Law firm panel

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As good an illustration as you could ask for that the financial markets are an extended phenotype — a ghastly, metastasised spandrel that exists for the pleasure and enrichment of the commercial law industry.

Investment banking is riven with contradiction. That a calling so devoted to the principles of the anarchic free market can organise itself into private enterprises that behave for all the world like Communist dictatorships. That even these cash generating leviathans can be harnessed towards the better ends of a scarcely visible constituency of legal advisors. The image of investment banks as docile harnessed sauropods munching stupidly away in the service of higher beings is not immediately intuitive, but then nor is the Idea that wheat domesticated humankind.

The law firm panel springs from an observation — we spend an awful lot of money of legal fees — and an indubitable trope of modern commerce: scale is everything.

You can picture the scene: an enterprising fellow in the legal coo team has pulled the past 5 years’ legal spend, totalled it, and used the AVERAGE function in Excel to generate a no-brainer.

“We spent £750m on external legal last year. that was spread across 1,500 law firms. that is an average spend of about half a million per firm. This is insane. If we concentrate that spend on a smaller selection, we dramatically reduced internal administrative costs and get a real opportunity to leverage our scale. If we guarantee a firm £50 million in billings we can push down their hourly rates, commit them to a programme of rolling secondees, have them run an annual training programme. We could cut our overall spend by 30% and get more out of this panel than we get for 1500 law firms right now.

This logic is unimpeachable. An action plan will be implemented immediately. The department’s apparently pathological impulse to waste money by hosing it randomly on countless law firms will be controlled. Order will be restored.

Now had our fellow used a pivot chart he might have seen a different story. Firstly, the firms account for 145 different jurisdictions between them. The median spend across the firms was £10,000.

Five hundred of them billed less than £5,000 each. That third of the group account for just 2m of the total spend.