A long, long time ago when I used to report on fund management, one of the defining figures was Tony Dye, then the chief investment officer of Phillips & Drew, one of the City’s most storied asset management houses.
Dye earned himself the nickname ‘Dr Doom’ through his bearish stance on equities, in particular by making the case that global stock markets were overvalued as the 1990s wore on. By the end of that decade, there were a growing number sharing that conviction as the dot-com mania and a takeover boom hiked valuations. But Dye made the case as early as 1995, years before the market turned.
In the years I have covered business, I have often thought about Dye’s stance. He made a strong intellectual argument that the market was overvalued on the fundamentals – indeed, the long-term cult of equity was coming to an end. Much of his assessment was correct. Yet if you were a client of Phillips & Drew, you lost a lot of money because, while Dye was intellectually right, he called the market wrong. Is that a vice or a virtue? On reflection, I increasingly think vice, at least if you work in a professional rather than academic context, no matter how admirable Dye’s independence. Leaders rise or fall on being right in the real world.
The relevance of all this to the profession is that not a week seems to go by when you don’t see some observers making bold predictions about what is going to happen to the legal industry. Will it be overturned by outside capital? Squeezed into irrelevance by artificial intelligence? Taken over by accountancy-tied firms? The partnership model consigned to history?
Though better placed than most to answer that question given my day job, experience, and the amount of fresh data and industry information that comes across my desk, I have few answers but lots of scepticism. I do know markets, professions and industries are hugely complicated systems, which continually defy observers.
To pick up the Dye point, one of the reasons to be doubtful of many of the predictions made of the industry is that many are made because of an intellectual argument that has some or much genuine merit. That may be, for example, to assert that law firms are too conservative, too expensive in certain areas or poor at using non-legal staff. Yet that doesn’t mean an X = Y end result in the real world. It doesn’t work like that. Markets can be irrational, inefficient or downright perverse, because they are built on people. And even if the forces identified do conform to certain laws and extrapolation, that doesn’t mean all the relevant variables are accounted for. The other problem with prognostication is far more basic: it is often coming from people trying to sell something.
As part of our 25-year celebration, Legal Business will later this year attempt to look forward to some ideas of where the profession may be going. As part of that, we’ll draw on as much data and input from veterans in the industry as we can – because I’m much less interested in where the industry should go as where it actually will end up.
alex.novarese@legalease.co.uk
