The investment-bank model
When David Greenwald returned to co-lead Fried, Frank, Harris, Shriver & Jacobson LLP in 2013 after a turn as a top Goldman Sachs in-house lawyer, the Wall Street firm was dragging. Revenue had fallen 17% since 2007 and competitors were picking off its lawyers.
One problem, he noticed, was that partners were notoriously lax about turning in their timesheets, which meant clients weren’t always getting billed. The slips were costing the firm $6 million a year.
Mr. Greenwald realized the firm needed to operate less like a law firm partnership and more like the investment bank he’d just left, if it wanted to survive.
He closed underperforming Asia offices and created a finance committee. All partners had to turn in plans for how to expand their businesses. Partners were paid more on merit than seniority, and could no longer see how much each of their peers made.
And Mr. Greenwald told partners to submit their timesheets every week or risk a fine.
Average profits for equity partners at Fried Frank have doubled since 2013, to more than $3 million last year, according to the firm. Gone is the egalitarianism that marked Mr. Greenwald’s early days at the firm: Fried Frank’s highest-paid partner makes 13 times its lowest-paid.
“We’re all on the path from being small partnerships, in which everyone can get in a room and debate and make a decision, to by necessity having to centralize a lot of the decision-making in a group of people or an individual,” Mr. Greenwald said.
That journey from partnerships to profit machines has made some lawyers very wealthy. At the 15 most-profitable law firms, top partners bill on average $1,655 an hour and their rates are rising faster than inflation, according to legal analytics company Bodhala.
At the nation’s 100 largest firms, average equity-partner profits have doubled since 2004, to $1.88 million last year, according to American Lawyer. Eight firms average more than $4 million.
“We’re making much more than anybody who doesn’t save lives deserves,” said David Boies, the litigator who broke off from Cravath in 1997 to launch his own firm. In his best years, Mr. Boies has paid himself $25 million, a spokeswoman confirmed.
Pity the associate
As firms compete to keep profits rising for those at the top, lawyers further down the ladder are sometimes getting left behind. Promising associates who could once expect to be named a partner within seven or eight years are waiting 10 years or more.
Firms have created new steppingstones along the way to appease them—and keep them grinding.
One newly promoted partner at a big firm said he was shocked to learn he would have to spend a year as counsel, an increasingly popular interim title. The firm told him it was to prepare him for the bigger change of being partner. “I wouldn’t be a cynical lawyer if I didn’t think there were other profit-motive reasons,” he said.
Another popular stop-off is “non-equity partner,” the title held by those 560 Kirkland lawyers not invited to the California retreat. They earn a salary rather than sharing firm profits.
In 2000, 78% of partners held equity in their firms, according to American Lawyer’s ALM Intelligence. Last year, 56% did.
At Kirkland, junior partners compete each year for a few coveted slots in the equity-earning partnership, many billing more than 2,500 hours a year to try to set themselves apart. Given how much of the day’s work isn’t billable, that can require working 80 hours or more a week.
At elite New York firms, a two-tiered system was once unthinkable. Partners were partners. In the past year, however, cracks have emerged at two of them.
Simpson Thacher’s leaders told partners in April that they plan to start naming non-equity partners. It is hard not to see the move as a response to poaching by Kirkland, which has lured away more than a dozen Simpson lawyers since 2016, most of them associates and counsel that Kirkland made into partners.
“If the firm won’t be loyal to you,” said David Lat, a longtime lawyer and legal blogger turned recruiter, “why should you be loyal to the firm?”
Willkie Farr & Gallagher LLP, a 131-year old firm that was home to a future U.S. Supreme Court Justice and two New York governors, made a similar announcement this spring when it rolled out a two-tiered partnership. Its leaders said the move is intended to reward promising young lawyers earlier and make the firm more competitive in recruiting.
“It was getting harder to tell associates, ‘stick around for 10 years and see what happens then,’ ” said Willkie’s chairman, Steven Gartner. “They wanted more certainty and wanted it sooner.”
Making partner doesn’t just take longer. It takes hustle. A few decades ago, partner titles were handed out largely on the basis of being technically proficient. Now, being a business generator is a crucial component.
Janice Mac Avoy, a Fried Frank partner, said when she earned the partner title 23 years ago, the business model was “wait for the phone to ring” and do a good job for the client on the other end.
When a partner suggested a lawyer being considered for promotion had great contacts and could generate new business, she recalls a fellow partner saying, “You know that’s not an appropriate consideration.”
many of us who write about Russia professionally, or who are Russian, have struggled to square what we know with the emerging narrative. In this story, Russia waged a sophisticated and audacious operation to subvert American elections and install a President of its choice—it pulled off a coup. Tell that to your average American liberal, and you’ll get a nod of recognition. Tell it to your average Russian liberal (admittedly a much smaller category), and you’ll get uproarious laughter. Russians know that their state lacks the competence to mount a sophisticated sabotage effort, that the Kremlin was even more surprised by Trump’s election than was the candidate himself, and that Russian-American relations are at their most dysfunctional since the height of the Cold War. And yet the indictments keep coming.
.. I mean that I’ve figured out how to think about what we know and not go crazy. The answer lies in the concept of the Mafia state. (And, no, I’m not invoking the Mob because Stone encouraged an associate to behave like a character from “The Godfather Part II,” as detailed in his indictment.)
As journalists who usually cover American politics have connected the dots of the story of Russian interference, those of us who normally write about Russia have cringed. Early on, it was common to point out that Paul Manafort, Trump’s former campaign manager, who is now under arrest, worked for Viktor Yanukovych, who is often characterized as the “pro-Russian President of Ukraine.” In fact, there was no love lost between Putin and Yanukovych. After he was run out of town, during the 2014 Ukrainian revolution, Yanukovych did seek refuge in Russia, but during his tenure as President he was an unreliable partner for Putin at best. Perhaps more to the point, he’s a crook and a brute. He served time for robbery and assault before he became a politician, and he is wanted in Ukraine for treason, mass murder, and embezzlement. A visitor to Ukraine can take a tour of Yanukovych’s palace, famous for its marble, crystal, immense scale, and a life-size solid-gold sculpture of a loaf of bread. Manafort made a career of working for the corrupt and the crooked. That in itself tells us little about Russia or its role in the 2016 campaign.
.. In media coverage, her e-mailing with a lawyer in the Russian prosecutor’s office was portrayed as evidence of a direct line to Putin, suggesting that she met with Trump’s campaign officials as his emissary. To me, it read as a lot of bluster on the part of a minor operator. From all the available evidence, and contrary to her sales pitch, Veselnitskaya did not have any dirt to offer on Hillary Clinton. To the extent that Veselnitskaya had established connections to high-level Russian officials, they were the kind that are necessary for a lawyer to be at all effective in a corrupt system.
.. We cringed at the characterization of the Russian online influence campaign as “sophisticated” and “vast”: Russian reporting on the matter—the best available—convincingly portrayed the troll operation as small-time and ridiculous. It was, it seems, fraudulent in every way imaginable: it perpetrated fraud on American social networks, creating fake accounts and events and spreading falsehoods, but it was also fraudulent in its relationship to whoever was funding it, because surely crudely designed pictures depicting Hillary Clinton as Satan could not deliver anyone’s money’s worth.
What we are observing is not most accurately described as the subversion of American democracy by a hostile power. Instead, it is an attempt at state capture by an international crime syndicate. What unites Yanukovych, Veselnitskaya, Manafort, Stone, WikiLeaks’s Julian Assange, the Russian troll factory, the Trump campaign staffer George Papadopoulos and his partners in crime, the “Professor” (whose academic credentials are in doubt), and the “Female Russian National” (who appears to have fraudulently presented herself as Putin’s niece) is that they are all crooks and frauds. This is not a moral assessment, or an attempt to downplay their importance. It is an attempt to stop talking in terms of states and geopolitics and begin looking at Mafias and profits.
The Hungarian sociologist Bálint Magyar, who created the concept of the “post-Communist mafia state,” has just finished editing a new collection of articles called “Stubborn Structures: Reconceptualizing Post-Communist Regimes” (to be published by C.E.U. Press early this year). In one of his own pieces in the collection, using Russia as an example, Magyar describes the Mafia state as one run by a “patron” and his “court”—put another way, the boss and his clan—who appropriate public resources and the institutions of the state for their private use and profit. When I talked to Magyar on the phone on Monday, he told me that Trump is “like a Mafia boss without a Mafia. Trump cannot transform the United States into a Mafia state, of course, but he still acts like a Mafia boss.” Putin, on the other hand, “is a Mafia boss with a real Mafia, which has turned the whole state into a criminal state.” Still, he said, “the behavior at the top is the same.”
The Mafia state is efficient in its own way. It does not take over all state institutions, but absorbs only the ones necessary for extracting profit. Some structures therefore continue to work as though they were part of a normal state. This may explain why we saw the official Russian foreign-policy establishment preparing, in the lead-up to the 2016 election, for a working relationship with the presumed Hillary Clinton Administration.
When we think about a normal state, Magyar told me, “the assumption is that the state acts in the public interest, and if that doesn’t happen, that’s a deviation.” That is true of how we think about democracies but also, to a large extent, of how we think about dictatorships as well: the dictator positions himself as the arbiter and sole representative of the national interest. A Mafia state, on the other hand, acts only in the personal profit-seeking interests of the clan. “That’s not a deviation,” Magyar said. “It’s a substantive, structural characteristic of the state. The state itself, at the top, works as a criminal organization.”
When members of the American media cover the story of Russian meddling, they implicitly portray Russia as a normal state, and the influence operation as an undertaking of the state aimed at furthering Russia’s national interests. This strikes Russians as absurd. By the measure of national interest, the Trump Presidency has been disappointing for Russia. Most of what Trump has given the Russian state has come through inaction:
- he has barely reacted to continued Russian aggression in Ukraine;
- he has failed to support nato; and
- he has said that the U.S. will withdraw from Syria, although it looks like the withdrawal is unlikely to be fast or total.
At the same time, diplomatic relations between Russia and the U.S. have deteriorated to the point of near-total dysfunction, and, despite considerable foot-dragging by the White House, the U.S. has continued to impose new sanctions on Russia.
By the metrics of a Mafia state, though, the Trump Presidency has yielded great results for Russia. A Mafia boss craves respect, loyalty, and perceived power. Trump’s deference to Putin and the widespread public perception of Putin’s influence over Trump have lifted Putin’s stature beyond what I suspect could have been his wildest dreams. As happens in a Mafia state, most of the benefit accrues to the patron personally. But some of the profit goes to the clan. Over the weekend, we learned that the Treasury Department has lifted sanctions on companies that belong to Oleg Deripaska, a member of Putin’s “court” who once lent millions of dollars to Manafort. If a ragtag team employed by or otherwise connected to the Russian Mafia state tried to aid a similar collection of crooks and frauds to elect Trump—as it increasingly looks like they did—then the Deripaska news helps explain their motivations. The story is not that Putin is masterminding a vast and brilliant attack on Western democracy. The story, it appears, is that the Russian Mafia state is cultivating profit-yielding relationships with the aspiring Mafia boss of the U.S. and his band of crooks, subverting democratic institutions in the process.
Deep learning, deep insights, deep artificial minds — the list goes on and on. But with unprecedented promise comes some unprecedented peril.
Around the end of each year major dictionaries declare their “word of the year.” Last year, for instance, the most looked-up word at Merriam-Webster.com was “justice.” Well, even though it’s early, I’m ready to declare the word of the year for 2019.
The word is “deep.”
Why? Because recent advances in the speed and scope of digitization, connectivity, big data and artificial intelligence are now taking us “deep” into places and into powers that we’ve never experienced before — and that governments have never had to regulate before. I’m talking about
- deep learning,
- deep insights,
- deep surveillance,
- deep facial recognition,
- deep voice recognition,
- deep automation and
- deep artificial minds.
..Which is why it may not be an accident that one of the biggest hit songs today is “Shallow,” from the movie “A Star Is Born.” The main refrain, sung by Lady Gaga and Bradley Cooper, is: “I’m off the deep end, watch as I dive in. … We’re far from the shallow now.”
.. We sure are. But the lifeguard is still on the beach and — here’s what’s really scary — he doesn’t know how to swim! More about that later. For now, how did we get so deep down where the sharks live?
The short answer: Technology moves up in steps, and each step, each new platform, is usually biased toward a new set of capabilities. Around the year 2000 we took a huge step up that was biased toward connectivity, because of the explosion of fiber-optic cable, wireless and satellites.
Suddenly connectivity became so fast, cheap, easy for you and ubiquitous that it felt like you could touch someone whom you could never touch before and that you could be touched by someone who could never touch you before.
Around 2007, we took another big step up. The iPhone, sensors, digitization, big data, the internet of things, artificial intelligence and cloud computing melded together and created a new platform that was biased toward abstracting complexity at a speed, scope and scale we’d never experienced before.
So many complex things became simplified. Complexity became so fast, free, easy to use and invisible that soon with one touch on Uber’s app you could page a taxi, direct a taxi, pay a taxi, rate a taxi driver and be rated by a taxi driver.
In 1900, there were two great philosophers working side by side at Harvard, William James and Josiah Royce. James was from an eminent Boston family and had all the grace, brilliance and sophistication that his class aspired to. Royce, as the historian Allen Guelzo points out, was the first major American philosopher born west of the Mississippi. His parents were Forty-Niners who moved to California but failed to find gold. He grew up in squalor, was stocky, lonely and probably knew more about despair and the brooding shadows that can come in life.
James and Royce admired and learned from each other, but their philosophies were different, too. James was pragmatic and tough-minded, looking for empirical truth. Royce was more idealistic and tender-minded, more spiritual and abstract.
They differed on the individual’s role in society. As David Lamberth of Harvard notes, James’s emphasis was on tolerance. We live in a pluralistic society and we each know only a fragment of the truth. People should give one another enough social space so they can be themselves. For Royce the good life meant tightly binding yourself to others — giving yourself away with others for the sake of a noble cause. Tolerance is not enough.
James’s influence is now enormous — deservedly so. Royce is almost entirely forgotten. And yet I would say that Royce is the philosopher we need today. In an age of division, fragmentation and isolation, Royce is the philosopher we don’t know we have. He is the philosopher of binding and connection.
Royce argued that meaningful lives are marked, above all, by loyalty. Out on the frontier, he had seen the chaos and anarchy that ensues when it’s every man for himself, when society is just a bunch of individuals searching for gain. He concluded that people make themselves miserable when they pursue nothing more than their “fleeting, capricious and insatiable” desires.
So for him the good human life meant loyalty, “the willing and practical and thoroughgoing devotion of a person to a cause.”
A person doesn’t have to invent a cause, or find it deep within herself. You are born into a world of causes, which existed before you were born and will be there after you die. You just have to become gripped by one, to give yourself away to it realizing that the cause is more important than your individual pleasure or pain.
You’re never going to find a cause if you are working in a bland office; you have to go out to where the problems are. Loyalty is not just emotion. It is action.
“The loyal man serves. That is, he does not merely follow his own impulses. He looks to his cause for guidance. This cause tells him what to do,” Royce wrote in “The Philosophy of Loyalty.”
In such a community, people submit themselves to their institution, say to a university. They discover how good it is by serving it, and they allow themselves to be formed by it. According to Royce, communities find their voice when they own their own betrayals; evil exists so we can struggle to overcome it.
Royce took his philosophy one more crucial step: Though we have our different communities, underneath there is an absolute unity to life. He believed that all separate individuals and all separate loyalties are mere fragments of a spiritual unity — an Absolute Knower, a moral truth.
That sense of an ultimate unity at the end things, shines back on us, because it means all our diverse loyalties are actually parts of the same loyalty. We all, he wrote, “seek a city out of sight.” This sense of ultimate unity, of human brotherhood and sisterhood, is what is missing in a lot of the current pessimism and divisiveness.
Royce’s philosophy is helpful with the problem we have today. How does the individual fit into the community and how does each community fit into the whole? He offered a shift in perspective. When evaluating your life, don’t ask, “How happy am I?” Ask, “How loyal am I, and to what?”