You can’t value what you do not know – Nobelist on fees based on advance valuation of a law firm’s knowledge

Nobel laureate Kenneth Arrow said something about doctors that applies equally to lawyers: “[T]the value of information is frequently not known in any meaningful sense to the buyer; if, indeed, he knew enough to measure the value of information, he would know the information itself.” That trenchant shot by Arrow comes from the Harv. Bus. Rev., July/Aug. 2010 at 55.

Since one common reason to retain a firm is that they know more than you as an in-house lawyer about a particular legal issue, Arrow’s point means you probably can’t assess very precisely the prospective value of the firm’s services and counsel. Afterwards, possibly, the value the firm generated can be assessed in dollars but even that is often not the case. To pre-value a remedy for ignorance may be a fool’s errand.