I’m currently reading a fantastic book titled ‘Here Comes Everybody.” The books is primarily about “crowdsourcing.” Crowdsourcing is about leveraging large, interested communities to accomplish enormous tasks i.e. Wikipedia, Flickr, etc. Crowdsourcing is like outsourcing, but on steroids. The book states that for most of modern life, our desire for collaborative effort has been filtered through rigid institutions. Hierarchical institutions were/are necessary because of the complexity of managing groups. The more complex the problem, the more people required, which necessitates management. One of the most important benefits of management is the control of communication between members in the group. There are usually multiple layers of management separating CEOs from the low-level employees. There is nothing wrong with this structure. Hierarchies will always be necessary for most businesses.

Now, groups are assembling and working WITHOUT managerial oversight. In the past, there were transaction costs associated with assembling groups. There were multiple factors to consider before joining a group: travel, gas, are there enough people, do you have the time, etc. Today, there are zero transaction costs associated with joining like-minded groups. People can easily aggregate together and accomplish amazing things. Wikipedia is just the start.

The book states that when transaction costs fall, the largest firms increase in size. The upper limits of size is inversely related to management costs, so when you lessen the management costs, there’s opportunity for growth. Also, small companies become more effective at doing more business at lower costs than larger companies that maintain high transaction costs.

Do I think lawyers will go by the way of Encyclopedia Brittanica, having the bulk of work done by a large, committed community? Nope. I think knowledge workers are insulated from this occurring. People will always need specially trained lawyers to analyze issues and give counsel. The law is complicated and the skills necessary to interpret the law will not be commoditized. BUT, the “business of law” will see dramatic shifts. Lawyers can now network with each other like never before, they can outsource the easy stuff, hire virtual assistants, manage their documents in the cloud i..e Zoho or Google Apps, which dramatically reduces technology costs.

As the book says, when there’s high overhead, institutions have to be selective with the work they do. It has to be profitable. Instead of asking “Why,” lawyers can now ask “Why not?” It might take a while, but the legal industry is about to decompress and clients will be the beneficiary.

Tags: business, law, tech