Rees Morrison’s Morsels #166: the long and the short of it

Distinctions among law departments by market value? ISS, the rating agency, has announced that it will judge companies against a peer group of 14 to 24 companies, based on industry, revenue and market value. It is unclear to me how the market value of a company has an effect on anything about how a law department operates or vice versa (See my post of Aug. 8, 2011: collects four posts on lawyers per billion dollars of market value.).

Surveys that may get more than one respondent from a department. An invitation to a survey was distributed by ACC and MCCA to approximately 10,000 in-house lawyers. Although data was collected from December 2010 through April 2011, only one response per law department was accepted. If multiple responses came from the same law department, which one did they pick? Did they choose by title, first in, fullest data set (See my post of July 21, 2008: survey methodology with 40 references, 25 internal references.)?

The nominal fallacy. We succumb to error when we think that if we name something the name carries explanatory meaning. This error is called the nominal fallacy and is referenced in John Brockman, Ed., This Will Make You Smarter (Harper Collins 2012) at 62. If you talk glibly about a “discount” you may feel that once you have named the arrangement with a law firm with that term you understand it better. You think the term “discount” itself carries explanatory meaning, but that is wrong thinking. This blog has correctly pointed out other fallacies (See my post of March 23, 2006: sunk-cost fallacy; Aug. 22, 2006: fallacy of induction; Jan. 18, 2008: fallacy of misplaced concreteness; March 15, 2009: fallacy of conjunction; April 2, 2009 #4: special pleading as logical fallacy; and Aug. 18, 2011: teleological fallacy.).

The economics of SaaS compared to installation on a company’s servers. I was recently told that many law departments take a five-year useful life for depreciating software they have bought. The total cost of ownership over that period could be more when you “rent” the software. It is also cheaper to rent than to buy if you are going to swap out the software relatively soon. Another consideration is that if each year you make the decision whether to renew or not (unlikely with matter management software, I agree), it keeps vendors on their toes. Finally, acquiring a license is treated as a capital expense vs an operating expense for ASP software (See my post of April 20, 2011: capitalized expenses with 7 references.).

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