October 05, 2011

American Bar Foundation

March 28, 2000

Arthur Garwin
Center for Professional Responsibility
American Bar Association
541 N. Fairbanks Court
Chicago, IL 60611

Dear Art,

As you requested, here are a few observations about the utility of conducting market research about the demand for one-stop shopping or multidisciplinary practices.  I will begin by reporting what our economists stated and then offer a few other points.

James Heckman, one of the top economists at the University of Chicago, commented simply that subjective questionnaires on these matters have not been that useful.  He suggested that the questions about purchases of services in the abstract would not be effective in telling us what people might actually do.  Austan Goolsbee, an economist of the University of Chicago business school, provided more elaboration.  He said that there is only one way to find out if there is a demand, and that is to see if there turns out to be a market.  He suggested, however, that one might approach the question by looking at the demand "around" any potential MDP, meaning the general areas of accounting work, business consulting, and legal consulting.  In his opinion, it is clear that there is sufficient general demand to suggest that, under particular circumstances, some of it could be carved out by a new kind of provider.   In his opinion, however, the actual success of an MDP would depend on specific packages of services.  What would be important would be pricing, how efficient the services were, and the quality of people who go into the particular business.  He did no think a market survey could handle these issues in the abstract.

Certainly there are companies that would undertake this kind of research, but these scholars suggest that the results one way or another would not be convincing to those with expertise about economic decision-making.  My own observations about law and business also suggest that the demand is hard to predict and changes quite a bit over time.   For what it is worth, there was reportedly almost no demand for business litigation (except defense work and the collection of debts) from corporate clients until the 1970's and 1980's.  A new supply of litigation services pioneered by such firms as Skadden Arps helped to create a new demand more generally.  Similarly, companies outside the United States until the "invasion" of U.S. (and to a lesser extent British) law firms did not use lawyers very much except for routine work in court and out of it.   The demand for legal advice in forming businesses, raising capital, and forming business relationships was almost completely absent.  That has changed dramatically.   It may also be interesting that McKinsey and Company, probably the leading business consulting company, was built under the leadership of a law graduate, Marvin Bower, who reportedly had enormous difficulty at the outset in persuading companies that they actually needed business consultants except when a company was in trouble.  Needless to say, McKinsey and other business consultants succeeded in creating that demand over time.  The rapidly changing consulting environment makes it further difficult to decide what demand may turn out to be.

None of these observations dictate any particular policy conclusions, but I offer them to suggest that there are some reasons not to expect market research to resolve this debate.  It is hard to measure the demand in the abstract, and one of the features of professional services is that they tend - if succesful - to appear as if they created the demand.

Best wishes,
Bryant G. Garth