, medium sized, small, and the new-fangled ones with the evenly spaced tiny notches that grab into the paper to hold it tight.

When the war broke out, extra money for paper clip experts grew scarce at Lake & Lake. Poor Clip would have been out pan handling on Rush Street, if he hadn’t convinced Darby Waterstone, the senior partner, to start charging Clip’s sorting work to clients at 50 cents an hour.

This foray into billed hours territory was a grand success. So, one day, Waterstone announced “From here on, we’ll be charging every lawyer’s time by the hour. Your hourly rate will be based on your shoe size.” Then, he ceremoniously unloaded a wad of chewing tobacco into the brass spittoon under his desk to punctuate his pronouncement and emphasize the importance of this moment in the history of the law.
After that, billed hours spread across the profession faster than hot cream cheese on a whole-wheat bagel. The formula did get more sophisticated. Height was added to shoe size as a factor. Then age. Then the number of letters in the name of your law school. In the face of all the added complexity, the spreadsheet fully proved its mettle.

It wasn’t all smooth sailing, though.

For one thing, you had to deliver the same amount of value for every hour that you wrote down. An hour cost the client $32.50, and it was supposed to buy $32.50 worth of legal service. So the hour from 8 to 9 on Monday June 10 would be charged at $32.50, same as the hour from 4 to 5 on Thursday October 3. And the values delivered for the two hours had to be the same. Or so it seemed.

This presented a challenge.

Suppose you were thinking hard and making fast progress on a knotty case law analysis starting at 8:00 AM one morning. You had to pay close attention when the work was going that well, to be sure to slow down and do some daydreaming starting around 8:23. Otherwise you’d be in trouble versus the next hour from 9 to 10 AM when nothing much was going on productivity-wise, because your kid sister called to chat, and you ducked down to the lunchroom for a corn meal muffin. Keeping the values delivered in all of the different hours of a day or a week equal took some tricky brain gymnastics.

Once you had that mastered, you had to figure out how to make your $32.50 hour worth exactly 0.789 as much as the $41.25 per hour charged by Bill in the office next door. That was an even bigger brainteaser.
I’m not saying Bill wasn’t a terrific lawyer. But he was slow. Real slow. And he was charging more per hour than you. So you had to be careful—on two scores—not to get ahead of him. There were always ways, of course. You could work the New York Times crossword. Or take a leisurely hike to Harry’s Hash House for fish and chips.

It wasn’t easy. But spreadsheet marketers, lawyers, and the emperor with his new duds got to feeling pretty content once the kinks got worked out of the system. And the money rolled in.

It was just about then that clients turned persnickety. Who could blame them? The bills looked too high. The protests grew. What did the different rates mean? Carol does better work than Joe; why is her hourly rate lower? Why did George’s rate go up when the quality of his work didn’t? Could the rates be blended? Like a marshmallow-lime frappe? Could you discount Jane’s rate by 8.46% and throw away her hours over 42 per week—for the first three months of the year; then switch to a contingent fee arrangement for the following fiscal quarter. Would a fixed fee deal be possible? Could you defer the fees? Send the bill electronically?

And hold the fries?

I doubt it

Written by thinker

July 23rd, 2014 at 7:26 pm

Posted in Uncategorized

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