How now, purple cow? What Fintechs can teach the legal profession about being remarkable - Young Lawyers' Committee

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Stella Loong
Technology lawyer, Melbourne, Australia
 

Introduction

Have you heard of Tesla, LinkedIn, Palantir or YouTube? If so, you’ve heard of a venture founded by one of the so-called ‘PayPal Mafia’.

Have you used Facebook, Uber or Airbnb? If so, you’ve used a venture that received backing from one of the PayPal Mafia.

In fact, it’s not hard to have had some contact with the PayPal Mafia, when they have funded more than 1,000 ventures.^[1]

The ‘PayPal Mafia’ is a term originally used to refer to 20 men who made their fortunes when PayPal was bought over by eBay. However, in recent years, the moniker is used to refer to a growing and diverse list of 142 PayPal alumni who have founded companies.^[2] 

How did this Fintech become a disruptor as well as the breeding ground for so many remarkable ventures? How can the legal profession be like the PayPal Mafia?

In this essay, I argue that the legal profession needs to create purple cows and explain three lessons that Fintechs can teach about how to create them.

What is a 'purple cow'?

Seth Godin, whom Business Week has called the ‘ultimate entrepreneur for the information age’,^[3] calls remarkable ventures ‘purple cows’.^[4] Godin describes being remarkable as: '[something] worth talking about. Worth noticing. Exceptional. New. Interesting.'^[5]

The rise of Fintechs introduced purple cows into the financial services industry and this has changed the industry forever.

Why must the legal profession create purple cows?

‘The first thing we do, let’s kill all the lawyers.'^[6]

According to Godin, if something is not a purple cow, it is a brown cow – boring and invisible.^[7] The legal profession must therefore create purple cows or ‘put a purple cow into everything [we] build'^[6] because the alternative is being boring and invisible. The legal profession must be remarkable because we fundamentally exist to uphold the rule of law. Being remarkable so that we remain relevant is not a ‘nice-to-have’; it is our duty.

Austrian economist Joseph Schumpeter’s 1940s theory of ‘creative destruction’ describes a continuous process where the existing paradigm is destroyed and replaced with the new. The result is innovation.^[9] When creative destruction becomes part of our culture, it means that our profession is in a state of continuous innovation. The objective and result of embedding this in our culture is so that we can help more people more effectively more often. To illustrate, it means that when someone creates software that results in lawyers no longer having to spend thousands of hours doing discovery, these lawyers naturally and purposefully move on to pursue the remarkable elsewhere [emphasis author's own].

The bell has tolled for the legal profession. The Covid-19 pandemic has imposed further stresses on an already broken profession. As we saw in the 2008 global financial crisis, it is likely there will be fewer law graduate positions for students and less funding for legal aid and the justice system, while lawyers will face lay-offs, salary freezes and pay cuts.

These stresses come on top of a profession that is already battling to stay happy and healthy. Statistics show that the majority of lawyers have suffered from mental health issues.^[10] In 2018, the widow of a partner at a top United States law firm wrote an open letter titled 'Big Law Killed My Husband'.^[11] Judges too have come out publicly to share their battle with illness caused by overwork.^[12] Based on the findings of the IBA’s 2019 report on bullying and sexual harassment, lawyers commonly perpetrate such unacceptable behaviour against each other.^[13] And what can one say in response to recent revelations from the High Court of Australia that accounts of sexual harassment by a former Justice towards six female judges’ associates ‘have been believed’?^[14]

Figure 1: Leo Cullum, 'Can we, just for a moment, Your Honor, ignore the facts?'

In this watershed moment, we need remarkable solutions that will help everyone to thrive.

The rise of Fintechs

‘Fintech’ is a catch-all term for technologies that disrupt the way financial services are delivered. The term is also used to refer to companies that build these technologies. At the heart of Fintech is a purpose –to democratise financial services.^[15]

PayPal is perhaps the most well-known Fintech. PayPal revolutionised the way payments were made by providing individuals and businesses around the world with an easy and quick means to transact with each other over the internet. Its adoption by eBay has made it synonymous with e-commerce and it is one of the leading providers of digital payments.

Another formidable Fintech is Tencent’s WeChat Pay, which integrates with the WeChat messaging and social media app. In the last quarter of 2019, WeChat Pay facilitated an average of over one billion payments a day between over 800 million users and 50 million merchants.^[16] It has helped WeChat to so fully integrate with users’ lifestyles that they seldom have a need to leave the platform.

Fintechs came to the forefront in a climate where dissatisfaction with big banks was rising and the market had a greater appetite for disruptors. Their success has fostered a sense of trust and openness towards the use of new technologies in a traditionally conservative industry. Not only have Fintechs paved the way for more innovative solutions to enter and thrive in the marketplace, they are also challenging banks and other players in the industry to innovate quickly or enter into partnerships if they want to remain relevant. The financial services industry has flourished in this new era of Fintech innovation.

What can Fintechs teach the legal profession about creating purple cows?

Adopt a ‘founder’s mentality’

Based on their decade-long research into 8,000 companies, Bain & Company’s Chris Zook and James Allen identified three traits shared by companies that achieved sustained and profitable growth: an insurgent mission, an owner’s mindset and obsession with the frontline. Together, they form the ‘founder’s mentality’. A founder’s mentality is found in Fintechs as most are still founder-led. However, Zook and Allen argue that any leader can inculcate these traits in any organisation.

AN INSURGENT MISSION

An insurgent mission is likened to ‘waging war against an industry on behalf of underserved customers’.^[17] This quality is evinced by TransferWise, which has changed the status quo for how money is sent internationally by enabling clients to do so at much lower fees than what banks charge. It is also at the core of Sempo, which makes financial services available to refugees and people in remote communities.

Over time, and as more people join the company, organisations tend to forget what their founders originally set out to do. However, organisations can go through ‘renewals’, which bring them back to their founders’ mission.^[18] For the legal profession, what would a return to our roots look like?

Xinja, Australia’s first 100 per cent digital bank, which prides itself on being ‘made for people',^[19] has published an online product roadmap. This roadmap allows clients to comment and vote on upcoming features that they are excited about. This information can then be used to help its engineers prioritise product development and deployment. Where a project is of a sensitive nature, this is also included in the roadmap under the moniker ‘Secret Sexy Squirrel’.

A legal co-op could harness the use and publication of a ‘product roadmap’ to create a new legal product for the delivery of legal services. Specifically, this interactive roadmap could be used to crowdsource ideas on how the product should be designed and members of the public could also be recruited as beta testers. This process would help the profession (and our allies) gain the critical mass needed for the development and adoption of new and emerging technology that will help society attain justice and uphold the rule of law.

Members of the legal profession could also consider developing and articulating their goals and plans in an interactive roadmap and presenting this to stakeholders for feedback. By strengthening relationships with stakeholders – and perhaps feeding off their energy – the legal profession may experience a reinvigoration of its purpose.

OWNER'S MINDSET

Having an ‘owner’s mindset’ means taking personal responsibility for the company’s decisions, as if you were the owner of the company. Founders crave for employees to have an owner’s mindset and one way to do this is to let them actually become owners. At early-stage Fintechs, it is common for founders to offer employees a chance to own a piece of the pie under employee share schemes. Usually, the option to own shares will vest over a number of years. This means that in order for an employee to buy all the shares they are entitled to, they need to be loyal to the company for a number of years. Similarly, the idea of becoming an equity partner has attracted many lawyers to private practice over the years, so why not start extending the opportunity to lawyers from the moment they qualify?

Entrepreneur Jennifer Prosek has also succeeded in creating an owner’s mindset at CJP Communications by introducing ‘Commission for Life’. For any successful new business meeting an employee sets up, they receive a five per cent commission on the revenue for the life of the business relationship. This programme has helped to create an ‘Army of Entrepreneurs’ whose goals are aligned with the company’s.^[20] A similar incentive usually exists for partners of law firms, but could this be rolled out to all employees to foster an owner’s mindset?

An owner’s mindset can also be generated by creating many ‘mini-founder’ experiences, such as by ‘creating franchises with direct ownership stakes or encouraging employees to create internal startups that might later be spun off.^[21] In the law firm context, I would ask the Chief Executive Officer if I could shadow them and subsequently (or concurrently) run a spin-off. I’d gather a team of young lawyers who specialise in different areas of law and I’d create and market an alternative full service legal product which caters for a new niche of clients. I would service them for a competitive fee, and they’d know I could tap on the shoulders of giants if I needed more expertise. This spin-off wouldn’t just give the law firm an opportunity to create something remarkable, it would also help to provide more people with access to justice.

How do we foster unity of purpose in a diverse legal profession? Could we distribute a ‘social benefit dividend’ whenever a member advances our mission? For instance, if all of us reported on the impact we’re having on achieving the United Nations’ Sustainable Development Goals, would this reverberate positively through the profession? If such an idea is too grandiose, perhaps we could each create our own scorecard where we gave ourselves a score against what we would consider ‘essential factors’ in the delivery of legal services? These factors could include customer delight, empathy and service delivery –  in addition to the results we achieve for our clients and other stakeholders. Also, from mini-law firms to legal co-ops and startups, how can we create and fund more ventures so that more people will have ‘mini-founder’ experiences? What will help us remember that, at the end of the day, all members of the legal profession are in the same boat?

Figure 2: @AndrewArruda (Twitter, 3 April 2020, 8.59AM AEST)

FRONTLINE OBSESSION

Being obsessed with the frontline means elevating the status of those key people who are up close with the client and empowering them to improve the client’s experience. At Xinja, frontline staff are called ‘Customer Advocates’ or ‘Xinjarati’ and the first requirement in their job description is:

‘MUST delight in helping people and making their Xinja experience positively memorable. This means you put customers at the heart of everything you do.^[22]

Xinjarati have delighted customers by sending them flowers and other thoughtful surprises. They don’t have a playbook but are guided by their answer to ‘What would Xinja do?'^[23]

Kevin Hale, founder of WuFoo and a partner at leading startup accelerator Y Combinator, talks about the extra benefits of frontline obsession. In his lecture on ‘How to Build Products Users Love’, Hale says that making everyone at WuFoo do customer support meant that his team obtained feedback on what wasn’t working and would then fix it.^[24] This is in contrast to other companies where founders tend to have other people in the company provide customer support because, in their minds, ‘these other tasks are inferior’ [emphasis author's own].^[25]

For the legal profession to develop a frontline obsession, I suggest that lawyers back a protégé by empowering younger lawyers to improve client service and giving them visibility of the various systems used by the organisation to deliver services [emphasis author's own].

In the law firm context, empowering a protégé includes encouraging them to put the client’s interests ahead of meeting internal targets (eg, billables). It may be that having a strong client relationship focus will at least in the short-term result in missed targets, however, in the Fintech world, it is not uncommon for investors to continue investing in multiple capital-raising rounds despite the Fintech’s books being in the red. Investors do so because they are confident of receiving a future return. Furthermore, in the legal profession, this ‘return’ should not be defined so narrowly. In the pursuit of justice, a ‘failure’ from a commercial perspective would pale in comparison to the return society enjoys when justice is served.

Adopting a culture of continuous improvement assumes things will not be right (or perfect) the first time and that perfection is not the end goal. Admittedly, this approach sounds risky and runs counter with how lawyers tend to think. Nevertheless, we can adopt a ‘yes, and’ approach rather than dismiss this idea straightaway. In addition to ‘always be thinking’, lawyers should ‘always be tinkering’!

If young lawyers are given visibility of systems, they can start thinking of how to build standardised processes and products to develop frontline customer service. While sophisticated legal advice will need to be customised for the client, having a consistent set of procedures in place helps to ensure a smooth client experience. Fintechs are obsessed with simplifying the onboarding experience. Complex and heavily regulated ‘know your client’ checks are incorporated in the back end of the form-filling process so that these checks and the customer sign-up process appear to occur seamlessly simply by the customer submitting a form on the website. Similarly, conflict checks and ‘know your client’ questionnaires, which law firms need to conduct, could be performed by a customer service professional (rather than a lawyer) or a chatbot or via an online form (rather than a human).

Think differently about the ‘competition’

EQUALLY-VESTED PARTNERS IN SOCIETY

Can the legal profession benefit from entering into strategic partnerships with those whom they consider their ‘competitors’? While you might think that Fintechs are at loggerheads with banks, this is not usually the