Ron Baker is in the House

I have written about Ron Baker before, the author of several books on value pricing. This morning, Ron left the following (edited) response to some of the give-and-take in the comments to a recent post. To get a flavor of the debate, and to whom Ron is responding, read all the comments. Here are some choice excerpts:

Hourly billing is not the cheapest way for a client to buy legal services, since the lawyer always has an incentive to bill more hours. There is no correlation between inputs and activities, and output and results. To think otherwise is to fall prey to Karl Marx's Labor Theory of Value. Many large companies now insist on fixed prices up front, and when "scope creep" occurs change orders are used. Houlry billing is not here to stay, it's only being kept in place by the apathy of the professions.

How do actuaries price earthquake or flood insurance? The answer, of course, is they are pricing risk, so are lawyers. Clients don't buy time, and to think they do is the problem with the professions. Do you care how long it took Porsche to build your car? Do you fly on an airline that charges you $4 per minute? They operate under uncertainty and risk, too, but so what? Who better to scope the project than the lawyer. If you think you are being paid for your time, you have put an automatic ceiling over your earnings. Do you think Tiger Woods has this attitude? You are being paid for your Intellectual Capital, not your time. Time is useless, and you certainly can't leverage it. It's the results you create customers are buying. All living beings, and all businesses, are subject to the constraints of time, so what?

Value Pricing doesn't mean price gouging, it means charging a price agreed upon up-front, BEFORE you do the work, JUST LIKE EVERY OTHER BUSINESS ON THIS PLANET. To deny this, and claim professional's aren't subject to the laws of economics, boggles my mind. How many things do you purchase as a consumer that you don't know the price up front? Why do you think clients of lawyers are any different? Humans tend to avoid risk and uncertainty, and yet when you price by the hour that's all they get.

I think highly of Ron's theories and his books. He has kindly agreed to answer a Q & A here at the [non]billable hour. If you have questions, submit them to me and I'll edit them and get them to Ron.