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The problems of not pricing knowledge

The problems of not pricing knowledge

Law firms don’t know how to price their knowledge, which is the actual thing they sell. Instead, they end up billing for their activity after the fact. They charge for the few hours of activity instead of the years it took to gain the knowledge and experience. This causes enormous problems for both firm and client.

The problem for the firm is that there’s no real way to differentiate clients, projects, and time spent; it’s all covered by the same rate, depending only on which timekeeper is doing the work. This means that the firm has no way to ensure that its lawyers focus on the more-profitable, higher-margin work. Instead, the current business model (created in 1919 by Hale and Dorr) bluntly rewards lawyers for the sheer mass of hours worked, without regard to the profitability (or even quality) of the work.

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