Thoughts on why in-house counsel may be risk averse

For many fundamental reasons, the practice of law within corporations breeds caution and circumspection. Setting aside whether those who choose to attend law school start off more risk averse, or whether those three years foster it, other forces strengthen the aversion during a career.

1. The world is extremely complicated and unpredictable, so even the most conscientious and painstaking legal research, drafting and thinking can be upended instantly. The best-laid schemes o’ mice an ‘lawyers, Gang aft agley. Worse hindsight almost always sees what should have been done or known.

2. Unlike good decisions that have a hundred parents, a lawyer’s mistake is an orphan laid squarely at the door of that person. When rewards are shared and setbacks personal, the risks of judgment are asymmetrical (See my post of Aug. 10, 2009: pirates and slaves and individual risk.). Why try something new when the potential target will blaze on your back?

3. Facts are never fully adequate; more else can always be gathered and thought about; closure is never possible for a lawyer with experience, imagination, and a desire to prosper in a career. The downside worry of premature judgment always looms.

4. As with health, clients presume legal competency and are sanctimoniously aroused if something goes wrong. Oblivion holds until the transaction goes off the tracks.

5. Our psychological makeup paints us to remember loss more vividly than gain (See my post of Nov. 17, 2008: gain needs to be twice risk of loss.). We forget the normal and dwell on the unusual, especially damage.

6. Many clients view the role of lawyers to keep them out of trouble. That is a potent sword. Your boss, your paycheck, depend on you, so do nothing rash.

7. All risks are business risks, but the distinction blurs and some decisions, often those that go south, are easily transmuted into “a lawyer’s blunder.” If a visit to the woodshed is in prospect, you learn to be very, very careful.