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<p>Unfortunately, no, that’s not how you would calculate the figures, for as I’ve stated repeatedly: billing is just an artificial accounting construct. That’s because biglaw legal services are a package deal for which the client is not allowed to choose a-la-carte but can only select an entire prix-fixe meal (or else not purchase at all). </p>
<p>As an example, McDonalds could in principle take a $5 Big Mac and, for the purposes of accounting, “divide” the costs to the customer in any number of ways. Heck, they could “bill” me with an invoice stating the pickle costs $4.99, and the rest of the sandwich costs $0.01. But that’s merely an accounting fiction. It doesn’t mean that the value of the pickle is indeed $4.99 , nor does it mean that I could choose to buy a pickleless sandwich for 1 cent. If I want the sandwich, I have to pay the entire $5, and how McDonald’s might allocate the costs for accounting purposes is irrelevant. {Heck, even if I order a pickle-less Big Mac, they’re still going to charge me $5.} </p>
<p>The real question is therefore exactly how much value are the new associates truly adding to the entire ensemble of legal services provided to the clients. And let’s be perfectly honest, the partners, along with the senior associates, are adding the vast bulk of the true value. That’s what the clients are truly paying for. In the same way, the ‘real’ value of the Big Mac probably lies in the meat, bun, and the McDonalds ‘secret sauce’. That’s what I’m really paying for, and the value that the pickle adds is negligible. </p>
<p>Put another way, how many people would truly pay $4.99 for a standalone Mcdonalds pickle slice without any of the rest of the sandwich? Probably nobody. By the same logic, how many clients would legitimately pay $250-300 (or, heck, even $175) an hour for a brand new biglaw associate without any accompanying work from any partners or senior associates? Again, probably nobody. But why not - after all, if the service was truly fairly priced, then customers would happily partake, right? In both cases, clear overpricing is occurring. I would pay that $4.99 for the overpriced pickle only if I could get the rest of the sandwich for a total of $5, and similarly clients tolerate paying overpriced new associates only to obtain access to the rest of the biglaw service bundle. </p>
<p>That clearly demonstrates the artificial accounting nature of these billing rates. How firms choose to bill their customers has no direct relationship with how they then choose to pay their employees.</p>