I deeply wish this was more of a thing. If you look at the way law firms work, this is how they take their specialized knowledge and keep more of the value they create for themselves. I don't see any reason we can't/shouldn't have a similar model in software engineering be the de-facto now that the field is mature enough to support it.
>What would be the difference from a company owned by five individuals that also do all the work and a coop formed by five individuals?
Parent is probably talking about "BigLaw" (thousands of lawyers) and boutique law firms (hundred lawyers or less). Most lawyers at the firms are employees (i.e. the associates) and not part-owners (i.e. the partners). They are not co-ops.
Even in a tiny local law firm of 5 partners/owners and no junior associates, they'd still have the staff paralegals and secretaries as non-owner employees so they're not really co-ops either.
FWIW, farming co-ops are often more similar to the lawyer model, in practice: A small number of owners who hire out lots of manual labor.
You could certainly have a similar model for software co-ops, using contracts for various non-central parts of the work.
Most worker co-ops also include a probationary period for new hires before they become part owners (because to do otherwise would be a bit insane). A really long probationary period with a low chance of conversion starts looking a lot like the lawyer model...
Because the model of a law firm is maybe 10 senior partners own the company and there's 200 attorneys and several hundred assistants and paralegals under them. Its not much different than most modern corporations having a bunch of shareholders and a board in practice.
One major difference is that a law firm makes money by selling billable hours whereas a tech company makes money by producing, selling, and distributing an actual product.
You don't see law firms raising millions to open shop, but it's almost a pre-requisite for serious tech companies. A law firm can be profitable from day one. This difference makes it much harder to use the co-op model for tech companies unless all the workers are independently wealthy and don't need VCs.
In the US, at least, all members of a law partnership (or professional corporation) must be licensed attorneys. That's baked into both state law and rules of professional conduct, and is a serious limitation on organization that tech professionals are not saddled with.
Yeah, LLPs/PLLCs might have the credentialing requirements. However, I am not sure law firms have to organize with those structures -- I admit ignorance in that case. I was thinking more generally.
Law firms don't have economies of scale. Two partnerships can serve N clients roughly as well as one larger company could. Most software has huge economies of scale, so it's unlikely small partnerships would be successful long-term unless they filled a tiny niche (read not-very-profitable) that wasn't worth pursuing by a bigger company.
> Law firms don't have economies of scale. Two partnerships can serve N clients roughly as well as one larger company could.
That's not really accurate. Larger law firms can have more specialized attorneys; they can offer clients a more comprehensive set of expertise - not only in areas of law, but geographically ('let me call an IP attorney in the Paris office'); they can have larger personal and business networks, which provide access to more resources, more business, enable them to broker more solutions for clients, and which give them more influence.
Large law firms provide a one-stop-shop that some clients, like large businesses, are willing to pay a premium for due to the convenience factor. They’re not providing law services more efficiently, measured by cost, compared to smaller firms.
It's more than one-stop-shop services (see the GP), and it is more efficient in one way: One stop shop, specialized legal skills, etc. are more efficient for certain tasks than the services small firms provide. Also, it can be more efficient in another way: If I said low-wage software developers were more cost-efficient, what would you say? The same goes for attorneys.
I find myself on the side of big firms here, but small ones also are more efficient in some ways. My only point is that, for some services, there is an economy of scale.
By the definition, software isn't an economy of scale. Unit cost doesn't decrease by magnitude as output increases. A utility company is an example of economy of scale.
Economies of scale don’t just have to be areas where unit marginal costs decrease as volume increases, they can also be areas where fixed costs dominate marginal costs, which is the case for many software firms because marginal costs are usually very small
Economies of scale exist when the average cost decreases as the number of units increases. The average cost for N units is the sum total of all fixed and per-unit costs divided by N.
Don't law firms, like software companies, usually have a small inner circle of founders and key staff who make the decisions and keep most of the profits?
And don't law firms treat the average staff lawyer worse than software companies treat the average developer?
Not necessarily founders but BigLaw has partners at various levels and then associates plus various support staff. And, yes, BigLaw (like investment banking) has a reputation for really working associates hard in addition to having something of an up or out structure. Which probably works OK for law because a lot of the associates probably went to law school because they weren't sure what else to do with their liberal arts degree--and don't necessarily want to stay in law long-term anyway.
Up or out is right. But the most common “out” path is to a corp legal department. Better hours, and now the partner that used to work your ass off buys you lunch to court your business.
Yeah. Though I know a lot of lawyers who migrated into non-law positions after a few years, including politics (also usually for a few years depending on their leanings and the climate--e.g. White House) but also a variety of other things. As you say, there are also a variety of corporate legal positions including government affairs and the like in addition to straight law jobs.
