Why social animals will preserve the City of London

I heard on the news today that officially today (17 January) is the most depressed day of the year.  Post-Xmas debt is at its maximum; the weather is invariably dark and dreary; the newness of the presents has worn off and, frankly, there is just nothing to look forward to.

View from Paramount in Centre Point

This evening, as a bit of a pick-me-up on such a depressing day, I went with a few colleagues to the Paramount Club which is based on the top floors of Centre Point above Tottenham Court Road Station.  Before you think "how pretentious" this is not some private members' club and this was my first visit (but will not be my last).  The views of London are truly stunning (see rather poor BB photo) and, probably, unbeatable although once completed The Shard might give it a run for its money.

Looking down across the West End and to the City and Canary Wharf I considered the following issue:

As businesses constantly consider ways to drive down costs and as technological advances continue to increase the ease with which work can be carried out in any geographical location how can expensive areas such as the City of London and Canary Wharf expect to be around in, say, 50 years time?

The truth is that I do not know the answer but I can posit one possible reason to remain optimistic - human beings are social animals.  Nothing proves this more than the growth in the use of social media over the last 2 to 3 years.

It might be thought that it is that same growth in social media which threatens the very bricks and mortar I believe it is likely to save.  But this all depends on how you view the various social media platforms (e.g. Facebook, Twitter, LinkedIn).  Are they intended to replace physical proximity or to facilitate it?
From personal experience I believe that they cannot replace it.  They can replicate some of the closeness originally only available by talking to someone face to face or, since the invention of the telephone, at the other end of the line.  With improved video conferencing face-to-face will be possible without leaving your desk.

However, no matter how much they improve and become part of our lives they cannot replicate one important element - the shared experience that comes in being in the same place at the same time.
Being a social animal is not about simply talking to and communicating with others.  It is about sharing experiences with them.  If this were not the case why do banks have huge trading floors?  It cannot be just about the communication but rather the need for physical proximity.

This human requirement is something which resonates particularly within the client-adviser relationship.  The uninitiated might have thought that with all the forms of communication available today there is no reason why an adviser should ever physically meet a client.  Yet, I am confident that if you ask most (if not all) clients which of their advisers they "trust" the most it will be the ones who they meet up with every now and then.  The others might e-mail them; might link with them on LinkedIn or follow their tweets on Twitter but none of that is a replacement for sitting together at a table just chatting.

So for as long as human beings remain social animals the City and Canary Wharf will be well populated.

Pinsents – first firm to offshore work of qualified UK lawyers | News | The Lawyer

Pinsents - first firm to offshore work of qualified UK lawyers News The Lawyer

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Am I about to be outsourced to South Africa?

I awoke this morning to read in The Lawyer that Pinsent Masons is the first firm to send real legal work (i.e. work that qualified associates would do) to a company in South Africa. Outsourcing is not new to law firms and nor is outsourcing off-shore. However this is a first as it means real legal work going off-shore and judging by some of the comments made by my peers on TheLawyer.com they are not happy about it!

This is a fascinating development in the provision of legal services. I think that there is little argument that to a large extent geographical location is no longer an important factor in the provision of any services apart from those requiring you to be in a specific place (e.g. a plumber). So why did lawyers possibly consider themselves different? Afterall, in some ways our jobs are even more easily transferable across the globe. I could be writing this blog, reviewing and drafting documents and reports and generally conducting my work life from anywhere on the planet (and, I suspect, from the International Space Station as well) - my clients do not care where I am as long as they can get hold of me when they need to!

So what is the big issue?

Well I think that there is a difference between a firm based in another country with limited or no office in the UK providing legal advice from a cheaper base and a firm existing properly in the UK and outsourcing legal work to another company in another country to cut costs. In the first case, from trainee up there is the potential to get exposure to all parts of transactions. The only thing that might be partially lacking is client contact although this would increase as you became more senior and your skills would develop accordingly.

However, in the second form, which Pinsent Masons has adopted, there is a whole chunk of work experience that is now being removed from trainees and junior lawyers. One cannot play down the importance of that kind of experience in developing a well-rounded lawyer. The ability to run a transaction well can only come from the experience of being a tiny part of a similar transaction and seeing the effect that decisions made at the higher level have further down the chain.

Am I surprised?

Of course not. The increasing dichotomy between partners' needs to keep profits growing and clients' needs to see fees fall meant that something had to give. Law firms have to find a cheaper way of conducting business especially in the current climate and this is one way to go.

Will it affect quality?

This is an impossible question to answer as often quality is dependent on the individual as much as the company employed. However, the fear of failing to impress a given supervisor will be lost as will concern regarding damage to brand. Again, these are not tangible things which can be measured.

Is this the end (or at least the beginning of the end)?

Who knows. I do not see it as being possible to remove the human touch, certainly at the higher value end of the spectrum. Clients want specific lawyers for specific deals. The problem is, as pointed out by a number of comments on TheLawyer.com, what effect will the outsourcing of the low value work to cheaper locales have on the experience required for the next generation of lawyers just starting out? Could it ever be positive?

Don't the partners and clients know this?

I think they do but at the end of the day we now live in a short-term view society. This has been highlighted as one of the main causes of the financial crisis. Partners and managers are not worrying about the effects of something in 10 years' time but rather the benefits that will be achieved in 2-4 years' time. Some may also suspect that the whole fees issue is a short term one and once the economy recovers it will disappear.

The problem is that whilst it might be true that law firms will not be expected to further cut fees it is highly improbable that they will be able to significantly increase them either. Further, if you were a partner in a firm who had outsourced work to South Africa and you could now increase your fees and either (i) bring more work back on-shore at a higher recoverable cost or (ii) keep it off-shore and make more profit, which would you opt for?