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The leaders of law firms become leaders because they’re great lawyers, gifted salespeople and they don’t lack in ego. It’s not always because they’re great businesspeople, and sometimes this shows.

Middle law—firms ranked about 40 to 120 by profits per equity partner (PPP)—appears intent on a lemming-like leap off a cliff. How else to characterize their compulsion to match the Milbank, Tweed, Hadley & McCloy associate salary increase? It may be based on an irrationally exuberant sense of the state of the market. Hence, it’s worth getting some facts straight.

First, the law firm revenue engine shut down in 2007. It hasn’t restarted; it won’t restart. Figure 1 contrasts the year-to-year changes in Am Law 100 revenues with U.S. GDP over the past 20 years. Prior to 2007, law firm revenues moved in an exaggerated response to economic growth—each percent increase in GDP had an associated 3 percent increase in Am Law revenues. That ended with a jolt in 2007. Since then it’s been a one-to-one relationship.

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