What Costs More Than a $1,000 Per Hour Lawyer?

Beginning just three years ago, some large firm legal fees reached that amount – about $17/minute – providing fodder for legal bloggers, and Internet articles on a variety of topics, including new marketing opportunities and excessive fees for bankruptcy matters to name just a couple. Only senior lawyers in the largest firms actually charge that much, and that’s to large companies on non-commoditized work. What about the rest of us? What makes a service worth that much to us? On my daily walks with Sam, we have a lot of epiphanies. Here’s one we came up with just before a Nor’Easter looming on the horizon. And no, this isn’t a rant about lawyers and their fees.

This is about snowplowing. I can only talk about the Boston area. Here, snowplowing costs anywhere between $35-50 per 3 inches of snow per driveway (the rest of you can fill in your own numbers). The average time per driveway – 3-5 minutes.

Here’s what’s interesting to me. Why is a homeowner willing to pay about $10/minute to anyone with a snowplow, yet would complain about that rate for most other services. I applied the Trust Equation to this question.?

  • Credibility: We’d prefer they not wreck the lawn or dig up the driveway, but if they do, well, things happen. We do want them to actually clean up the snow though.
  • Reliability: Jackpot. We’re paying for them to show up. Fast, and often if needed. If they show up relatively on time, they’re worth it. If they don’t, they’re not. Simple as that.
  • Intimacy: No need to empathize with us or share. Just do what is a straightforward job.
  • Self-orientation: If they want to tell us how great they are, it’s fine–just do the job.

This is a transaction, so Intimacy and low Self-orientation just don’t matter. However, Reliability is so important that we’re willing to pay more per minute than just about any other service we get. Credibility is important only in that the job be done reasonably well.

This made us think–where else is Reliability and Credibility so important that we’re willing to pay extraordinarily high rates so we can get it? Here’s our very short list:

a. Ambulance services. This is way out of line on a per minute basis. We’re paying for the competency to be available when we need it. Imagine if the costs were less, and they were only available at certain times. We have to pay more so they’re ready when we need them.

b. Travel–last minute. When you have to get home fast, you’ll pay multiples of the regular cost. I was in Dallas, and was required to stay 4 hours later than my flight. My round trip was about $350. My return flight 8 hours later on the same day was $1800. I wasn’t happy but I was willing to pay it. While air travel is not incredibly reliable, it’s more reliable than alternatives to travel long distances. I knew I’d get home.

Conclusion? Time sensitive needs merit higher rates, particularly where there are limited resources (like snowplows during a storm, planes to a specific destination, ambulance services), knowing you can use the service and it’s reliable is worth whatever it costs up to a point. What that point is depends on our need at the time.

9 replies
  1. Barbara Kimmel
    Barbara Kimmel says:

    Hi Stewart-interesting post and Happy New Year. Another major difference between the law firm and the examples you cite is one of transparency. Plowing “is what it is” while legal fees aren’t always “what they may appear to be.” Because of this lack of clarity/transparency, those on the receiving end of the legal bill may have a difficult time figuring out what the charges represent, or whether the services rendered were “worth that much.”

    Disclaimer: I have worked in several law firms.

    Reply
  2. Jeri Sessler
    Jeri Sessler says:

    I would add one more field to this list: Physicians who specialize in a particular field, e.g., Cancer or Cardio-Thoracic Surgery. Their rates are high, the risks of failure mitigated by their experience (credibility), they show up when you need them/are referred to them (reliability), no need for intimacy (fix the problem/cure the disease), and it doesn’t matter whether their self-orientation is high or if they entered the field they are in because of some particular altruistic interest.

    Reply
  3. Jeri Sessler
    Jeri Sessler says:

    one more thought: They charge those fees because they can — e.g., the risks to them of you going to someone else who can provide the same service for less (switching costs because of the immediacy of need) is low but the risks to you of switching to a different provider can be very high.

    Reply
  4. peter vajda
    peter vajda says:

    I think Jeri Sessler nailed it, “They charge those fees because they can.”

    So, what about those (doctors, lawyers…) who can, but choose not to? I’m thinking there’s got to be some element of self-orientation in the mix somwehere, (even if it’s passive, deep down, unconscious…), no?

    Reply
  5. Peter Feldman
    Peter Feldman says:

    Of course, if we knew that the snow plow would take 36 hours, would charge us for the call to get them there, and would charge $350 an hour for each of five plower’s helpers, who would research the density and weight of the snow, wear and tear on the plow, and risk of hitting a fire hydrant, we might go out there ourselves, shovel, and get off cheap paying the cardiac surgeon. Perhaps the key is what we’re willing to pay to avoid the most likely unpleasant alternatives, with the threshold being the severity of their unpleasantness divided by the likelihood that they will occur. Or something like that. So, do we pay the plow guy his fee because we know he’ll show up and actually clear the driveway or because the alternatives are simply not acceptable? Are we really that sure he’ll actually show up before he does? Can this apply to our favorite service providers, plowers of the law? Absolutely.

    Reply
  6. Stewart Hirsch
    Stewart Hirsch says:

    Interesting and valuable points – thank you all.
    I’m persuaded a lot by your comments Barbara and Peter – that the job is finite and the cost is relatively certain makes it easier to spend the money, although if we have to wait 24 hours, we might think the value is down a lot. And Jeri, I thought of adding specialty docs to the list, and now that I see the argument, I think that’s right. And they do indeed charge those fees because they can, and in part because everyone else does.

    Peter , I agree that the alternative, shoveling out for 2-4+ hours, can be much worse than paying over $200 for 20 inches of snow removal, even if it only takes 5 minutes. Interestingly, Frank points that out too, although we don’t know whether the $25,000 will indeed save $100,000. Which brings us back to Barbara and Peter’s point about certainty. Much food for thought – thank you!

    Reply

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