Overcapacity

Mass layoffs hit the legal community in the past few months with massive firings announce at virtually every major law firm in the AmLaw100 and some really astounding numbers coming out of firms like Orrick, O'Melveny, Latham, Cadwalader and Holland and Knight and others too numerous to count. Some lawyers are using the crisis (see my post on Not Wasting A Crisis) to start their own firms but it seems clear to me that there is no way that the "down market" is going to be able to absorb all the displaced professionals. Which is worse, losing your cushy job at a big name firm or finding yourself competing for smarmy divorce work with 100s of other former big firm attorneys, not to mention the experts who have been doing it for the last 5 years while you were busy with Indentures and Offering Supplements.

What's an erstwhile big firm attorney to do in a market that is suddenly awash in erstwhile big firm attorneys?

1) Cut your overhead. To beyond the bare bones. Ordinarily I am an optimist, and I am an optimist about you too, but this is no time to be timid. If you can sell your house, sell it. Prepare your student loan lender for some bad news. I hate to say it, but the private schools may be short a few students next term. Vacations?!? Ha ha ha ha. I am not so much focused on day to day expenses (like groceries or Happy Meals) but it is absolutely essential that you get realistic about your own personal credit crisis. Evaluate your debt load and don't be afraid or ashamed to go so far as personal bankruptcy. A laid off attorney in a bad market just isn't going to be able to carry the debt load that he did in better times.

2) Consider alternative fields. Your law degree and your big firm experience are great assets. They are just not liquid assets in today's market. Where demand does exist, health and post-secondary education, and will exist, infrastructure construction, alternative energy and early childhood education, is where you want to be. And not necessarily as a lawyer. Do you have any skills, talents or other resources that can be put to use in these fields, or supporting people who are employed in these fields? Think about all the ways you could support doctors and other health care professionals. Can you start a business that serves colleges or college students? I would suggest that we all start thinking today about services outside the law where our talents will be welcome.

3) Consider alternative locations. A lot of laid off lawyers are where a lot of lawyers are; i.e., in New York, Los Angeles, San Francisco, Charlotte, Chicago, etc. These are the most expensive places in the country to live. (Washington D.C. is up there in both number of lawyers and cost of living, but DC is probably going to be the center of the economic universe and a reasonably good for legal talent, at least in terms of holding a position, for the next few years.) Meanwhile the cost of living in the less go-go economies of the mid-west is emminently reasonable. If you came off the farm to go to Harvard (a la The Paper Chase) and now find yourself dumped by Cadwalader, maybe you could relocate back to the country and set up your own outsourcing operation. With lower overhead, and similar experience you have a competitive advantage and you don't have to move to India to get it.

4) Downsize your expectations. When you think about it, erstwhile big firm lawyers are in the top 5% of the top 1% on the planet economically speaking. A crisis to us looks like a holiday to the vast majority of the planet. I realize that doesn't help you deal with a spouse who was accustomed to your mid six-figure contribution to the annual household budget. Or with a father who always wanted you to follow in the family tradition. But the facts are nobody reading this is going to starve today or sleep outside tonight. Most of us are doing just fine right now. We may have to make some unpleasant choices in the future, perhaps in the near future, but even at that chances are very, very good that we will enjoy basic nutrition and shelter throughout our natural lives. In other words, practice being grateful for what you have. Then build on that to make your live the one you want.

Feeling Good

Some of us have been trained to look everywhere but where the treasure is. For whatever reasons, and I have my own none too flattering suspicions, the adults around us way back then taught us to not only restrain but positively abhor our desires. We were told that desires were evil, to be resisted at all costs, almost to be a sign that anything of worth lay in the exact opposite direction.

Nonsense. Suppose the universe to be created by an all-powerful, all-knowing and all-loving God. Why then would such a being instill in us the almost irresistable urge we call desire? Could it be . . . could it be . . . could it be, not Satan (as the old Dana Carville Church Lady routine went) but that God, the Creator or the structure of the universe set things up so that we desire whatever that ultimate power itself desires? Wouldn't that be the simplest and most straight-forward explanation for desire?

Don't get me wrong, I am as convinced as anyone that reckless pursuit of selfish and short-term gains can be painfully destructive. But that's my point. Most of us don't really enjoy sexual debauchery or rampant intoxication when considered in the light of the inevitable consequences of such behavior. As we gain experience and learn about the inevitable consequences of our pursuit of short term gratification, new and more enlightened desires take their place. We develop an appetite for a calm and undisturbed mind, for example. Or we seek communion with nature or an earnest conversation with a cherished friend.

I also happen to believe that our desire cannot progress to this mature enlightenment except through the path that leads through the pursuit, and perhaps the unbridled pursuit, of those lesser, more fleeting, more immature desires. But even if one accepts that immature desires need restraint and redirection, we need not accept that all desire is rotten.

I submit that our desires are holy and sacred, they are the God-force offering its energy and direction to us, our destiny pulling us forward. As such, the highest honor we can pay when it comes to desire is to follow it. And until my own desires become important to me, more important in fact than my job or my lover or my child, I will be a miserable martyr and everyone around me will notice and no one will want to be around me anyway. And I really don't blame them.

Until I learn to honor, pursue and attain my own desire, I don't have anything to offer anyone else anyway.

Envisioning Peace of Mind

The financial markets are as bad today as ever and yet I seem to be in good spirits, enjoying the blue skies and perfect spring breezes here in Santa Monica. I remember similarly beautiful days when the financial markets were roaring and my mood was dour to say the least. Obviously my mind is capable of going wherever it wants to go, happy or grumpy, regardless of conditions. Is it possible for me the train my mind to consciously go to the states that I desire and consciously avoid the states that I dread?

I think so. I have been working on it lately. I make lists these days, not of things to do or people to call but of all the good things that have happened in the last 24 hours, or everything I can think of that I appreciate, or all the things I am looking forward to. The result? I am a better frame of mind, more often, for longer periods of times.

I also refuse to indulge in worry or anger. Don't get me wrong. I'm not superhuman. Someone waltzes in right at the dramatic finish of the Lakers game and interrupts me and my anger will probably flare up. But I don't indulge in anger. I don't replay the scenario over and over in mind fanning and fixing the anger emotion in my body, mind and soul. I consciously choose to direct my attention elsewhere. And when I can't, I realize that it is not some other person who is hurting me by making me angry, but me that is hurting me by allowing myself to remain angry long after the conditions that sparked my anger have passed. I have finally learned how to give up my greivances and move on. I either address it in the moment or just let it go entirely. No more bearing grudges for me.

Worry is another self-destructive thought pattern. It won't burn your body, mind and soul up quickly like anger. It will just slowly sap your energy, like weeds choking off a garden. It's a complete waste of energy and totally unnecessary. As the saying goes, 90% of the stuff we worry about never happens. And as to the stuff that does . . . well, for me I choose to endure the pain and agony of all these horrible outcomes only once, not 15, 20 or 100 times as I can when I choose to create and replay these scenarios of a bad future over and over again in my mind.

Since worry is just thinking about the future, let's keep that part. Only let's imagine a future in which everything turns out perfectly. Suppose you knew that you would have all the money you needed to do whatever you wanted to . . . tomorrow. What would you do today if that were your assumption? Suppose you knew that a perfect outcome for your life was already being prepackaged for delivery to you and all you had to do to get it was be true to your Self. What would you do today if that were your assumption? Suppose you could train your mind to believe not only that everything is going to be all right, but that everything is all right?

How would you feel and what would you do then?

What are you waiting for?

People, Profit and Service

I am not sure that the depth and breadth of the changes in our economy are sinking in, even at the highest levels. Going back to the Civil War-era the American economy has been unabashedly profit driven. Getting more people to buy more at higher prices was accepted without examination as the main and often sole goal of American business. The profit motive ruled over all and no one was the least bit embarassed about it.

This was a model that worked fairly well, or at least worked, so long as Americans were sold on salvation through consumption. We baby boomers fit right into the model for over five decades as our teen, young marrieds and mid-life consumption habits drove markets in film and music, automobiles, convenience food and stores and, of course, housing. As long as a massive population bulge wants more, more, more, a profit-centered business model is set up for success. With the proliferation of radio and the TV, entertainment became the centerpiece of our home lives and profit-driven consumer product companies paid for advertising that paid for the entertainment.

As the companies reached the limits of their ability to sell products for cash, new and creative ways to provide consumers with access to financing for ever larger purchases had to be invented. An unhealthy finance bubble was launched and tens of thousands of professionals were sucked into service greasing the consumer finance skids. When we reached the limits of our creativity, the finance fueled bubble popped. That is, once we had finally figured out how to make a loan to a person with no equity, no credit history and no proven ability to repay, we had taken credit as far as it could reasonably go. Some say we took it even further than that. Independent of the credit bubble, I believe demographics are lining up against an economy based on spiraling up consumption. A few years ago, my "greatest generation" mother begged me, as Christmas approached, "Please, please, no more gifts." This was not the mandatory "no gifts" routine. This was a person who had just been working on her estate planning contemplating the burden that her lifetime of possessions had become. This was a person who was dreading any further accumulation of stuff.

Since growing the credit markets is, at least for the short term, no longer an option, it seems to me that the whole concept of a growth economy is called into question. Which leads to the question: if companies are no longer to be measured on the basis of how much profit growth they can generate quarter after quarter, how should we evaluate companies?

Let me suggest that our new standard be service. What is your company doing for it's constituencies? How are your customers better off because your company exists? What is your company doing to better the lives of your employees? How are you helping your community? And the beautiful thing about the service mentality is that it applies all the way down the line -- you can measure your company on the level of service, you can measure your executives on the level of service, you can measure your employees on the level of service, you can even measure your kids or your pets on the level of service?

Wouldn't it be great if we were all determined to put more in than we took out? Imagine our society then.

Redployment of Resources

I spent the last 20 or so years working with some of the smartest people I know creating new, spectacular and innovative financial products. And we were good. In the current issue of the New Yorker there is a cutting, but perhaps a little too true, cartoon where the caption reads: "True, a salary cap on Wall Street may limit the talent pool, but, on the other hand, if they get any more talented we'll all be broke." Many of us got sucked into the huge, expanding vortex of real estate finance during those decades. Now we are seeking other outlets for our creativity.

And how creative were we? Well, at the peak, we were able to convince investors that the risk associated with a loan made to a borrower who had no equity, no credit history and no apparent means of repayment was risk that could be managed through creative finance. No single individual can bear the blame for this. As a comedian friend of mine's routine goes: "It seemed like a good idea at the time." And when it comes to real estate loans, it's impossible to make a bad loan in a rising market.

Of course, the days of rising real estate markets covering all sins have been temporarily suspended. Which may be all well and good and in the nature of markets generally for the economists of the world. But leaves the individual finance professional with a difficult puzzle to solve. What do you do with a finance rocket scientist when the space program has been disassembled?

The first thing that seems clear is that Washington not Wall Street will be the stronger influence on the direction of our economy for the next couple of years. Investors are so skittish these days that they are piling en masse into Treasuries and shunning all other opportunities. Yield hogging is passe. Risk avoidance is vogue. With so much money being piled so cheaply into Treasuries of every maturity, the market is actually saying, "We trust government and, pretty much, nobody else with our money."

Well, what is the government going to do with all that money that everyone wants to lend them? Actually, that's not a mystery, but it is a fairly massive list. However, President Obama has been pretty clear about the Cliff Notes version of it: more Infrastructure, more Health Care and in some cases differently directed Health Care (away from pharmaceuticals and toward lifestyle changes and prevention), more Education with an emphasis on both early childhood education and post-secondary education, and more Clean Energy and Home Grown Energy. These are the national priorities that the Obama administration has set and is pursuing.

I'm not sure how securitization professionals can add value and energy to these sweeping societal changes. All I know is that in the next few years, these industries will be where the action is while allegedly slicing and dicing the risk associated with pools of financial assets will be far less in demand.

Don't Waste a Crisis!

Don't ever waste a crisis. This nugget of wisdom, in various forms, has been floating around for a while (and seems to be immensely popular lately) but it came to me courtesy of President Obama's Chief of Staff, Rahm Emmanuel who was discussing the American addiction to foreign oil. A crisis is a beautiful opportunity. Faced with drastic circumstances we become willing to take risks that would be too overwhelming or threatening otherwise. Backed into a corner by matters outside our control we summon unimagined resources. Feeling we have nothing left to lose, we launch ourselves on some of the riskiest, and most rewarding, adventures of our lives.

Dozens, maybe hundreds, of times each day we experience little sparks of desire, tiny tugs in the direction of things we would like to do or try. An almost equal number of times during each ordinary day we push back on the desires, reminding ourselves that we have made other choices . . . and need to stick to them. Then a crisis comes along and upends the status quo. This same crisis that scares and threatens so much also gives us the perfect opportunity. It explodes our neat little day to day existence and with it all the unintentional shackles we have forged for ourselves. "If I don't have a job now anyway, maybe this is the time to take that six-month quest through India that I always dreamt about." "Since the entire industry in which I have built my career for the last twenty-five years has been leveled, maybe now is the time to mold a business out of my real passion. I can't do any worse than broke."

One of the most powerfully beneficial social movements of the last century was the tremendous advance in the field of alcoholism made by the group that came to be known as Alcoholics Anonymous. Whether we buy into all their tenets or not, no one can argue the fact that Alcoholics Anonymous and Twelve Step Recovery generally have brought amazing relief to innumerable suffering people all around the globe. What most people don't know, however, is that the AA program likely would never have been created but for the stock market crash of 1929 and the subsequent crushing economic depression. AA's co-founder, Bill Wilson, was a high flying finacier during the jazz age of the 1920s. Crushed by the '29 crash, he struggled to try and rebuild his life on the only basis that he knew -- finance, business and deal making. In the next 5 years he failed so many times, in business and with alcohol, that the only avenue of expression left open to him was to dedicate his life to helping other alcoholics recover. And he did it like he did everything else, to excess, and with excellence. His message of hope and recovery has spread in the decades since and spared millions of the afflicted, not to mention their families, from suffering and tragedies too great to measure. Crushed by a crisis he could no longer evade or avoid, Bill Wilson turned his talents away from business and helped launch a solution for what had been one of the most perplexing and heart breaking problems in history up until that time.

Maybe this economic crisis has come home to you personally. Maybe your position has been eliminated and your industry devastated. That's GREAT! This is a once in a lifetime opportunity. In the face of complete devastation, with nothing left to lose, no one can blame us if we dare to try the big dream and fail. From the looks of things we were pretty much lined up for failure in any event. Why not take a small step in the direction of work that we really love, that we really enjoy and that is really meaningful to us? Wouldn't it be great to wake up in the morning and feel like we just can't wait to get started? What single simple step can we take today that will lead us closer to making the most important contribution we can imagine? Given the situation, it's not like we're doing anything else now anyway. What do we have to lose?

I once asked Nobel Laureate Muhammed Yunus ("Banker to the Poor") what all the lawyers would do in a world where loans do not require contracts, as is the case with his Bengladesh microfinance company Grameen Bank. His reply, "Something much more interesting."