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Rees Morrison’s Morsels #93 – additions to earlier posts

Information theory and leakage of information in law departments. According to information theory, each transmission of information diminishes the accuracy of what is transmitted (See my post of May 23, 2008: every relay doubles the noise and cuts the message in half.). Doesn’t that suggest that each summary of some idea for a knowledge management repository loses half its reality? Does it mean each time you refer a question the information quality diminishes? Or if a partner at a law firm tries to cross-sell a colleague, there is diminished effectiveness?

Legal and SG&A costs. The McKinsey Quarterly, 2009, No. 1 at 40, shows in a graph that the share of selling, general, and administrative (SG&A) costs to sales has climbed steadily over the past fifty years and reached about 28 percent in 2007. That sounds to me like costs other than costs of goods sold and compensation. It is a measure of administrative intensity and complexity that absorbs law department costs also.

South African Legal Process Offshoring. Adria Greene, Esq. is the founder and Chief Executive Officer of a South African-based LPO, lawpoint. Ms. Greene is a Founding Member of the South African Legal Process Outsourcing Association.

Catastrophe bonds for litigation monsters? Niall Ferguson, The Ascent of Money: A Financial History of the World (Penguin Press 2008) at 227, explains that “natural catastrophe bonds, … allow insurance companies and others to offset the effects of extreme temperatures or natural disasters by selling the so-called tail risk to hedge funds like Fermat Capital.” Allow for my abysmal ignorance of these specialized derivatives, but could there be cat bonds for awful litigation results? After all, as Ferguson explains, “the buyer of a ‘cat bond’ is selling insurance; if the disaster specified in the bond happens, the buyer has to pay out an agreed sum or forfeit his principal. In return, the seller pays an attractive rate of interest.” Billions of dollars of weather-risk derivatives exist. Why not litigation risk derivative bonds paid for at interest by law departments and bought by specialized legal investors such as hedge funds (See my post of Dec. 4, 2005: catastrophe modeling tools; and April 26, 2006: litigation catastrophe odds.)?