Robb thinks this no longer necessarily holds true today, thanks to largely online, open-source markets that can dramatically increase the efficiency of building what I've been calling "ad hoc firms."Coase asked the question: if markets are extremely efficient (as maintained by many), why isn't everything built/done using contract labor?The reason he found is that when trying to get something complex done, market prices don't capture many of the costs involved.For example: It costs money/time to find the right people, to negotiate for their labor, to find/acquire the right investors, to establish the right processes, to set up the organizational control systems, etc In short, because it's expensive to do this, entrepreneurs typically create a company so that they only have to go through this process once.Is this still true today?
This trend and potential also applies to law firms. Traditionally--and lawyers generally not known for their innovation in terms of their own business structures--law firms are classical "firms" precisely for the reasons highlighted by Coase: there is substantial cost involved in assembling the right team to optimally serve a client. That inefficiency, however, is melting away for those prepared to capitalize on the potential of new marketplace formats for labor and services.
Just as Coase pointed out, if there were no costs involved in assembling the right team, then all legal services would be delivered by tailored and just-in-time assemblages, or "ad hoc firms." In fact, if there were no costs involved in creating such assemblages, it's quite clear that ad hoc firms could deliver superior knowledge, talent, service and value than traditional firm models. I'm not sure whether we've already crossed the threshold where the value derived outweighs the cost of the ad hoc firm model, the obvious desire of traditional firms to keep their heads firmly planted in the sand notwithstanding. What I am confident in is that we're rapidly moving in that direction, and that both legal service providers and consumers need to position themselves for the day when that line is undeniably crossed. And, because of the widespread reticence to even acknowledge this dynamic let alone do something about it, there is tremendous potential for those individuals positioning themselves for that future today.