Oh, Snap. How one ‘camera company’ fell victim to the Thucydides Trap by Michael Motala

Source: SoftPedia.

Source: SoftPedia.

Despite management efforts to instill confidence among Wall Street investors, Snap Inc.’s (NYSE:SNA) shares plummeted 20% to $18.05 during last Wednesday’s after-hours trading, following the release of disappointing first quarter results.

Snap announced revenue of $150 million, up 286% from the same period last year, as well as a net loss of $2.2 billion (or $2.31 per share), and an adjusted EBITDA of -$188 million. The company lost more than $2 billion dollars largely due to staff and executive compensation. CEO Evan Spiegel alone took home a cool $750 million bonus for his work taking the company public.

Back on March 2nd, when Snap Inc. went public, the fresh issue resulted in more than 200 million trades on the first day, with the stock appreciating 44% to $24.48 dollars at the market close. With a market capitalization of $33 billion dollars, the IPO was the largest since Alibaba went public in 2014.

Yet a precipitous drop in share price following first quarter earnings is not unusual. Following the release of their first quarterly reports, Twitter’s shares plummeted 24.2%, and Facebook dipped 11.7%.

While Twitter has languished in its attempts to generate growth, Facebook’s lucrative advertising business and two billion strong global user base has sent its stock price soaring. Moreover, Facebook also awarded similar staff and executive compensation following its IPO, however in the same period it generated $1.2 billion in revenue, compared with Snap’s meagre $150 million in the first quarter.

The stock also tumbled as investors reacted to Snap’s disappointing user growth.

Snap reported that daily active users (DAUS) rose 36% from the same period last year, reaching a record 166 million who send three billion “snaps” a day, but the pace of Snap’s user growth is decelerating. On the investor conference call, Spiegel also disclosed that average users spend 30 minutes per day on the app.

“87% of our U.S. daily active users between the ages of 18 and 34 cannot be reached by any top 15 TV network,” Spiegel reassured investors. “Our platform allows us to engage an audience that research shows is difficult to reach.” Yet there is little evidence Snap is effectively capitalizing on this unique bracket, losing 14% in revenue per user this quarter.

The results come amidst fears that Instagram’s new “stories” feature, a facsimile of the ephemeral snap, poses an existential threat. Owned by Facebook, Instagram alone has over 700 million monthly active users.

“When Google came along, everyone really felt like they needed a search strategy,” Spiegel told one concerned analyst. “When Facebook came along, everyone felt they needed a social strategy. And now I think with Snap, with our company, we believe that everyone is going to develop a camera strategy,” he added.

Back in 2013, Facebook CEO Mark Zuckerberg offered to acquire Snap Inc. for $3 billion dollars. It was a peace offering, and Snap’s cofounders declined. And since then, Facebook has nimbly copied Snap’s key innovations, such as lenses, while popularizing them across its own integrated platforms.

While Snap’s management have hedged their bets on virtual reality, history shows us it is only a matter of time before Facebook subsumes whatever innovation the company comes out with next.

Regrettably, Snap has fallen victim to the Thucydides Trap.

In his account of the Peloponnesian War, Thucydides wrote that “what made war inevitable was the growth of Athenian power, and the fear which this caused Sparta.” The so-called Thucydides trap, a self-fulfilling prophecy, was then coined by Harvard historian Graham T. Allison in Destined for War, an analysis of Sino-American relations.

The metaphor applies equally to Snap’s predicament. At its score, the Thucydides Trap describes a situation where a rising power, like Snap Inc., seeks to displace an established hegemony, like Facebook, at the former’s peril. Inevitably, falling for the trap procures conflict like the war between Athens and Sparta, resulting in a devastating loss for the upstart.

While Snap’s management declined Zuckerberg’s peace offering, there are growth prospects further afield. By copying Facebook’s acquisitive strategy, Snap can stay relevant and grow its user base. Aggressively integrating new digital products and services into its suite of offerings, Snap could profit from a diversified, multi-platform ecosystem that generates synergistic user growth and ad revenues.

The alternative, focusing on one platform and user experience, risks a Twitter-like fate.

Snap’s newly-minted shareholders have little scope for influencing the company’s strategic direction, as the capital structure gives voting rights exclusively to co-founders Evan Spiegel and Bobby Murphy.

Aside from Thucydides’ metaphor, investors should heed one further lesson: beware the peril of vote-less shares.

Unlike Ancient Greece, the corporate world does not aspire to democracy. 

 

In Ontario, the bootlegger has become the robber baron by Michael Motala

Source: LCBO. 

Source: LCBO. 

President Donald J. Trump’s substantive criticisms of Canadian economic policy, ranging from the accusations of softwood lumber dumping, to fresh allegations that the government unjustly subsidizes dairy farming, are in fact nothing but a dustup in the long and storied history of Canada-US economic relations.

It started in the roaring ‘20s, during the age of American prohibition, when Canada drew ire from its southern neighbour, as alcohol manufacturing north of the 49th parallel took off. “Rum-running” bootleggers criss-crossed the world’s largest undefended border, from British Columbia to Ontario, fueling a network of underground speakeasies and crime while unabashedly thwarting US policy.

According to Canadian historian Daniel Francis, at the time “there wasn’t a job in Canada that paid that much for so little work.”

These days, north of the US border, what was once a bootlegger economy has become the domain of robber barons.

The Liquor Control Board of Ontario (LCBO), together with the Beer Store and a small retail chain owned by Ontario’s wine growers, have an exclusive fiat over the distribution of alcohol. Influenced by the homegrown temperance movement, a reaction to developments in the USA, Ontario’s liquor monopoly was an attempt to limit alcohol consumption in accordance with prevailing social mores. The approach to regulation and distribution is sui generis in the developed world.

The protections envisaged in Ontario’s liquor laws later became enshrined in the Canada-US trading relationship, survived NAFTA negotiations in 1993. Still in force today, practices are justified in terms of the social benefits accruing to Ontario’s public health infrastructure through the annual government dividend.

Do these alleged benefits stand up to scrutiny?

In the 2015-16 annual year, the LCBO alone reported a revenue of $5.57 billion dollars ($CDN), with net earnings of $1.97 billion, and dividend of $1.935 billion to Ontario taxpayers. Brewers Retail Inc., which operates as The Beer Store, has a monopoly over the sale of beer, and it is estimated it generates another $2.5 billion in sales. The majority of its shares are owned by foreign interests Molson Coors Brewing Co., Anheuser-Busch InBev SA, and Sapporo Breweries.

Meanwhile, unlike the LCBO, the Beer Store does not provide a public dividend, and merely redirects taxes like an ordinary business. There is no evidence the arrangement is superior to a more competitive market, and in fact, comparative cases suggest otherwise.

Just what are the consequences for consumer welfare?

The economics of the situation are increasingly clear. On the demand side, the existence of the LCBO limits consumer choice sets because it eliminates any retail competition. On the other hand, on the supply side, with unparalleled purchasing power in global markets, importing products from 85 countries, the LCBO could theoretically yield better prices, and pass on savings to consumers.

However, in 2014, the Calgary-based CD Howe Institute cited numerous cases where Ontario product prices were only marginally superior when compared to other Canadian provinces, where alcohol sales are deregulated. That means the LCBO is not passing on savings to customers. In fact, the report found the LCBO’s margin was nearly double those of competitive retailers in other provinces and U.S. states.

For its part, the Beer Store charges consumers and restaurant chains excessive margins, while funneling profits abroad. To sell at the Beer Store, non-owners encounter a barrier to entry in the form of an annual licensing fee.  Craft brewers, and small Ontario wine growers, complain that the prevailing conditions make it impossible for them to compete, and grow their business.

Ontario’s beer and liquor economy has all the trappings of an anti-trust case, similar to America’s domestic airlines. Like the most egregious horizontal or vertical monopoly, Ontario’s planned liquor economy harms consumer welfare while enriching private corporations.

But there is one crucial caveat. As a species of government, the arrangement is justified equally in economic and implicitly moralistic terms, and the regime is protected by an unjust and relatively unassailable shield of public authority.

Ontario’s idiosyncratic model is a reminder that big government, operating under paternalistic auspices, can sometimes be the progenitor of anti-competitive markets.

It begs the question: might and ought the logic of anti-trust law one day be applied to regulatory excess? 

From Rustbelt Ressentiment to Global Trade Realpolitik by Michael Motala

From Rustbelt Ressentiment to Global Trade Realpolitik

A deeply divided and pessimistic American electorate delivered Donald Trump’s victory in the electoral college, portending an era of global economic relations dominated byrealpolitik.[I]  

It is the first time in US history that a losing candidate has commanded a lead of two million in the popular vote, amounting to a near supermajority of the nation’s economic stock. According to research from the Brookings Institution, Hillary Clinton’s voters reflected an outsize 64% of aggregate GDP, compared to Trump’s mere 36%.

Striking the right balance between the electorate’s disparate economic and demographic interests in the nation’s foreign policy will be a tough challenge for the next White House administration. Living up to Trump’s promise to abandon the Transpacific Partnership would be contrary to America’s economic and foreign policy interests—reflecting those of the economic and popular majority. It would also risk upsetting the delicate geopolitical balance in East Asia, while ceding market power to China. The alternative, a failure to deliver growth and manufacturing jobs, would be seen as a betrayal of Trump’s base that would thrust America into an even deeper political crisis with global ramifications.

A Tale of Two Americas (above). The Brookings Info-graphic showing the economic imbalance underpinning Trump’s electoral victory.[II]  

A Tale of Two Americas (above). The Brookings Info-graphic showing the economic imbalance underpinning Trump’s electoral victory.[II]  

Regional Distribution of Votes by County (above). The Washington Post/Associated Press graphic illustrating the regional distribution of Trump voters by county.[III]

What is the Transpacific Partnership (TPP), and why was it so salient during the last election?

The TPP is an agreement to liberalize trade and promote regional economic integration. Concluded in October 2015, the agreement binds Australia, Brunei Darussalam, Canada, Chile, Japan, Malaysia, Mexico, New Zealand, Peru, Singapore, United States, and Vietnam.[IV]  According to the Council of Economic Advisers, the US exported $680 billion dollars of goods and $184 billion dollars worth of services to the member countries in 2015. Implementing TPP would lift growth rates and contribute to rising living standards.

The result of the electoral vote highlights a dissonance between knowledge about TPP’s aggregate economic benefits, and the loss of manufacturing jobs under prior preferentail trade deals like NAFTA. Surveys show that the Presidential candidates were campaigning on different points in two different Americas with vastly different concerns. Trump’s protectionist, and the salience of TPP, catered to the rustbelt’s disaffection and pessimism.

The Pew Research Center’s post-election survey found that 71% of Trump’s voters perceived across-the-board decline in the economy since 2008, while in stark contrast 67% of Clinton voters saw an improvement.[V]

Overall, the survey highlighted voters’ anxieties about little progress made on jobs, security, immigration and crime since 2008.  

While the Democrats relied on core ethnic and demographic constituencies like blacks, women, Latinos, and LGBT, strategists and the Washington elite were out of touch with the concerns of voters who have disproportionate influence in the College of Electors.

The Republicans, on the other hand, used a red herring tactic with economic issues like TPP. Campaigning on protectionism in the face of TPP’s benefits to the US economy struck a chord with the hollowed out middle class. The Trump campaign capitalized on resentment over the uneven distribution costs and benefits of globalization, tipping the balance in states most affected the financial crisis and the hollowing out of manufacturing jobs.

Shortly after the election, the President-elect vowed he would scrap the TPP on the first day of his Presidency. Given the litany of provocations since releasing this pledge, it is plausible Trump will make good on the hardline stance on China.

Just what are the implications for Trump’s voters and the world economy?

The Peterson Institute for International Economics released a report in September 2016 assessing the Presidential candidates’ platforms. [VI] On trade, it found that Trump would devastate viable American businesses and their vicinities. Peterson also found that the failure of TPP would weaken strategic alliances in Asia, cede regional power to China, and erode the East Asian geopolitical balance.

According to a more recent report released by the Council of Economic Advisers, the cost of not passing TPP would be substantially larger than the foregone benefits. In the absence of TPP, echoing the Peterson Institute, the Council warns that countries will move forward in negotiating their own trade agreements that exclude the US. In fact, Beijing is working hard to implement its own Regional Comprehensive Partnership. Without a substitute preferential trade agreement, the US would suffer a global competitive disadvantage.

One in twelve US jobs depends on trade.[VII] With over 45 percent of current US exports are destined for TPP countries, alternative preferential trade arrangements would create crippling trade diversions and economic inefficiencies. 

The very disaffected voters who put Trump into the White House would see a further decline in their standard of living and levels of output. In a world forever changed by the populist fervor behind Brexit and Trump, it could lead to a political calamity and stoke deeper divisions between rural and urban America.

There is, of course, a chance that the wildcard President-elect will not live up to his promises.  

Trump pivoted on Obamacare, going from a vow to scrap the deal on the campaign trail to a promise for reform soon after he was elected. Perhaps it is too soon to assess the President-elect’s China policy. Trump’s Twitter provocations may be a strategic tool to gain leverage in future negotiations on trade.  Moreover, Trump’s remarks at a December 14th meeting with technology leaders suggests an interest in sustained global trade, although it is unclear under what terms and if any have been contemplated.

“We’re gonna do fair trade deals. We’re going to make it a lot easier for you to trade across borders because of a lot of restrictions, a lot of problems that I think you’ll see,” remarked the President-elect.

“If you have any ideas on that, that would be great because there are a lot of border restrictions …” he added. [VIII]

Instead of scrapping the TPP, President Trump should focus his foreign policy on addressing legitimate issues in the world trade order, and the failures of Obama’s Asia pivot to shore up American leadership. Addressing the deficiencies in the World Trade Organization’s Dispute Settlement process, for example, would allow for a more efficient resolution of legitimate industry concerns arising from global trade.

---

Sparring with Stephen A. Douglas in his failed campaign for US Senate in 1858, Abraham Lincoln declared “a house divided itself cannot stand,” in what become one of the most-cited speeches in American political memory.

Touring the events of 2016, it is apparent President Lincoln’s warning has acquired transatlantic resonance. Both Brexit and Trump share a common cause: deep economic disaffection, which has in turn strained the relationship between high-output and low-output regions. Absent the redistribution of the benefits of globalization, divided domestic politics in the Anglo-American world will culminate in the unmaking of the current global economic order governed by the United States of America.

[I] https://www.brookings.edu/blog/the-avenue/2016/11/29/another-clinton-trump-divide-high-output-america-vs-low-output-america/

[II] https://www.brookings.edu/blog/the-avenue/2016/11/29/another-clinton-trump-divide-high-output-america-vs-low-output-america/

[III] https://www.washingtonpost.com/news/wonk/wp/2016/11/22/donald-trump-lost-most-of-the-american-economy-in-this-election/?utm_term=.18f25ecbc1d7

[IV] https://ustr.gov/about-us/policy-offices/press-office/press-releases/2015/october/summary-trans-pacific-partnership

[V] http://www.people-press.org/2016/11/10/a-divided-and-pessimistic-electorate/

[VI] https://piie.com/system/files/documents/piieb16-6.pdf

[VII] http://trade.gov/publications/pdfs/exports-support-american-jobs.pdf

[VIII] http://www.wsj.com/articles/transcript-trumps-introductory-remarks-with-tech-executives-1481754651

 

Law School on Trial: Empirical Insight & Student Perspectives by Michael Motala

Law School on Trial

Empirical Insight and Student Perspectives

Michael Motala & Sam Michaels

The legal academy and profession is abuzz. Following the publication of the Canadian Bar Association’s Legal Futures issue, much digital ink is being proverbially spilled contemplating the need for pedagogical reform. In this context, we are pleased to present two arguments and some suggestions. We will firstly report empirical insights and analysis from the Obiter Dicta’s most recent recruitment survey. The survey and subsequent reporting delve into the On Campus Interview (OCI) process from both an analytic and personal perspective, providing some sorely needed student insight into the discussion. Second, we hope to cast a light on some poignant student perspectives and commentary. We will do so by illuminating the debate through the experiences of current students, before concluding with our suggestions for the future and some of the Osgoode Hall administration’s recent work.

 

I.

Empirical Insight

Today’s Obiter Dicta marks the first-ever long-form student recruitment edition since our foundation in 1928. OCIs are for many students the last hiring process before seeking out articling positions, and yet this important moment of transition is also a source of polarity and divisiveness. Though OCI’s were designed to bring organization and structure to student hiring, they are often criticized for creating a hyper-competitive atmosphere and a manipulative hiring process. The survey examines both the statistical realities of OCI’s and student opinions on the experience.

Figure 1: Demographic Data

 

 

With two thirds of OCI participants responding to our survey, we are confident that the Special Edition gives a useful and informative look at student impressions of the OCI process. The Special Edition begins with a review of some of the most pertinent and important results, and some of the stand-out data. The Edition goes on to analyze hiring trends and the makeup of the student population. It concludes with student comments and opinions on the OCI experience.

Figure 2. Offer Distribution by Self-Reported Identities

 Specially for the audience of the Canadian Bar Association, we have extracted selected figures and analysis for discussion and reflection. One of the first aspects of the survey that stood out is the homogeneity of the survey-takers. OCI participants are most likely caucasian, from a wealthy background, armed with a liberal arts degree, and heading towards student debt. They also reported mental health problems at a disproportionate level to the general population, and those with issues were more likely than not to see them worsen while in school.  

Figure 3. Student Financial Profile

The hiring statistics reveal a picture that beckons for further analysis. While over half of participants received an offer (which is only a fraction of the overall class size of JD candidates), a majority sent off over 30 applications, and had to go through a phone call, an OCI, multiple in-firm interviews, and firm-organized social events before being hired. Once one considers the literal hundreds of hours required for the process, the rewards feel diminished. More analysis should be done on other legal hiring processes, to create a body of comparative data for different employment-seeking strategies.

Figure 4. Interviews & Offers

Within the student comments that make up the conclusion of the survey report, one can find the expected range of emotions such a process breeds. Students who commented about receiving offers also mentioned their relief and overall satisfaction with the process. Those who were left out lamented the hundreds of wasted hours, the gruelling workload, and the callous environment. Overall, it is clear that while the OCI process serves its purpose of creating an option for hiring, it is not providing the best option.

Figure 5. Mental Health Insights

The reality of any hiring situation is that the employer holds disproportionate power over the candidate. Despite its better intentions, the OCI process reinforces that divide. The online application platform is slow and outdated, regulations ease the process more for the firms than the students (for example, call-time rules have inadvertently forced students to guess at their availability between the firm on the phone and the ones they are still waiting on), and there is an overall lack of protection for students from being “strung along” by firms.

When one considers the massive commitment of OCIs, the arduous process, and the wide spectrum of student opinions, it becomes difficult to argue that it is any better than a hundred other ways one can find employment. And therein lies the problem. Students enter law school with no real knowledge of law or the legal industry. The school should either take it upon itself to provide extra support, or do nothing at all. The OCI process, when it works, has not demonstrated itself to be superior to any other method of finding employment, and when it does not, is hugely detrimental to students.

Adherence to the status quo is already costing the legal industry, as other industries move in to scoop up disillusioned clients, and the system reels from the access to justice crisis. In such a state, the last thing law needs is more homogeneity, fawning over traditional law firms, and big-law job focus. The OCI process certainly has value, but in law school, it’s put at the top of the pedestal. At the least, it may be time for law schools to seriously reconsider the cost-benefit of having OCI’s as such a central aspect of the legal education program.

 

II.

Student Perspectives

It’s the first week in November and newly crisp outside. Toronto’s financial district is invaded by the latest cohort of second year law students vying for the dream. Adorning freshly pressed suits and womenswear, everyone looks the part. Bay St. lawyers do not hire students like other professionals. The law recruit is an idiosyncratic game of cloak and dagger. It’s the “make or break” moment for those aspiring to a career in Big Law. While starting salaries have not changed in nearly a decade, first year associates still take home $100,000 a year. Not as much as New York firms, to be sure, but participants are desperate. Student debt levels across the province have sky rocketed because of U of T Law’s unrelenting tuition increases. Candidates play along or get cut. If they are unlucky, the personal cost is immense.

By this point, the flock has been thinned. A few weeks before students interview at firms, they take part in “speed dating” on campus. Candidates have seventeen minutes to make their case for the job. But the questions are not substantive, like other industries. Interviewers strive for a casual conversation. Firms look for “fit,” not merit. When the time has elapsed, the buzzer goes off, and candidates are herded like cattle to the next stall. Rinse and repeat.

Students endure up to ten back-to-back interviews a day with little respite. Late into the evening, custom dictates that students must send disingenuous “thank you” notes to signal their interest in a firm. It can take hours to get it right. Then there is call day when candidates schedule in-firm interviews—usually orchestrated in less than five minutes after the clock strikes 8 am. Only a fraction of students are granted a second shot. Big Law leads the rest on so it can tick the “diversity box” in marketing.  

The real fun is saved for November’s in-firm week. For three days, candidates may be booked for twelve hours straight at up to eight firms. Five is the maximum recommended. They meet tens of lawyers in successive interviews, schmooze at cocktail receptions, and get wined and dined. Candidates are under constant scrutiny. Nobody wants to look desperate. Firms are also selfish. To get the job, candidates must signal their “first choice”—even when it is not the case, and there are no other options.

35% of candidates cried during in-firm week. 54% with mental health conditions report law school has aggravated their incidence. 20% were educated at private school, while another 20% will graduate with over $100,000 in debt. Participants in the survey were given an opportunity to provide written feedback to the follow questions, with selections excerpted below. Comments have been selected to balance competing narratives, and a full selection is available in the Special Edition.  

After completing the process, how do you feel?

 

Relieved that the madness is over.

It feels surreal! The last few days were a whirlwind! I'm obviously really happy with my outcome but I'm also so tired and ready to relax.

Disenchanted with law school, generally. The things people told me would be looked positively upon in interviews (ECs) weren't even a discussion point.

I feel very disappointed, quite exhausted, and very behind in my other commitments (school, volunteering, and extra-curriculars). I am by no means a pessimistic person, but I do feel very discouraged and am questioning my choices to go to law school and desire to work in a big Toronto firm. Furthermore, I am very concerned about my finances and debt load, as well as my grades this year since I now have to devote MORE time to finding work after having lost weeks to the OCI process already.

It was an emotionally exhausting week. I didn't even know I possessed the range of emotions that I felt over these three days!

Did you observe or experience any inappropriate behavior or comments from lawyers during the process?

I felt an extreme, extreme amount of pressure by one firm to voice that they were my first choice.

I had not made a decision at that time and decided not to tell them they were my first choice unless it were absolutely true.

Asking me how many interviews I had. 

Asking who my top choices are.

What were some of the most awkward, inappropriate, or unexpected questions you were asked?

One lawyer asked my age. 

I spoke with a lawyer who spoke about other firms negatively. 

[Redacted Seven Sisters Firm] should not be making all candidates come to the breakfast reception on Wednesday morning when many of them are clearly not in contention. This is not fair to the students and is a waste of everyone's time. They should be telling the candidates who are no longer in contention to not attend the reception.

What would you change about the process? 

I would change my approach and have the mentality that my goal is to get as many offers as possible, possibly to the point of indicating that there is more than one firm that is my "top choice". Though this may be an ethically challenging position to take, having gone through it all, it seems as if firms have no difficulty doing this to students.

I have nothing productive to say - this was seriously the worst. Encourage people to pursue their interests beyond Bay Street, and invest more in non-OCI job airtime in the schools.

I could go on about the flaws in the recruitment process and, more broadly, law school generally speaking for hours. Suffice it to say that I believe the problems with the administration of our grades at Osgoode - namely, the curve - are precedent to the problems with the recruitment process - namely, the emphasis on first year performance, and specifically first semester performance.

What is one piece of advice you would give to future participants?

 Be honest with yourself about the barriers that face you as a candidate -- race, gender, etc. Don't listen to people who say "be yourself and relax", because yes, be yourself, but focus on being the best that you can be. This means hard introspection, not a happy-go- lucky attitude. Most importantly, do a mental walk-through of what you must do to stay productive if you fail, in both big and small ways. Having a plan to move forward will give you hope moving forward and pull you out of the disappointment and frustration you will feel, if/when you do fail.

Anything else you would like to share?

Osgoode Hall Law School prides itself on diversity. It boasts one of the most diverse law school environments in the country. I am not sure of the veracity of that statement. I am not sure of how the hard data compares to other law schools. Suffice it to say that Osgoode Hall Law School promotes an image of itself as extremely diverse. The Osgoode administration makes a point of noting the inclusive environment Osgoode provides to students of colour, Aboriginal students, LGBTQ2S+ students, students from varied academic backgrounds, and students with varied interests. I believe that Osgoode Hall Law School has taken greater steps than some law schools in promoting an image of diversity. In other words, I believe the school has to a certain degree achieved its commitment to change the face of the legal community. But this achievement is only on the surface. Osgoode Hall Law School has done very little to support diversity beyond its admission standards. Academic standards still privilege white, straight, male students with a background in political science, history, or economics. I have never felt so much like an outsider as I did throughout the LSUC recruitment process. Osgoode's commitment to diversity is a farce. It is an outrage. It is in no way reflected in the hiring culture at the largest law firms. Osgoode's commitment to diversity has done very little to alter the environment at the firms who recruited through the LSUC system. The emperor has no clothes. The commitment is meaningless.

III.

Challenging the Classical Model

The “classical model” of lawyering contemplates the freshly minted law student practicing corporate law on Bay Street, working 12 hours a day until they have a child, burn out, or make partner, and living happily forever after. This idea supplies the implicit justification for the cost of legal education. Our profession is a potentially lucrative monopoly. Nevertheless, the leaders of our profession must address the fact that many students sign up for this dream. Particularly those saddled with the highest debt levels from a lower income backgrounds, the economic injustice of this unsuccessful Faustian bargain can be suffocating. More data needed on employment outcomes. The OCI process is out of touch--- a toxic microcosm of the legal profession’s culture.

The legal profession is having an existential moment. Recently, the New York Times reported on a legal battle launched by Anna Alabura against her former law school. The 37-year-old graduate of New York University and Thomas Jefferson Law School is saddled with $170,000 of debt. After 150 interviews, and working part-time non-law jobs to make ends meet, it is clear she totally struck out following graduation. Arguing the school published misleading employer data, Alabura has persuaded a court to hear a lawsuit against them. She is among a small group of claimants who have succeeded in achieving a hearing on the merits in the United States (there is only one other case that will proceed). Alaburda is an exception to the rule, though her case highlights growing frustration with the way legal education is operated without regard for modern economic realities.

Business Insider recently profiled Professor Dorothy Brown of Emory University School of Law. Brown predicts that a top US law school will shutter in two to four years. “Most people at top-50 law schools think this is a fourth-tier problem, and I think that misses the mark,” argues Brown. She continued: “It used to be that if you wanted more revenue, you could simply raise tuition, however those days are long gone.” Price theory vindicates Brown’s prognostications. The inflated price of legal education is a golden straitjacket on the profession and its most vulnerable entrants, and it threatens to undermine the business case for modern law schools.

The institutional foundations of Canada’s legal education system are markedly different from the US, to be sure. We have fewer law schools and lower tuition rates. It is concerning, however, that the University of Toronto’s Faculty of Law, with the province’s other law schools in tow, is consistently raising tuition fees. The opening of Lakehead’s law school, and Ryerson’s plans for a JD program, will compound the problem. With fewer graduates per capita, Canadian students on balance have a better time of finding a job that US counterparts. Is it about to get worse?

Based on numerous conversations with business lawyers, it seems the Canadian industry is not growing, and salaries have stagnated for a decade. What justifies increasing fees? The Special Edition highlights the fact the most lucrative jobs are given to the two Toronto schools in disproportion. Pedigree still matters. Diversity in the profession is still lacking. Suffice it to say, the law is out of touch with the Trudeau government’s New Diversity Politics.

The Economist calls the turbulence and change we are experiencing the Fourth Industrial Revolution. Pick up any leading financial affairs magazine and all you will see nearly all the stories are on tech, finance, and cybersecurity. MaRS Discovery District and Ryerson’s Legal Innovation Zone have a growing number of innovative legal startups. Yet again, the profession has returned to a debate over theory and practice. In this context, there is a vital opportunity to challenge the assumptions—the theory of lawyering and legal education if you will—so law schools are proactive about the future.

A 2015 contribution to the Globe & Mail’s Report on Business (with which the present authors most heartily agreement) proposes the use of the peer-to-peer model “Ubernomics” to increase the value proposition of the legal profession. By fixing the mismatch between labour supply and demand at the core of the access to justice crisis, the Juris Doctor can maintain and increase its increase its value. Adopting other innovations can also help new entrants to the profession more proficiently, change the profession’s dominant mindset, and chart a new course for the future.

A reluctance to embrace innovation will be fatal. Fortunately, Ontario schools are taking up the challenge of pedagogical and programmatic reform. Osgoode Hall and Dean Lorne Sossin, to their credit, demonstrate a genuine openness to discussion and collaboration with the student body. Through the Dean for the Day contests, for example, annually the administration solicits student submissions on policy and strategy for the school. This year’s submission highlighted the urgent need for the school to plug into the digital economy, and engage difficult questions about diversity in the profession. Under Dean Sossin’s dedicated leadership and advocacy, Osgoode is poised to reshape the profession and the way law is done.

This is also an opportunity to ask ourselves a more important question: what is lawyering? What sort of future can we build for the profession? By sharpening the focus on the public interest concept, and broadening the scope of our vocation, we can reinvent the modern lawyer in the globalizing digital world. Connecting elevated legal inquiry with the needs of public affairs, legal pedagogy can encourage students and young lawyers to participate in the public discourse. The foundational skills of the JD make an excellent application in the world of journalism. This is just one way of increasing the social value of our profession. A deeper focus on entrepreneurship will further equip students with a practical toolkit, and an enhanced ability to address the access to justice crisis. 

Moving forward, students and young lawyers must strive to challenge the institutional inertia of the profession, the law’s deeply embedded hierarchies of class and power, and the implicit ontologies guiding curricular and programmatic design and execution. We hope you are with us.  

PS – Click here for a link to the Obiter’s special edition to see the results in full.

Sam Michaels is a third year Juris Doctor student and the Editor-in-Chief of Obiter Dicta. Michael Motala is a second year Juris Doctor student who authored the survey, and recently served as Osgoode’s Dean for a Day. Check out the Osgoode Dean for a Day Video to see how the school is approaching legal innovation.