VeraSage

David Giacalone at ethicalEsq Just Doesn’t Get It

Ron Baker - 05/15/2006

David Giacalone is a self-proclaimed legal ethicist and blogs at f/k/a ethicalEsq.  He has ranted and raved against value pricing before, and I have responded multiple times.  One was an in-depth response that challenged David on his views, but he never did reply.

His latest rant against Value Pricing, me, my books, as well as others who are attempting to transition the legal profession from hourly billing to Value Pricing, is particularly egregious.  It refers to us, collectively, as “hucksters.” Please understand, I love dissent, because as Clarence Darrow once said:  “To think is to differ.” We even have a “Skeptic/Dissenter” option for membership on our VeraSage Web site.

But it is hard to engage in an intellectual conversation with someone who lacks a rudimentary understanding of basic economics.  David references a current IBM commercial about premium cashews sold in hotel mini bars.  The commercial is funny, and we even use it in our courses.  Since David couldn’t recall the commercial, I offer the link to it here as a [free] service to him.

The commercial speaks of a jar of cashews for $8, and David has done his price shopping, referencing a Rite Aide weekly circular from May 7, 2006, which has a price of $2.99.  What David fails to recognize is a jar of cashews from Rite Aide is not the same jar of cashews from the hotel mini bar.  The price difference is one of conveience, the same reason people pay for bottled water at airports rather than drinking free from the water fountains.

David continues to confuse Value Pricing with price gouging, a blatant misinterpretation of what I advocate.  Yes, I do advocate setting a price commensurate with value, rather than labor inputs, but never once do I advocate gouging the customer.  In fact, VeraSage is an enormous proponent of a 100% unconditional money-back guarantee.  David fails to mention this anywhere.

David continues to propose that there is a conflict between Value Pricing and a lawyers “fiduciary and ethical duties,” as if there was a conflict between an attorney making a profit and professional ethics.  This is kindergarten economics, and is not worthy of serious intellectual debate.  In fact, I could make the argument, using Immanuel Kant’s categorical imperative, that hourly billing is absolutely unethical, since we wouldn’t want all businesses to universally use this pricing model.

David also writes:  “No, it’s not okay for lawyers to charge fees significantly higher than their hourly rate as an ironic response to client complaints that bills are too large under the hourly-fee system.  Fiduciaries don’t manipulate clients to reduce their price sensitivity.  Period.”

So, hourly billing is the most any attorney, anywhere, can ever earn?  And who determines this maximum hourly rate, David?  This goes right to Karl Marx’s labor theory of value, a theory repudiated in the real world, but one that David wants to continue to guide the legal profession’s maximum price.  What about all of the ethcial problems the hourly billing system creates?  Why do customers of attorneys everywhere I go demand fixed prices from their attorneys?

In an afterthought, posted on May 13, 2006, David cites a Peter Drucker article from the Wall Street Journal, Oct. 21, 1993, “The Five Deadly Business Sins,” one of which was “the search for high profit margins and ‘premium pricing.’” As an avid fan of Drucker, I must say David, once again, you miss the point.  Drucker argues that premium prices can attract competitors, which is certainly true.  But Drucker was an enormous advocate of price-led costing, made famous by Toyota, among others.  This is well documented in all of my books.

I wish David would read my books, especially the chapters where I deal with pricing and ethics.

David, I really enjoy your rants, and again, I make the following offer:  If we ever meet, the drinks are on me.