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  • Writer's pictureJaap Bosman

What lawyers could learn from Alaska gold miners

At TGO Consulting we work with law firms in a great many different jurisdictions across the world. Due to the international nature of our practice I have to travel frequently and as a consequence often have to spend a few nights in a hotel.

After a day of working with a client followed by catching up on emails and work in the evening, I typically end the day with watching something light and entertaining on TV. Among my favorites is a series called ‘Gold Rush’ which is aired by Discovery Channel and its affiliates across the world. It is a reality television program following the open pit gold mining efforts of various family-run mining companies in Alaska. The series (176 episodes to date) has been aired globally since 2010 so you might have come across it. As improbable as it might seem, these rough unsophisticated gold miners may have some valuable lessons for law firms:

Lesson 1: always know your bottom line

Mining gold in Alaska cannot be done without considerable investments. Miners need very expensive equipment to even get started. Once the miners have secured a claim, typically against a percentage of the gold they will find, they need heavy duty excavators to get to the paydirt (gold rich soil), they need a high capacity heavy duty ‘wash plant’ to clean this paydirt and extract the gold, and they need some massive Volvo 60-ton mining dump trucks to get the paydirt to the wash plant. Operating all this machinery requires massive amounts of fuel and a skilled crew. So gold miners face hundreds of thousands USD in upfront costs that they first must recover before they can make a profit. The miners in the TV series are small family run businesses. They have typically mortgaged their homes and borrowed from whoever they could to finance their endeavor. If their mining season does not return enough, they and their families face personal bankruptcy. The miners are extremely aware of their costs and as a consequence remain hyper focused on getting as much gold as they can. Relentless and without any distraction they focus on the weight of that pot of gold after every cleanout.

Interestingly there is a parallel between operating a goldmine and operating a law firm. Law firms first need to recover the costs before the partners start getting an income. Although law firms do not need expensive heavy equipment and massive amounts of fuel, the costs are still considerable. Numbers do vary but as industry average a law firm that makes 100 million in revenue incurs 65 million in costs. This means that the law firm in this example will first need to make that 65 million in revenue before the costs are covered. Only after this 65 million has been secured, the partners start to earn an income.

As basic as this is, it is shocking how detached some partners are from this simple business calculation. Every lawyer starts the first ten years or so of his/her career being an employee. Employees don’t have to worry over revenue, costs and profit. Their income is secured, regardless how the business is performing. Once a lawyer becomes a partner, why would this attitude change?

Secondly most law firms have become institutionalized. As the firm already existed before most partners became partner and will continue to exist after the current partners have left, partners do not feel they are entrepreneurs. The law firm does not feel as their business. Partners are passengers on a train that seems to be self-propelling. They can hop-on or hop-off, but the train will continue. The firm as a whole is a collective responsibility and therefor no-one’s responsibility. Partners in a law firms do not face the prospect of bankruptcy for themselves and their families if one year there is no profit.

Lawyers should watch the miners in Alaska and try to get some of that basic entrepreneurial business spirit. Once partners start to understand the business dynamics and start to feel the heat to return a healthy profit, this will prevent them acting as ‘employees’ on a cozy 9-5 job with a guaranteed income. So don’t wait but get out to get those great clients, enter your timesheets every day, invoice once a month within the first week of the next month, hawk-eye if your client has actually paid the invoice and take immediate action if he doesn’t. Be constantly aware of cashflow, costs and profit. Act like an entrepreneur who has put everything he owns at stake.

Lesson 2: Don’t waste time on clients that do not bring a good return

Not only comes mining for gold in Alaska with substantial financial investment, the miners are also faced with a very short period of time to make their profit. Due to the location of the claims far up north in Alaska and Canada, the mining season extends only a few months during summer. The rest of the year the ground and the water remain solidly frozen making mining impossible. For the miners time is not a commodity they can waste.

In one episode, while removing the top layer of soil to get to the paydirt, the foreman noticed that there was gold in the top layer and wanted to put the ground from that top layer through the wash plant to extract that gold. After a 24 hour test-run, it was established that the return in gold, cleaning the top-layer, would not justify the time it would take to clean it all out. It was better to just remove the top layer and basically throw that gold away and get to the rich paydirt as quickly as possible and start cleaning that. The miners have a limited amount of time and have to maximize the returns of every available minute in order to reach their targets and make a healthy profit.

As for gold miners, for lawyers time is finite. Accepting a matter or a client that has a below par return on time invested will block the opportunity to take on matters that are more profitable. Time is a precious commodity and should be used sensibly. Far too often we see lawyers that take on a client or a matter at a rate that cannot be justified. Partners feel a pressure to meet their targets and fear the potential of having an empty desk. Driven by this fear, some partners take on everything that comes their way without asking themselves the question whether they are making the best use of their time. Accepting a client that will pay low rates creates a problem. The bigger this client gets, the bigger the problem. Sometimes it is better not to accept a matter and wait for the next opportunity. Don’t waste time cleaning paydirt that does not contain the right amount of gold. You will not be able to make up for it and it will ruin your season.

Lesson 3: Whatever happens, act as a team

Gold miners are by nature rough guys. Those who want to work in the remote wilderness of Alaska and be away from civilization and their families for months are predominantly strong individualists and not the easygoing sociable types. Gold mining is a particularly heavy job with long hours and a lot of physical and mental stress. No wonder there sometimes are hefty arguments and they fall out at each other. But whatever happens, whatever the argument or difference of opinion between them, they always know that in order to succeed they have to remain a team. Only together and only with a common goal they stand a chance of making a profit.

No need explaining what lawyers in general and partners in particular could learn from that…


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