THE CHRONICLES OF A CAPITALIST LAWYER

RANDOM THOUGHTS OF A CAPITALIST LAWYER ON LAW, ECONOMICS, AND EVERYTHING ELSE

  • Conspiracy Theories Revisited


    From all the existing theories in the world, I bet conspiracy theories are the most long lasting ones. But why? Why people love conspiracy theories so much? What's the effect of these conspiracy theories and how the government should deal with it? A short paper from Cass Sunstein and Adrian Vermeule could give some hints to answer that. Download it here.
    According to them, one of the distinctive characteristics of conspiracy theories is their "self sealing" quality, meaning, conspiracy theorists are not likely to be persuaded by an attempt to dispel their theories; they may even characterize that very attempt as further proof of the conspiracy. I begin to think that these conspiracy theorists are acting like religious fundamentalists, resistant to correction and living in denial :p.
    In any way, the case of conspiracy theories is pretty relevant for Indonesia. The paper argues that conspiracy theories are more powerful in societies with systematical malfunctioning or skewed institutions of knowledge. Some simple questions, do you believe your own government, that they really work for the benefit of the society? Do you even believe that all of the cases related to "religious violence" are a part of bigger schemes?
    Conspiracy theories can also be dangerous. We wouldn't have any problem if they stay as nice gossips material to be discussed at "warung kopi". The problem is, they are not as simple as that. In some cases, conspiracy theories can produce an imminent threat to the society. Consider the case of zionist-american conspiracy to control the world, that everything that happen in this world until today are the result of their control? Do you believe this? Personally, I don't buy it, especially with the current economic crisis in America. But as you may see, some people believe that. Try the terrorists who think that they are in a holy war with Americans because of such conspiracy theories. Or if we look nearby, the case of Ahmadiya persecution can be a solid example of the danger of conspiracy theories. Ahmadiya has existed in Indonesia for more than 75 years, why the dispute occurs now? What's behind all of this? Will the violence stop?
    The paper further argues that the Government should carefully deal with conspiracy theories. Remember the "self-sealing" quality? Therefore, not all conspiracy theories should be rebutted, only the ones who pose the most serious danger. And even if it is the case, the rebuttal should not always be made by the Government, especially if the Government is the subject of the conspiracy theories. Independent think thank institutions can also help. Of course, these institutions must have solid credibilities to gain the trust of the people (and I must say, the case of establishing these trusted institutions is quite challenging in Indonesia).
    I would suggest you to read the entire paper by yourself. This is a very short paper, consisting of 30 pages only and has summarized the basic issues of conspiracy theories. Hopefully, the paper can open our eyes on how easy we can fall into the prey of conspiracy theories.
  • Studying Costs at US Law Schools: A Little Comparison with Indonesia


    I've just found this rather gloomy article accusing that some US law schools (mostly third and fourth tiers law schools) were tricking people to think that the super expensive tuition fee of those law schools is a good investment for their future, since in reality, many new law graduates later find out that they are succumbed to excessive amount of debt without any proper job to support the repayment. A pity indeed!

    Based on the data provided in this site and my own personal research, the general annual cost for studying at a US private university law school, whether it is a top tier or low tier one, is around US$65,000-US$70,000 (meaning that a law student needs to spend around US$200,000 to finish a 3 years JD course!). The cost can be cheaper though if it is a public university, but still, it's expensive from any point of view. If you are interested, you can see the data of various US law schools ranking here.

    With such huge amount of tuition fee and living expenses, no wonder law graduates are expecting to find a decent job that can help them to repay the loan as soon as possible. But, with a decline market for lawyers and the economic recession in the US (somehow the case is still the same for 2011), finding jobs are getting harder and harder for law graduates, and the situation is far worse for low tier graduates. Now, what surprises me is the fact that there are many people in the US who actually think that being enrolled in low ranked law schools can actually give them some advantages in competing with top tier graduates, especially when the tuition fees' discrepancy is relatively small. Are these people overestimated themselves, or are they simply the victims of an organized scam by law schools? Time will tell.

    If you ask me, I am more interested to know why US law schools are very expensive and whether the same will someday happen in Indonesia. As a comparison, the total tuition fee of my law education for 3.5 years (2001-2005) at the University of Indonesia, an Indonesian public university, is only US$980 (with an exchange rate of US$1 = Rp9,000). Try to compare this with the current annual tuition fee of the University of Washington School of Law, a public university in the US, which reaches US$22,267 for residents and US$32,777 for non-residents. I know that University of Indonesia's tuition fee has increased significantly for the last few years, but I am certain that the total amount is far cheaper than its counterparts in the US.

    Another interesting question, does the overall quality of top tier US law schools justify the expensive tuition fee? Hopefully yes, since I'll be going to one of them in September. Wish me luck :p
  • Do Corporations Have Personal Privacy?


    I've just found an interesting case from the Supreme Court of the Unites States on whether corporations have the so called "personal privacy". You can review the opinion here and a brief commentary from the SCOTUS Blog here. Apparently, according to the Supreme Court, while in legal terms the word "person" may include corporations, the word "personal privacy" is not applicable for corporations since the word itself pertains to the privacy interest of individuals, it suggests a type of privacy evocative of human concerns, and this is not the sort usually associated with an entity like corporations. To put it simply, can you actually hurt the feeling of a corporation?

    The case itself is about the request from a US trade organization asking the US Federal Communications Commission to disclose information related to its investigation upon AT&T on the basis of the Freedom of Information Act ("FOIA"). The request was rejected due to some exemptions under FOIA, i.e. (i) trade secrets and commercial or financial information, and (ii) records or information compiled for law enforcement purposes that could reasonably be expected to constitute an unwarranted invasion of personal privacy. The main issue came from the second exemption. While in the end no information was shared, the exemption was made by FCC on the basis that some of the information may attack the personal privacy of AT&T's employees. AT&T cannot accept that reasoning and further asked the court to protect the information on the basis that the disclosure of such information may attack the personal privacy of AT&T. Yes, this is a game of words.

    As discussed above, the Supreme Court finally decided that personal privacy is not applicable for corporations. They have already received enough protection from the restriction to disclose trade secrets and commercial or financial information. So why bother asking protection for personal privacy information? However, it should be noted that the above opinion was made on the basis of a strict grammatical interpretation on the words "personal privacy". While I mostly concur with the use of grammatical interpretation when the text of the laws is clear, I think it would be better if the US Supreme Court can also provide an economic insight on their decision.

    Sure, companies do not have any feeling and no board of directors are crazy enough to claim that a disclosure of certain information can hurt the feeling of their company. BUT, any company would do almost anything to maintain its reputation and disclosure of certain information can surely hurt the reputation of the company, which is bad for the business. Can we cover this issue of reputation within the context of personal privacy? Maybe, but for now, the United States Supreme Court will stick with their latest concept of personal privacy, and I will reserve that question for another time.

    I would love to know what Indonesian jurists will do if a similar case is happening here. This might open an engaging discussion on the limit of imposing human attributes to legal entities.
  • Remembering Joe Flom


    A little bit late but still important to be shared in this blog. Joe Flom, the last founding partner of Skadden, Arps, Slate, Meagher and Flom, one of the biggest law firms in the world in terms of size and revenues, passed away on 23 February 2011. Now, every aspiring corporate lawyer should know this guy as he is simply a legend among corporate lawyers, especially those who focus their practice in merger & acquisitions. You can check his profile here or read a beautifully crafted obituary about him from one of his fellow partners, Peter Atkins, here. Goodbye Mr. Flom, I am sure your legacy will continue to live for a very long time. Rest in peace.
  • Thinking Like a Lawyer for Corporate Lawyers


    To be honest, I've practiced as a lawyer for more than 6 years and still, I don't know exactly what's the true meaning of thinking like a lawyer. Apparently, Prof. Bainbridge thinks that to enable more lawyers to think like a lawyer, law schools require more experienced lawyers than PhDs to teach at those schools. See the article here. You can also see a nice law review article on thinking like a lawyer here.

    I have to disagree with some of his premises though. My gut feeling says that the main problem with those PhDs is not that they can't teach lawyers about other fields that can enrich a lawyer's ways of thinking but simply because the quality of those PhDs are mediocre. On the other hand, I am quite certain that asking more experienced lawyers to teach at law schools seems like a good proposal, especially if you're talking about corporate laws. Like it or not, in Indonesia, the development of corporate laws lies mostly in the hand of corporate lawyers instead of theoretical lecturers. The problem is, most of these lawyers don't have the time to share their knowledge to law students, which is a pity.

    Why do I say that the teaching of corporate laws needs corporate lawyers? Corporate law is not only about legal issues per se. There is an economic structure behind the corporate laws and to understand such structure, lawyers need to have sufficient experience handling various corporate transactions. These experiences will enable lawyers to gain knowledge on the commercial issues of their clients which will further help them in understanding the economic structure of the corporate laws and how to improve such laws.

    Some thought provoking questions: Why there should be a limited liability concept for companies? Why directors have fiduciary duties toward the company? Why do we need commissioners for supervising the management of the company? Why we tend to limit a company to enter into affiliated party transactions? And many more.

    As you may see, the above questions pose certain economic rationales. There is no simple right or wrong answer in corporate laws as in the end, it depends on the economic structure that the regulators choose to build the foundations of corporate laws. There are virtually unlimited ways to improve our corporate laws, promote efficiency and create more preferences to the society. We need to always remember that corporations are essential institutions of the market, and therefore, it is natural if the laws that govern corporations should be designed carefully and thoughtfully.

    Stay tune as I will uncover some of these economic structures in my future posts.
  • SEC's Shareholder Proposal Policy and the Materiality Principle


    Here is a very interesting article from Prof. Stephen M. Bainbridge on the absurdity of the new SEC's Shareholder Proposal Policy which basically gives the right to minority shareholders of a publicly listed company to force a vote in a general meeting of shareholders. The absurdity lies in the fact that according to a US court precedent, the tests for granting the validity of such proposal include matters on ethical and social significance, and not only economic matters.

    Of course this would be problematic for companies as this is the same with providing the minority shareholders with the ammunition to control the company for matters which are not directly related to its financial and business performance. In this case, I fully agree with Prof. Bainbridge analysis on the importance of materiality principle in securities laws. If the shareholders want to be involved in the company's management, it should be done only for material transactions that may economically affect the investment value of the relevant shareholders in such company. If the shareholders can actively use the company for their own personal and political needs, why bother to have the concept of limited liabilities?

    Luckily, Indonesia does not adopt this kind of rule, though I am surprised that the development of shareholders protection law in the United States has already reached a position where it is difficult to differentiate the role of shareholders and management.
  • Going to Chicago Law School


    So I guess it's official. I will be going to the University of Chicago School of Law in September 2011! I must say that I'm very happy and excited with this result. After all, learning Law and Economics at the law school which created this field at the first place is one of my biggest ambitions. But the best part of being admitted at a first class law school like Chicago is that I will have access to "unlimited" legal materials, and not to mention the fact that I will also be able to spend nine months to read and write new materials without being disrupted with my day to day work as a lawyer. Hopefully, I will have more time to write in this blog during my school days. Another advantage is that Chicago is not that far away from Ohio where my Shiye (the teacher of my kung fu teacher) teaches his class of Bajiquan. An opportunity to learn the art from a real living master is surely a big bonus for me, and I can only be grateful for all of these opportunities. Can't wait to go there! :)
  • Paying More for Less: Understanding the Correlation between Big Payment and Work Performance


    About a year ago, I wrote a short article on whether there is any relationship between guaranteed high bonus and excessive risk taking by the management of a company. You can see the post here. Basically, such guaranteed high bonus gives a negative incentive to the board of directors to take higher risks in order to gain better benefit for the company. While higher risks might be translated into higher profits, they can also cause higher costs and losses which would trouble the company and the shareholders. In other words, big payment might actually produce worse results.

    Apparently, Dan Ariely, a Professor of Psychology and Behavioral Economics at Duke University, has a similar view on this issue, though he reached the conclusion from different perspective. In his latest book, The Upside of Irrationality, he discusses his experiment which more or less shows that higher payment does not always work. The experiment was conducted in India, where several participants were asked to play some games in which they will receive financial compensation if they completed certain objectives within the games. The tests were divided randomly into 3 categories (the games were same, though), the first category gave very small payment (equal to payment for 1 working day in India), the second category gave mediocre payment (equal to payment for 1 week of work), and the third category provide the highest payment (equal to payment for 5 months of work). FYI, the average costs of one month living in India is US$11, so 5 months means US$55. That's why Dan had enough funds to conduct his research :).

    What's the result of the experiment? Well, you might have guessed this: statistically, those who play the games in the third category end up as the worse players. It seems that the thought of having such a huge payment in the end of the game gave them a huge pressure, so huge that most of them fell under the mental pressure. This is interesting and yes, I can relate this to myself. As an example, when I do online shares trading, the bigger the stake is, the harder I make the final decision. It is a very stressful experience! The case is different when the stake is low, and I definitely can make a better decision in such case.

    Therefore, it is quite easy for me to understand the result of the above experiment. When you know that the stake is very high (i.e. the end rewards), there is always a possibility that you will fall under the pressure which eventually will affect your overall performance. The similar thing can happen to those CEOs who are promised with guaranteed big fat bonuses. Since they need to establish a sufficient evidence that they are worthy enough to receive such payment, they take actions that might be riskier which then turn out to be a deep trouble for the company. Hence, lower performance.

    I must say that Dan Ariely experiments entertain me most of the time. Like it or not, men are not always rational. There are certain conditions where our rationality might be defeated by our impulse. Only by accepting this fact that we can actually improve ourselves from such weakness. For more information, I suggest you to quickly buy the book. It's available in Times, as far as I know.
  • Tweet Series: My Rants on Lawyering


    I've been twittering for some time and realized that Twitter is a really bad choice for storing your thoughts. So, in order to preserve some of my ideas there, I will post my tweets collection from time to time here, starting with my Lawyering Tweet Series. Enjoy :)
    1. As a lawyer, you can be as smart as possible, but if you can't get the deal done, you're useless. As simple as that.
    2. A partner said that lawyers should have high sense of client belonging. Well, if I get the client credit, I'll treat them as family!
    3. To move to the next level, lawyers should never forget to do good marketing, since partnerships are offered to rain makers.
    4. So we're having a session on being a Happy, Healthy and Ethical Lawyer. I tell you one thing. Stop the crap, and pay us more. Case closed.
    5. Lawyers will never get a balanced life from some trainings, but from proper work distribution and efficient working system.
    6. If you're a good lawyer, client will trust you no matter what. Appearance sure helps, but only for the first meeting.
    7. Any good lawyer knows that the purpose of contract drafting is to reduce or even eliminate any potential dispute, not to create one.
    8. It is a tragedy that qualified lawyers who understand the law must work under laws made by unqualified people.
    9. What is the joy of becoming the best lawyer in town if you are merely a spokesperson of some bad and stupid laws?
    10. A lawyer who can't write properly is like a chef who can't cook.
    11. Being a lawyer requires great intelligence, persistence, and diligence, but none of them would be helpful if you don't have the passion.
    12. Quality of life is a bullshit for lawyers. If you're complaining of not having it, you definitely work in the wrong area.
    13. A lawyer cannot be considered as smart if he cannot produce other smart lawyers.
    14. A lawyer who doesn't know that his job is risky is a dumb, but he is still better than a lawyer who knows the risk and doesn't take it seriously.
    15. What is the first thing to do when a lawyer receives a new assignment? Review it? Make a summary? Nope, request the client matter number!!!
    16. Commercial pragmatists are the future of lawyers: those who can blend smoothly in-depth legal knowledge with practical commercial skills.
    17. To know whether a lawyer is good in making a legal opinion, look not at the content, but on its assumption and qualification.
    18. A little advice to fellow lawyers, never assume that your clients know your assumptions. Assumptions were made to be written not assumed.
    19. As capital market lawyers, our main task is to make proper public disclosure, not fixing all problems. You're not God.
    20. Fellow lawyers, remember this: someday all of our extreme hardship and long hours shall become stories for us to laugh. Be patient!
    21. A first class lawyer is not he who knows everything but he who knows when to stop and say "let me check that again."
    22. Lawyers should be ambitious with their career. Without any ambition, you'll soon forget why you're here in the first place.
    23. Lawyers' dedication comes from belief in excellence. But it must be supported by good rewards. We're not monkeys that you can pay with peanuts.
    24. To be a great lawyer, focus and be an expert in at least 1 particular subject. Being a jack of all trades is only good if you're a clown.
    25. A lawyer needs to maintain his sanity to have a long term career. At certain point, take a nice break and enjoy our life for a while.
    26. For lawyers, clients should always be number one, but don't be naive and make unnecessary sacrifices cause they aren't everything.
    27. A lawyer should master the art of covering-my-own-ass before he can master the art of giving-the-right-solution.
    28. It perfectly makes sense for lawyers to complain on their job. What unusual is the people who think that those lawyers are exaggerating.
    29. In case you have not realized it, there is a limit to which a lawyer can be held responsible for his deeds.
    30. Lawyers are paid to give advices that can be understood by mere mortals. If your lawyer confuses you, you definitely pick the wrong one.
    31. A good lawyer would never choose to advance slowly in his career, as he will always aim for a great leap to fame and fortune. Be ambitious!
    32. Lawyers are problem solver. If you think you're good only for succesfully spotting issues, you're still a half baked lawyer.
    33. Three basic foundations of a law firm: Capital, People, and Reputation. Losing the latter would have the most devastating impact.
    34. A good lawyer knows that the first draft is always a rubbish. It is through continous review and amendment that we produce a masterpiece.
    35. Lawyers' creativity is not granted, it is obtained from countless practices and accumulation of knowledge. There is no short cut!
    36. A good lawyer must be knowledgeable and well versed in many issues, but he understand that it doesn't mean that he knows everything.
    37. A partner might be the most brilliant lawyer in the world, but he is still one person. Without having a solid team, he will certainly fail.
    38. What's the secret of creating the best firm? Recruiting the best people and maintaining them with the best incentives.
    39. I don't care where you come from or your past achievements. What I care is whether you are a good lawyer or not, now and in the future.
    40. For lawyers, the respect from one person is far more valuable than acquaintance with 100 people. Cause the first will be your loyal client.
    41. You work products reflect who you are. While there is always a chance to fix them, why not give a great impression from the first?
    42. Lawyers, your transactions are your portfolios. Make sure that they and your role in them are well recognized by existing and future clients.
    43. A lawyer can't progress to the next level if he can't articulate his ideas in a systematic way.
    44. Lawyers are advisor not decision maker. Our job is to give our best advice and let the client to decide. As simple as that.
    45. What is the biggest asset of a lawyer? A genius mind? Relationship mastery? No! Reputation. Hard to build, easy to lose.
    46. A commercial pragmatist lawyer will try to satisfy the client's commercial needs to the extent possible without breaching the law.
    47. The best part of becoming a lawyer is the fact that the subject of law is pretty much unlimited, there are always new things to learn.
    48. As a lawyer, if we can't do what the client wants, inform them immediately and make them understand. Don't sacrifice the relationship.
    49. In lawyers' job, there is no bullet proof mechanism from making mistakes. Thus, be creative in preparing your ass covering strategy.
    50. Knowing the fee structure of each assignment is essential for lawyers, so they can bill their work efficiently and appropriately.
    51. A lawyer should plan his career from the first day he entered the job. After all, the ending path is always visible, what matters is how?
    52. A good lawyer should know his limit. If you feel you can't handle the workload anymore, do not hesitate to shout it to your boss.
    53. If you're a lawyer, you'll eventually learn that in terms of acquiring knowledge, the sky is the limit.
    54. Clients confidentiality must be maintained by lawyers. If you can't be trusted with their secrets, how can you be trusted for other things?
    55. Actually, lawyers should be prioritized in obtaining scholarship, because a good lawyer is essentially a better legal scholar.
    56. I learn that in term of quality, there is no significant difference between us and foreign lawyers. It's about the correct exposure.
    57. A law firm's opinion must be unanimous, thus no lawyers in such firm can issue a dissenting opinion. I too am obliged to follow that rule.
    58. For some lawyers, lawyering is a way to earn living, but for some others, lawyering is a way of life. I am for the latter.
  • On Why Prison is Overrated in Solving Corruption (Indonesian version)


    Here is another piece of article in Politikana discussing the latest sanction for Anggodo. I am more and more convinced that we need a better form of sanction rather than sticking with prison.

  • The Protection of Criminal Suspects in Law and Economics Perspective

    Forthcoming in Jurnal Teropong Edisi RUU KUHAP 2015 | 23 Pages | Posted: 10 May 2015 | Date Written: April 28, 2015

    Public Choice Theory and its Application in Indonesian Legislation System

    24 Pages | Posted: 8 Oct 2012 | Last revised: 8 Nov 2014 | Date Written: October 8, 2012

    Special Purpose Vehicle in Law and Economics Perspective

    Forthcoming in Journal of Indonesia Corruption Watch, 'Pemberantasan Kejahatan Korupsi dan Pencucian Uang yang Dilakukan Korporasi di Sektor Kehutanan', 2013 | 15 Pages | Posted: 22 Aug 2013 | Date Written: August 18, 2013

    Legal Positivism and Law and Economics -- A Defense

    Third Indonesian National Conference of Legal Philosophy, 27-28 August 2013 | 17 Pages | Posted: 22 Aug 2013 | Last revised: 3 Sep 2013 | Date Written: August 22, 2013

    Economic Analysis of Rape Crime: An Introduction

    Jurnal Hukum Jentera Vol 22, No 7 (2012) Januari-April | 14 Pages | Posted: 12 Nov 2011 | Last revised: 8 Oct 2012 | Date Written: May 7, 2012

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