Money Stuff — Run on the Law Firm

Key claims

• Weil Gotshal & Manges, one of the country’s 30 largest law firms with nearly $2.1 billion in revenue in 2025, is winding down its operations after a cascade of partner departures that mirror the structure of a bank run.
• The economics that make law firm collapses possible: a rainmaker partner who brings in $50M of revenue earns only ~$15M in profit, with the balance subsidizing service-partner salaries and firm overhead — meaning a competitor can poach that partner with a $30M offer and both sides win.
• The selection-bias dynamic worsens each wave: the first partners to leave are those for whom the leave/stay calculus is most nearly balanced, and those tend to be the partners whose departures inflict the most damage on the firm’s revenue base.
• Under the Model Rules of Professional Conduct, law firms are explicitly forbidden from using covenants not to compete or other retention restrictions — a rule written by lawyers who want the right to quit and take their business elsewhere, and which makes law firm bank runs structurally harder to stop than bank runs at actual banks.
• Banks and hedge funds can use golden handcuffs — deferred compensation, clawbacks, long vesting schedules — to hold partners through a rough patch; law firms legally cannot, leaving them with no structural brake on a departures cascade.
• AI increases the operating leverage of the most profitable partners: if a partner can retain $49M of a $50M book by running AI systems instead of associates, the internal cross-subsidy model collapses faster and the incentive to leave with one’s book grows sharper.
• The Kalshi prediction market is facing criminal charges from Utah for violating state gambling law, despite a federal CFTC order requiring it to operate nationally — an emerging federalism conflict over who regulates prediction markets.

Notable quotes

“Partner withdrawals exhibit a selection bias. In general, the partners who leave first tend to be the ones for whom the leave/stay calculus is most nearly in equipoise. Unfortunately, it just so happens that these partners also tend to be the ones whose departures do the most damage.”

“Under the Model Rules of Professional Conduct, law firms are generally forbidden from using covenants not to compete and other restrictions to keep their partners from leaving.”

“You can see why the lawyers who write these rules would write them that way: They want to be able to quit in a huff, or for a better offer, and take their business elsewhere.”

“It is unethical for a lawyer to prevent another lawyer from practicing law elsewhere.”

“Some big law firms will invest a lot of money in AI systems to, like, do all the work of associates; at those law firms, a partner who brings in $50 million of revenue can keep $49 million for herself, because her only costs will be some tokens.”

“Weil was among the country’s 30 largest firms last year, bringing in nearly $2.1 billion in revenue.”

How it connects

• Matt Levine — author; his Money Stuff newsletter is the source
• Weil Gotshal and Manges — the firm collapsing, nearly a century old and a New York corporate powerhouse
• Financial Services — the broader industry context; the bank-run analogy is the organizing metaphor
• AI — the technology that could increase partner operating leverage and accelerate the structural fragility of the cross-subsidy model
• Kalshi — the prediction market facing state criminal charges despite federal authorization, the newsletter’s second major story
• Game Theory — the bank-run game theory logic that explains why law firm collapses are self-reinforcing
• Law Firms — the industry type whose unique ethics-rule constraints make them structurally different from other professional partnerships