Risky decisions

Prospective law students continue to ask:  Should I go to law school?  What law schools are worth attending?  Which ones should I avoid?  Is there a price at which law school offers an acceptable investment?  LawProf offered some thoughts on this subject many months ago, and his insights remain valid today.  If anything, law school seems to grow riskier by the month. 

People have trouble factoring risk into their decision making.  And if you’re considering law school, there are a lot of risks to think about.  It’s not enough, for example, to look at a law school’s median job outcome and think “that would work for me.”  That calculation is an excellent first step—and we can thank LawProf, other bloggers, and Law School Transparency for the information allowing that step.  But you have to think more deeply about risk if you want to make the best decision about law school. 

I outline here the top five risks that every 0L should consider before attending law school.  In my next post, I’ll offer my personal guidelines for evaluating any admission offer.  

Risk One:  The Price is High.  The very price of law school intensifies the risk.  Would you bet $1 on a 50-50 chance of winning $2?  What about betting $100,000 on a 50-50 chance of winning $200,000?  However you answer, these are two very different questions.  Most people would make the first bet more quickly than the second.  For most of us, losing on the first bet doesn’t matter much; we might even enjoy a dollar’s worth of fun in making the gamble.  But losing the second bet is life altering:  Most of us would really miss that $100,000.  The very price of law school makes the decision a high-stakes one. 

Risk Two:  You Buy It, You Keep It.  Most investments have resale value.  If you buy a house, and you don’t like it, you can sell the house.  If you buy stock, and the company underperforms, you can sell the stock.  You may lose significant money on these transactions:  house and stock prices do fall.  But these investments retain at least some resale value to cushion your risk.  You can almost always sell the house or stock for something.  You can also wait for the market to recover and resell when times are better. 

A law degree is different.  The degree may have personal value, but it has no resale value.  You can’t sell your JD back to the school, and you can’t transfer it to someone else.  (The one person who did sell his JD on Craigslist has already tapped that novelty market.)  Even if you hate practicing law, or can’t find a job, you are stuck with the full price of the degree. 

Risk Three:  The Legal Job Market Continues to Change.  Law schools have rather reluctantly admitted that 2010 and 2011 job outcomes are the “new normal.”  That is, hiring patterns won’t return to 2007 levels any time soon—if they ever do.  But even this statement misses a key fact about the legal job market:  It continues to change rapidly, and most of the signs are negative.  No one knows what entry-level jobs will look like for the class of 2015, but they may well be worse than those just published for 2011.

Why?  Here's the nutshell:  The changes in technology, globalization, and distribution of legal work—which created much of the recent downturn—are continuing. 

• Legal process software improves every year, and each version requires fewer attorneys than earlier versions.  This is true for both litigation and transactional work. 
• Large corporations can choose from attorneys around the world, not just for low-end outsourcing but for the most sophisticated legal advice.  The U.S. advantage in this international market is declining.   
• An increasing number of nonlawyers are doing legal work.  They aren’t practicing law, but they are interpreting legal rules for their own employers.  Human resource managers, compliance officers, and a host of other mid-level corporate/government employees have learned to work with legal regulations in their area.  These professionals still consult lawyers for novel or sophisticated issues, but they can handle bread-and-butter work on their own—sometimes with the help of computer systems.    
• Traditional legal employers continue to segment work.  Firms are increasing the number of staff attorneys, career associates, contract attorneys, and other “new normal” positions.  No one knows where these career paths will lead, but many of the positions have lower salaries, less security, and less training than traditional associate jobs.

Risk Four:  The Law School Admissions Market Is Volatile.  Some people ask, “Isn’t this a good year to go to law school, because schools are so desperate for students?”  Maybe.  At least some students have gotten offers from schools that might not have admitted them last year, and others have negotiated higher scholarship offers.  Depending on when you were admitted in the admissions cycle, you may hold a better offer this year than you would receive next year or the year after.

On the other hand, I see no evidence that law school applications will increase next year.  The number of LSAT takers declined yet again in June, and college students have had a whole year to absorb warning signs about law school.  Law schools probably will face the same applicant pool (lower scores, fewer total applicants) next year as they did this year.  Once again, they will have to (a) admit students they wouldn't have admitted two years ago and/or (b) further discount tuition.  

The bottom line here is that the market is so volatile that it’s impossible to predict.  Five years from now, we might look back at this year as the one when it was easiest/cheapest to get into law school.  But this might also be the beginning of a larger decline in credentials and tuition prices.  People who bought houses in 2008 paid less than they would have paid in 2007, but they were pretty sorry they didn't wait until 2009.

Risk Five:  You May Not Like Law Practice.  Whatever occupation you try, there is a risk you will hate it enough to leave.  When investing substantial money in a future occupation, you should always consider that risk.  We don't know how many people dislike law practice enough to leave the profession, but we know that the category exists.  We also know that there are people who strongly dislike law practice but feel tied to their jobs by loans and other financial pressures.  My educated guess is that at least 10% of law graduates dislike practice enough to leave the profession, while another 10% may stay with jobs they dislike.  

Consider this statistic:  After the JD, a nationwide survey of law school graduates, reports that seven years after graduation, three quarters of the graduates were "moderately or extremely satisfied with their decision to become a lawyer."  Sounds good at first, but this means that one quarter of the graduates were not moderately or extremely satisfied.  Indeed, some were extremely or moderately dissatisfied.  And these responses were gathered in 2007, before the crash cranked up stress levels among lawyers.  

When you invest heavily in a career, giving the time, energy, and dollars that law demands, you want to be at least moderately satisfied with your decision.  Consider the risk that you won't be. 

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If you're considering law school, think about each of these risks as applied to your personal situation. If you have a full-ride scholarship or a lot of money, the price risk may not weigh too heavily for you--although you still need to consider the opportunity costs of attending school for three years.  If you've already worked in a law-related organization, and feel comfortable with the profession's downsides as well as its benefits, the risk of disliking practice may be lower for you.  But everyone should think through each of these risks, just as you would carefully weigh other life-altering decisions.  The law schools will tell you the benefits of attending; it's up to you to identify the risks.

Coming next:  Some rules for risky times.