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I'm currently reading Jeff Jarvis's excellent book, What Would Google Do? Jeff is one the world's leading experts on digital journalism, and his blog, BuzzMachine, is terrific. The book's even better.
It's not what you might think: it isn't a history of Larry and Sergey creating Google in a California garage, and there are no fawning descriptions of the employee cafeteria and its free-range doughnuts, or whatever. In many ways, the book is barely about Google itself. Instead, it's about how the world has changed over the past ten or eleven years, and not just in a technological sense. According to Jeff, Google represents a new way of doing business, characterized by a commitment to innovation, a different way of generating revenue, and a dedication to speed, simplicity, and constant improvement. That is why Google is the fastest-growing company in the history of the planet.
So what if Google billed by the hour?
Seems like a ridiculous question, doesn't it? Why would Google bill by the hour for organizing the world's information and letting us all search it?
Google's nothing like a law firm, is it? Let's see:
- The geniuses who work at Google are obviously knowledge workers, and highly skilled ones at that. But wouldn't most lawyers agree that they are highly skilled knowledge workers, too? And many lawyers are geniuses (or believe they are).
- Google culls answers to questions from oceans of information. Certainly any first-year lawyer at a large firm (are there any left?) spends much of her time wading through cases and statutes on LexisNexis.
- Google exists to provide answers. And that's what lawyers are expected to do.
First of all, you could forget about innovation. Google famously encourages its employees — its knowledge workers — to spend 20 percent of their working time on projects that interest them. This is designed to encourage innovation, and it has led to many of Google's most important projects, such as Gmail, Google News, and AdSense.
By contrast, the most important metric for law-firm associates is hours billed. Bonuses and promotions and even job stability all depend on this magic number, leaving no room for innovation or personal projects. If Google billed hourly, there'd be far less innovation.
Similarly, the watchwords of speed, simplicity, and constant improvement would have to be junked. The core principle of hourly billing is "more time means more money." There is no incentive to get the job done faster. Indeed, there is a disincentive to being efficient and getting jobs done fast, because that would mean less time, fewer billable hours, and less revenue.
What about speed? Google prides itself on its speed. Every search-result page broadcasts how fast it delivered the results you wanted. (For example, I just Googled "hourly billing." The website gloated over the mere 0.35 seconds it took to find 1,580,000 results.) But if Google billed by the hour, its alacrity would cost it money. Goodbye gloating.
As for simplicity, no one ever accused lawyers of worshiping at that altar. Things need to be complex to justify all the hours billed. And constant improvement means spending time on training and development and innovation — all things that detract from billing hours.
Finally, since law firms are run on a cost-plus pricing model, there is no incentive to lower the costs to the clients. That's why even in recessionary 2008, 71% of law firms raised their rates. By contrast, Google developed its AdSense and AdWords models to allow its paying customers (the advertisers) to efficiently and inexpensively buy just the advertising they need, unlike in traditional advertising models. Which is why a company incorporated in 1998 was able to do $22 billion in revenue just ten years later.
But under hourly billing, you can forget about that, too.
The bottom line: under an outdated, labor-theory-of-value system like hourly billing, the most innovative and successful company in history would simply not exist.
So who do you want to be like: law firms, or Google?
