Law Students, Lawyers, and Risk Aversion

Risk

 

A Quora reader recently asked whether law students and lawyers tend to be risk averse. Based on my experience, I'd answer with a confident "yes." I wouldn’t say lawyers are as risk averse as an insurance underwriter, for instance, but they tend to be risk averse nonetheless. The risk aversion seems to come from (1) the individuals themselves and (2) the nature of law school and the legal profession.

Individuals

For as much uncertainty there is about law school and the legal profession, I’d argue that many aspiring law students attend law school partly due to risk aversion. As political science majors, for example, they may have thought of law school as a solid backup plan if they couldn’t find a satisfying job after graduation. They’re frequently told by their friends and family that “you can do anything with a law degree.” It seems like a safe, rational decision to obtain a graduate degree in a field that is not going away anytime soon.

However, as many recent graduates have discovered, law school isn’t necessarily a safe investment. It can be difficult to obtain a job as a practicing lawyer, especially for students with poor grades from less prestigious law schools. Surprisingly, it can be just as difficult to find a job in another industry. This can be due to a number of factors, including three years of lost work experience or the fact that employers may expect you to demand higher compensation because you hold a J.D. I’m not saying that these justifications are inherently correct, but they are potential reasons for employers to pass over your application.

So the reality is that while attending law school is not a guarantee of “success,” many prospective law students (1) ignore this fact or (2) think that they are the exception to this trend. They think they’re making a safe investment, but the decision is riskier than they think. Nevertheless, I think that their decision is somewhat based on risk aversion.

Law School and Professional Practice

Besides the individuals themselves who are already risk averse, law school and the legal profession tend to make lawyers even more risk averse. In law school, you read case law where the worst case scenarios actually came to life, whether it is death, bankruptcy, or missing limbs. You see the same sort of fact patterns as a litigator. Contracts are drafted to protect parties from any malfeasance or nonfeasance, yet I’d see that malfeasance or nonfeasance in my cases. This is why lawsuits occur in the first place.

After seeing these worst case scenarios come to life, it’s easier to become even more risk averse. This feeling isn’t unique to litigators, as transactional attorneys face similar tendencies in their work. Ultimately, it’s not inevitable that you’ll become more risk averse, but law school and the practice of law make it very easy to adopt this mentality.