As a father to two young children, I’ve played my fair share of rock-paper-scissors over the years. And while admittedly my competition has been restricted to the age 11 and under bracket, I’ve enjoyed my unfair share of wins. My flair with paper? Irrefutable. My finesse with scissors? Been there, done that. But rock … now that’s my go-to move. When all else fails, I throw down rock with abandon.
So I had to laugh the other day when I played rock and my daughter waved her crazy jazz hands in my face and screamed “Volcano!”
Me (Perplexed): “Volcano? Wait, what just happened there?”
Her (Triumphant): “Volcano! Volcano beats everything. I win!”
Me (Now Amused): “But there’s no such thing as volcano. You got a rock, a piece of paper, and a pair of scissors. There’s no volcano.”
Her (With a condescending pity that I’m sure to see again in her teenage years): “New rules, Dad. Deal with it.”
New rules, deal with it. Sobering advice from a 9 year old.
Never one to accept defeat, however, I decided to bring some science to the table. A few searches later on the interweb and I struck gold. It turns out that someone actually did a statistical study of rock-paper-scissors to determine if there were any hidden patterns among those who won most often.
Zhejiang University in China had 360 students play 300 rounds of rock-paper-scissors and at first it appeared that the distribution of rock-paper-scissors play was completely random. But on closer inspection, they found a deeper pattern. Statistically, they showed that a winner is more likely to replay the same winning strategy. In other words, if I play rock and I win, I’m more likely to play rock again. But if I play rock and I lose, I not only switch to something different but in fact I’m most likely to select an alternative option in a clockwise fashion (from rock to paper to scissors to rock). So after playing rock and losing, my next likely play is paper. If that loses, I then likely shift to scissors. And then back to rock.
This phenomenon is called the “win-stay, lost-shift” theory and on the surface seems intuitive. We tend to stick with strategies that have worked in the past. And if it doesn’t work, we try something new the next time. What I found very intriguing, though, was the pattern of selection upon losing. The fact that game participants changed strategy when losing is interesting. That they followed an unconscious and now predictable pattern of specific selection, that’s something altogether different. Armed with this information, you would have a serious competitive advantage. And conversely, lacking this information, you would be at a serious disadvantage.
This led me to thinking. Beyond securing bragging rights with my children, is there a lesson here that can be applied elsewhere? I think so. Take legal pricing for example. When it comes to establishing your price for legal matters, you tend to lean on your collective experience and establish pricing based on what’s worked in the past. This makes perfect sense. But there can be two pitfalls with this approach.
- First, if the environment and rules change dramatically then your collective experience may carry less weight than it did in the past. When my daughter completely altered the game by introducing volcano as an option, everything I thought I knew became suddenly less relevant and my reliance on rock literally melted before my eyes.
In the world of legal pricing, the New Normal is a metaphorical volcano that has changed the landscape of how legal matters are sourced and priced. What might have been considered an acceptable price just a few years ago, may no longer be considered market competitive … regardless of prior relationships and your track record of delivering great legal service.
- The second pitfall relates to information advantage. The one with the most information wins more often. It’s true with rock-paper-scissors. It’s even more true with legal pricing given its complexity. The variables of geography, matter type, sub-matter type, attorney tenure, firm size, and firm/attorney reputation each contribute to inform the potential price for a given matter. This complexity in turn leads to a rather wide pricing variability, something we know first-hand having analyzed more than $50B worth of legal spend. Just like with rock-paper-scissors, there are patterns beneath the surface that can provide valuable insight. By mining these patterns, smart players can optimize their pricing and win rate. In fact, the promise of data driven insights has led to an entire legal analytics industry.
Future success in legal requires not only the recognition that change is required, but the awareness that entirely new strategies may be required to win your unfair share. Whether it’s baseball, rock-paper-scissors, or legal pricing, the more you can leverage information as a competitive advantage the more likely you will be to succeed.
Change isn’t easy. Recognizing that what worked in the past may no longer work in the future is scary.
But as a wise 9 year old once told me, “New rules. Deal with it.”