Lawyers, be afraid ... be very afraid!

Lawyers need to watch their back … and their front for that matter.

For those who don’t know, I took the California bar exam this past July. In an effort to decompress and give me some time to reflect, I took a month-long trip to Southeast Asia. While I knew that this trip would change my perceptions of society and politics, I did not know that the trip would also challenge my profession as well.

This trip was the first time I had spent a considerable amount of time outside of the United States and I was having a little trouble finding my sense of space in the global environment. It all began with a trip to the Suria KLCC Mall in Kuala Lumpur, Malaysia. For those who have not been to Kuala Lumpur, the Suria KLCC Mall is situated at the base of the world famous Petronas Towers. The mall is as flashy and decadent as the towers. Suria KLCC is floor after floor of high-end boutiques such as Louis Viutton, Gucci, and others of such ilk.

I really had a hard time digesting the whole scene. Here I am in Malaysia, literally a world away from home and I felt as if I was in Beverly Hills. Confused, bothered, and bewildered, I had to do something. After making a left at Bvlgari, a right at the Cartier, and just a jog past the Tod’s (which makes a really cool looking loafer by the way) I found Kinokuniya, the Malay version of Borders. I wanted to find a book that would help me make sense of "wtf?" that I was feeling. I decided on two books: “The End of Poverty” by Jeffery Sachs and “The World Is Flat” by Thomas L. Friedman.

Both of the books I bought are absolutely amazing accounts of how the world works and how it could change for the better. While I do not mean to ignore Sachs (it merits a discussion on its own), the Friedman book gave an explanation as to why the developing world was growing in ways only previously seen in the western world.

Friedman’s basic premise is that the rest of the world is catching up to the United States in terms of economic competitiveness and growth. Technology has removed many of the barriers to entry that once existed for developing countries. Friedman’s work provides anecdote after anecdote of people in India or Russia taking what used to be an “American” industry and making it better, more efficient, and more cost-effective.

However, Friedman does not think that all is lost for the American worker. In his chapter aptly titled, “The Untouchables,” Friedman describes the types of American worker that will succeed in the new global economy. I read this chapter quite intently. After all, I don’t want to put all of my social capital in a career or profession that only going to get shipped overseas. Friedman does not specifically mention lawyers, but instead names categories of people that will be successful, like “collaborators” or “localizers.” I read the chapter thinking, “Lawyers collaborate, check! Lawyers localize, check!” I was feeling pretty good about my future job security.

Then the fell the hammer: “Manhattan Work at Mumbai Prices: Inside India's hottest legal outsourcing team.” That’s right, lawyers (at least in the way we know them) are about to get whacked.

The October 2007 issue of the ABA Journal featured Pangea3, the Mumbai-based legal outsourcing team that has taken the legal world by storm. The business plan is simple: American firms and corporations take work that is not cost-effective to handle themselves and send it to firms like Pangea3. Due to the low cost of labor (and accessibility to high-speed internet access), Pangea3 is able to take unprofitable American and turn it into profitable Indian work. The disparity in labor costs is staggering:

“A newly minted J.D. from a top 10 school in India can expect to earn about $6,000 to $7,000 a year … While this sounds alarming in com­parison with the $160,000 per year earned by some of their Ameri­can counterparts, it does translate to an annual purchasing power of $30,000-$35,000. And that goes far in a country where the average annual per capita income hovers around $500.”

Take a second to look at what is happening. Low-end legal work is becoming cheaper, but high-end legal work is becoming more expensive. Neither trend shows signs of slowing down. Indian lawyers will become more acclimated to the American legal system and will soon start targeting more complex forms of legal work. But things will not end up where you think they might. Don’t expect Pangea3 to achieve parity with the top flight U.S. firms. However, do expect Indian attorneys to achieve parity with attorneys who provide services to mid-market clients. Small and medium sized firms might shed new attorneys (who are notorious for being unprofitable) and start directing work overseas.

Well, I suppose I can rap for a living.