On being a China lawyer and on doing business in China
I was interviewed last year by Jason Aquino of Scouts Consulting as part of an ongoing interview series on strategy and innovation in business, sports, and national security. Jason will be releasing this series of interviews in the future, but in the meantime he is allowing me to publish mine here, mostly after I begged him to be able to do so because I liked it so much.
The first part of my interview dealt mostly with the legal industry and the second part dealt mostly with being a China lawyer. I flipped the two around and provided the China portion the day before yesterday and the legal industry portion today.
Dan Harris is the founder of Harris Moure, an international law firm with offices in Seattle, Portland, and Beijing. He represents and seeks to protect companies doing business in China and other emerging economies in Asia. His work has been as varied as securing the release of two improperly held helicopters in Papua New Guinea, overseeing dozens of litigation and arbitration matters in Korea, helping someone avoid terrorism charges in Japan, and seizing fish product in China to collect on a debt.
Dan and colleague Steve Dickinson co-author the China Law Blog, which discusses the practical aspects of Chinese law and how it impacts foreign companies doing business there. China Law Blog has been a mainstay of ABA Journal’s Blawg top 100 law blogs, and in 2013 was named to the Blawg 100 Hall of Fame. It is an indispensable resource for lawyers and companies seeking to do business in or around China. Dan’s perspectives on international legal issues have appeared in such publications and media outlets as The Wall Street Journal, Forbes, Fortune, Business Week, The Economist, The New York Times, The Washington Post, CNBC, and BBC News.
Last April Dan was a keynote speaker at the Oregon Law Review Symposium on Disruptive Innovation in Law and Technology, where he discussed how lawyers could better position themselves in the evolving legal marketplace. He talked about the aversion many lawyers have to marketing, as well as the need for lawyers to become more business-minded, which legal training traditionally hasn’t encouraged. You can find Dan’s paper from the symposium here (p. 881).
What are some of the barriers to innovation in the legal industry that you see today?
One of the common barriers is that most lawyers charge by the hour, which takes away incentives to innovate and become more efficient. Another barrier is the fact that so many law firms are run by 60-year olds.
Not that I have anything against 60-year-olds, but innovation oftentimes comes from people who look at industries in a new way. And young lawyers generally do not have much power in the legal industry.
But don’t law schools recruit students from a diversity of backgrounds? Doesn’t that help bring in new ways of looking at the profession?
That’s actually another problem with the legal industry. You can have a diversity of backgrounds, but law school pounds that out of its students, training all of its students to be incredibly conservative and risk averse.
And it makes sense: a lawyer’s job is to point out risks and help ameliorate them. But what that also creates is a personality that is afraid. Too many lawyers are naysayers.
I can give any business starting out 20 reasons why it is going to fail. But the trick to what I see as the good lawyers’s job is not discourage the client by doing nothing but pointing out the risks, but to help the client surmount potential problems. So many lawyers come up with the 20 reasons for themselves (or for their firm) and view them as reasons not to push forward, not to take risks, not to innovate, not to risk failure.
Is it fair to say that clients moving legal work in-house is a big problem facing law firms today?
There are a lot of reasons why so many law firms are struggling today. That is just one of them. Another is that they’re not really in sync with their clients. Their clients are focusing on business issues. Too many lawyers don’t think the same way as their clients, and that frustrates clients.
You would be shocked (or maybe you wouldn’t) at how many times companies choose our firm over two or three others simply because we were the only one willing to quote them a fixed fee rate on a project. These companies tell me that the other firms insisted that they had no way to know what the project would cost. If a law firm drafts a China manufacturing contract 3-5 times a month (as mine does), how can it not know how long it will take? In the early days when my firm was offering flat fees, some of the lawyers in my firm would try to make the same excuse for being unwilling to come up with a flat fee amount. My response to them was to “get over it and start thinking of yourself as a plumber and now imagine how pissed off you would be if your plumber told you he or she had “no idea” how long a relatively simple project was going to take.
And here’s the thing: take something like writing a manufacturing contract. Ninety percent of those that we take on come within a two to three hour range of each other, with maybe ten percent taking a bit more or less time. It is not as though one will take five hours and another will take twenty hours. And why can’t a law firm doing 50+ China manufacturing contracts a year take on the risk that it might be underpaid just a bit on a few of them? There are two answers to this. The law firm is actually not very experienced with such contracts or it is way too risk-averse.
Then there is the reputation lawyers have for being deal killers. The old saying among businesses is that lawyers always say no. There’s some validity to that. Lawyers must change in the same ways their clients are changing.
I’ve become obsessed with certain companies to see how we can apply what they’re doing to our law firm. For example, I’m fascinated with how a company like Uber has disrupted the transportation industry. What can my firm do on the legal side to disrupt? Our willingness to do so much work on a flat fee basis is somewhat disruptive in that I have actually had lawyers complain to me about our doing that.
In your article for the Oregon Law Review, you talk about the aversion lawyers have to marketing. Why do you think that aversion exists?
One thing that propels lawyers is this idea that the world is a meritocracy. The typical lawyer goes to high school, works hard, does well; goes to undergrad, works hard, does well; and goes to law school, fights to be in the top 10% of the class. Your first job is determined in large part by how you did in law school. Lawyers’ formative lives are based on reaching an attainable, pretty much numerical goal and then being rewarded for it.
Then they get in the real world, and all of a sudden the clients don’t care that they graduated from law school magna cum laude. They care about what you can do for their companies. Lawyers get thrown for a loop by that.
Lawyers don’t like the idea of having to compete. They had to compete in law school, but it was for a very clear goal. Now all of a sudden, they have to meet with 10 people in the hopes of getting two clients, and the carrot at the end is just not as clear cut.
And again, there’s the whole idea of uncertainty and risk. Lawyers will often talk about how this doesn’t work or that doesn’t work, and they do it with marketing, too. So many are unwilling even to try because they cannot get past the idea of failing.
When we first started marketing via our website and our blog, almost all lawyers would say, “I’ve heard you can never get a good clients off the internet.” They would state it like it was a fact, even though they had no evidence to support it.
Lawyers don’t like experimentation, the idea of “let’s try this and see if it works.” That’s too risky. And marketing is that: sometimes you think something’s going to work and it doesn’t, sometimes you think it’s not going to work and it does. The uncertainty kills lawyers.
Looking to the future, what kinds of firms are going to survive?
The first-tier big firms are absolutely necessary and will continue to thrive, as will some regional firms. But then there are the second-tier big firms that don’t have a niche, that aren’t as good as the Skadden Arpses, the Kirkland & Ellises, and the Latham & Watkinses of the world. These second-tier big firms are slowly getting edged out by both big and small firms.
Whenever our firm competes with a second-tier big firm for a matter, I love it because we offer so many advantages over them and yet they charge so much more than us.
The typical client that comes to us is not going to Skadden, Arps. You go to Skadden, Arps for the really big international deals, the really big international litigation. We get smaller international deals and smaller international litigation. Oftentimes we’ll compete for that work with a 250-lawyer law firm not nearly as well focused as us and yet it has a much higher cost structure. They might put five lawyers on a matter on which we would put two lawyers, or three lawyers on a matter on which we would put one lawyer and a paralegal or an international business specialist.
These second-tier big firms like to think of themselves as a Skadden Arps and they are trying to emulate Skadden. But they’re not Skadden.
Have you noticed differences in how the Millennial generation of lawyers thinks and works compared to its predecessors?
Absolutely. The Millennials are more in tune with business. They’re more comfortable with technology, they’re more comfortable operating anywhere, and they’re more comfortable appearing more “normal” and less lawyer-like, not using lawyer-type words. I think they understand better what clients want. Too many older lawyers feel compelled to tell potential clients everything about their own backgrounds and the work that they’ve done, rather than listen to the client and respond directly to that.
There are Millennials who have formed their own law firms, and they use newer technology. Within my firm, I oftentimes have to fight the older lawyers (of which I am one) on certain things. For instance, we set up Yammer – which is really nothing more than an internal Facebook – and some of our lawyers complained. They were worried about security, saying we shouldn’t be discussing firm matters “in the open.” But the security on Yammer is the same as for our emails. Both Yammer and our email are on Microsoft Office 365, and so both are equally unlikely to be compromised.
Then there are various groups in the firm that really use Yammer. One is our Regulated Substances Group, which Hilary Bricken has headed since she was 28 years old. There will be five to ten discussions every day on that group’s Yammer page. Someone will say, “Hey, I read this article about what they’re doing in Oregon. Does this make sense to you?” Or “You know, I just saw that in California, they’re going to do this. Maybe we should be doing that.” Then five or six people will respond to it.
In other groups, somebody will send an email saying, “I’m going to this event, does anyone know anyone who will be there?” They will carbon-copy eight people, including me, and then my inbox will get slammed with twenty emails from three people discussing some person I don’t know who might be at some event I won’t be attending. I don’t care, yet I’ve got twenty emails on it. I am constantly pushing people to stay out of my inbox. Put it on Yammer. Older lawyers often have trouble with that.
Have you seen Millennials struggle with certain imperatives of the profession, like having to actually call people on the phone instead of emailing or texting?
Yes, but I don’t view that as a negative.
One of the things I always talk about in terms of marketing is that anybody can be a good marketer. I used to help coach my daughter’s high school basketball team in the offseason. They had a player who was 6’4” and heading to the University of Washington with a full ride. She was a terrific player, and was going to get 12 rebounds a game. But for us to win, every single starter needed to get four or five rebounds. We couldn’t just rely on her. It’s the same with marketing; everyone needs to contribute in their own way.
There’s this idea among lawyers and probably others that the best marketer is the car salesman or the quarterback type . The reality is that’s just not true. There are many different types of potential clients out there. Millennials can be extremely effective with other Millennials. They can be extremely effective by being who they are, and dealing with people like them. That means texting and emailing instead of calling.
Millennials tend to be very morally centered. They really dislike working on matters when they don’t like the client, and there have been times when they have refused to do so and so we sent the client walking. There’s something to be said for that. They really like working on matters when they believe in the client. We typically discount our fees for not-for-profits. They like that.
This idea that Millennials are lazy, I don’t buy that. I’ve not seen that. They want freedom, and we give it to them. We’re a law firm that doesn’t care when or where our people do their work. We just care about the quality and the timeliness of the work. Our attitude on this jibes with what they are seeking and in that way we are a good fit.
One thing I’ve noticed – and I don’t think this is necessarily peculiar to Millennials, but a factor of being a new lawyer – is that I’m more confident in them than they are in themselves. They’ll look at their workload and see that in three weeks, five things might happen, so they’re reluctant to take on anything new. I see it as my job to convince them to go ahead and take on something new. Of those five things, probably only two or three are actually going to happen. I encourage them to take on a little more risk.
How has technology affected the way you practice law?
I generally dislike most legal technology because it’s lousy. But there is a lot more VC money starting to go into it, so I’m hopeful.
We use a program called Clio. It’s a cloud-based software program geared to law firms, and way better than anything was five years ago. There’s another one called RocketMatter. RocketMatter and Clio very much compete. Both are dubbed “comprehensive legal software.” I would describe them as pretty good – the competition is definitely helping – but every once in a while, we come up with something that’s not that unusual that is just not possible to do in the software.
When it comes to software for our firm, the best software we use is non-legal. One program I always rave about is called DocuSign. It’s very simple, and it just works. I think all programs should be like it. We love it because we can get off the phone and send clients a fee agreement in five minutes. The client doesn’t have to print it out, sign it, scan it, and email it back, which is the way most law firms operate. Everybody in the firm has a record of what’s going on with the fee agreement because it’ll show when it went out and when it was signed, and it’ll stay up in the cloud. It’s really a good program, and there are very few of those that work well for law firms. The proof is that all of our lawyers use it. Here’s a contrast. Our firm is a member of an international legal and accounting association based in Spain. When we joined this association last year we had to sign a document and then overnight the original to Spain. The association would not even accept a pdf!
There’s another software program we love called LawPay. One of the problems law firms have with alternative payments (forms other than check) is that when money goes into a trust account, it cannot touch the hands of a third person. So law firms cannot use PayPal or credit cards for trust account payments. If you have a big case and you’re charging by the hour or by the month, or if you want an advance fee payment, you have to use something like LawPay. LawPay may be the only company that does this and somehow it’s set up so that it complies with the bar rules.
Now we can get off the phone with people – it happens two or three times a month – they’ll sign the fee agreement, and we’ll be paid within 10 minutes. It’s just amazing. This is unbelievably efficient for everyone involved and our clients will often compliment us on it and I have no doubt it makes them feel even better about having chosen my firm for their legal work.
What would you like technology to do for you that it presently can’t?
We’re an all-Mac law firm, and as far as I know there is no good document generation software for Mac that’s dual language. We do five or six manufacturing agreements a month with Chinese manufacturers. These agreements are fairly complicated agreements and vary with each client, each product, and each manufacturer.
A manufacturing agreement for having your candy made in China is going to be very different from a manufacturing agreement to have golf carts made in China – the time periods, the standards, etc. But there are always going to be similarities. What I would like is a document system that would allow us to easily pull and re-use provisions in both the English (or the Spanish or the German or the Japanese) and the Chinese. For instance, if we know that there is going to be a 1% penalty for every day beyond a week that the product delivery is delayed, it would be nice to be able to review our ten best delivery delay provisions and just click the one that best fits, in both languages.
Like in a dropdown menu in the software? So you don’t have to copy-paste from past agreements?
Exactly. That’s not out there yet. We charge a flat fee for these manufacturing agreements, so any inefficiency is on us. If we could save even 30 minutes on each one, that’s real money. We would be willing to pay a lot for a Mac program that could do that in both our client’s first language and in Chinese.
Have you ever applied an idea from another field to help you do your job better?
All the time. Henry Ford. I want everybody to have the exact same computer in our firm, we buy our desks from the same company, and everybody has the same chairs. I want the small things to be systematized, so that we are freed up to deal with the bigger things. If somebody has a problem with his or her computer, I don’t want a staff person to have to spend three hours researching the best computer to buy. He or she can just replace it right away with a MacBook Air. It takes three minutes. The same is true if we need a new chair or a new desk.
We have loyalty with our vendors because it allows for smoothness. Could we maybe get a better deal somewhere else? Yes, but then we are taking a risk that it will be a disaster and five hours will be wasted. I borrowed that from Henry Ford. I want our firm on the low-level things to be an assembly line, to be routinized.