Sunday, November 26, 2023

Lawyer Says No...

If you want to kill an idea beforehand,  just say. "Let's run this by legal!"

Being a lawyer is sometimes no fun.  Generally you have to be the one to burst balloons and shoot down fun (but impractical or unsafe) ideas.  And just to make sure they really hate you, you send them a big bill for telling them "No, you can't do that!"  That is, perhaps, one reason why legal bills are some of the most uncollectable debt there is.

I used to bartend for receptions at the local art gallery.  We gave out free wine and it helped lubricate sales.  I can attest to this fact myself, as I have a painting over our mantle that I thought was nice, but "a little out of my range."  The gallery we bought it at (in Oregon) had a cafe next door and after several glasses of wine, suddenly we just had to have that painting!

Booze sells art.  I suspect at Sotheby's they keep the champagne flowing all the time.

Recently, we hired a lawyer to address some tax issues and whatnot for the gallery and of course, some of the board members wanted to play 20 Questions, as though our lawyer was a Rabbi or something.  Unlike a Rabbi, who might actually give you some good advice ("It's right to buy a Chrysler!") a lawyer generally will always give the safe answer of "No" to any question you have.

So, for example, some busybody (no doubt a teetotaler) asked our lawyer if we should be serving alcohol (wine and beer) and of course, the lawyer said "No" on multiple grounds.  It was unclear whether we would need a liquor license to do so.  Serving beer and wine to gallery members was apparently OK - at private functions.  But serving the general public?  You'll run afoul of the liquor board.  Another reason is liability, or "Dram Shop Law" that might make the server liable if a guest gets drunk and plows their car into someone.

So the safe answer, that takes no time or effort to research, is to say "No" which in this case, might also be the right answer as well.  But for many industries and business ventures, saying "No" to every opportunity because there may be risk involved is one sure way to go out of business.  Yes, a poorly-planned product can also cause a company to go bankrupt.  But failing to innovate or modernize your products can also result in a slow death for a company.  In a way, it is like investing.   Put all your money in risky stocks, you go broke.  Put all your money in a non-interest-bearing account, you bleed to death slowly as inflation eats into your savings.

You have to take risk somewhere, else you die.  The key is, in managing risk and realizing what is too risky and what isn't risky enough.  Playing it safe is always the "right" answer in most decision matrices.  The same is true for middle-managers who tend to be more risk-averse that those above and below them.  They are more interested in preserving their perks and the status quo than rocking the boat or taking risks.

The "playing it safe" rule ends up watering down things.  For example, if you (as a lawyer) were to advise a food company about labeling, you would likely tell them to put "Processed in a facility that may process nuts and dairy."  Why?  Because if some employee drops his Reeses Pieces into the vat of whatever it is you are making, and a customer ends up having an allergic reaction, you get sued.  The worst thing  you can do - and no restaurateur or food company ever does this - is guarantee the food as being free of whatever allergen a customer reacts to.  If you tell them your pizza is chock full 'o peanuts - even though peanuts and peanut oil have never graced your facility - then you are "safe" as it is the consumer's fault if they have an allergic reaction (or they hire a fancy lawyer and claim they did.  Act shocked - it happens!).

So the safe thing is to say all your products are laced with allergens - and lose a very small slice of the market, but avoid millions of dollars in lawsuit expenses.  The safe bet is the cheaper bet.  Lost in this exchange is the availability of hard data for consumers to work with.  Someone with a peanut allergy basically can't eat out ever, as only a foolish restaurateur (or a naive line cook or server) would guarantee to an allergic person, that their food didn't contain x.

And yes, there are folks who claim to have "allergies" and then go to restaurants hoping a naive line cook or server will say "Sure, there's no peanuts in our french fries" so they can sue the pants off the restaurant chain.  It is the reason restaurants put these disclaimers on menus.

Playing it safe often results in us losing out on opportunity, or merely our society becoming risk-averse and overly "safe" to the point where no one is saying or doing anything for fear of lawsuit or being audited or whatever.  You can safe yourself right into the poorhouse.

In personal finances (finally!) the same effect is true.  Ordinary working-class people, who have had to struggle so long and so hard for so little (relatively speaking) become or are, very risk averse.  It is easier to sell "loan insurance" to the poor and middle-class, as they worry about trivial (relatively speaking) debts, risks, and assets.  The poor and middle-class will buy extended warranties and low-deductible car insurance - paying through the nose for "peace of mind" but ending up merely paying more than they have to, for some basic necessity.  And half the time, these sort of "Peace of Mind" things boil down to mere contracts,which have big loopholes in them, which you don't discover until you try to file a claim on them.  Extended warranty companies go bankrupt all the time - and duck out on all of their obligations.

Some argue that only the wealthy can afford to take risks.  The poor person has to get "loan insurance" on his car loan, because if he died, his wife would be stuck with the loan balance!  But that is not a matter of being risk-averse, but rather just uninformed.  For the price of "loan insurance" on even a modest car loan, a poor person could buy a term life policy of $100,000 - which would put his wife in better stead, for far longer than the period of a car loan!

But getting back to basic risk-taking, being risk-averse is not always a bad thing, but you have to take some risks in life if you want to get ahead.  When opportunity comes knocking, you do have to answer the door.

If you ask any lawyer for advice about this, though, the answer would always be "No." - which placed him at no risk for liability due to malpractice!