For the first time since I have attended LegalWeek, it didn’t snow. (LegalWeek is the legal tech conference for Biglaw. The products are marketed toward a big law audience). While the lack of snow sounds inconsequential, just as the weather for this LegalWeek was different, we may be on the cusp of fundamental change in the legal industry.
There was lots of chatter and, well, hype about ChatGPT and generative AI. Tools that allow people to ask a question or for a task to be done and get a result. An AI tool that can write articles and memoranda for you.
And everyone seems to think generative AI is going to change the profession immediately. Many claim that the conversational ability of ChatGPT and other generative AI tools will make it so powerful that it will disrupt the legal industry.
Of course, it’s been claimed for years that this technology or that technology will change legal. That AI tools and automation will eliminate or reduce the amount of work needed to be done or being done by lawyers.
But each time this kind of sea change has been predicted, it doesn’t happen, at least on the scale that everyone thinks. And yes thing this time, it does feel different both because of the conversational ability and the potential power of the tools. So we will see.
The Logical Implications of AI Adoption by Legal
But it’s important to think of the logical implications that full scale adoption of many of these tools might have. The unintended consequences. I’m a big fan of technology, but we can’t ignore the consequences both as practicing lawyers and journalists.
The common refrain is that these tools will eliminate much of the scut work that lawyers, especially younger lawyers, have traditionally done. That these tools will allow lawyers to focus on what they do best. Strategy, vision, legal advice, prediction, seeking outcomes, etc. As a result, the theory goes, technology tools will not replace lawyers. They will just change the nature of what legal professionals do.
But let’s think about this argument and where it might take us logically ( I know, logic doesn’t always apply to the legal industry and law firms)
The elephant in the room is that by eliminating work that lawyers have done —even if it’s drudgy—the number of lawyers needed to provide legal services the old way will be reduced. And that’s bad news, especially for law firms.
The expansion of law firms and the explosion in profitability over the last 50 years have been based on billable hour and leverage concepts.
The business model for many law firms remains the billable hour. And because there are only so many hours in a day, law firms needed to leverage work to be really profitable. You can bill more hours to a file if two lawyers work on a project. Or 3. Or 10. The expansion of law firms and the explosion in profitability over the last 50 years have been based on billable hour and leverage concepts.
One Lawsuit One Lawyer
But with automation and generative AI, you may not have work to leverage. Let’s face it, in most cases. The lead lawyer is the one who strategizes and envisions. If the rest of the work can be done by computers, then the notion of “one lawsuit, one lawyer” (to paraphrase an old Texas Ranger saying) can become a reality. And those teams of associates and paralegals? No longer needed. Or better put, clients may no longer want to pay for their work when a machine can do it.
One of the panelists at LegalWeek opined that with generative AI, we would all become editors instead of writers. That’s a change, but let’s face facts, it takes less time to edit than to draft a document, Less time for law firms means fewer billable hours. Less need for lawyers
It’s analogous to what happened to legal assistants (formerly known as secretaries). When I was a young lawyer, your legal assistant (secretary) typed all our work. Busy partners sometimes had two secretaries to do all their work. But with the advent of word processing, all that changed. Most lawyers I know now type their own work. Legal assistants and secretaries? Few and far between. Technology rendered much of what they did obsolete. Law firms responded by eliminating these positions.
And make no mistake. Having senior lawyers able to do more on cases efficiently will inevitably lead to better work. The lead lawyer, knows the client best, sets the strategy and understands the best outcome. If that lawyer can use a computer to find documents, do research, and the like—tasks that have been done by any associates —the result is better. I know in the later years of my career, I was able to rely less on other lawyers and paralegals to do work, and with computers, I could do it myself. To do the proverbial more with less. My partners weren’t happy, but my client sure was.
Can law firms continue to pull in as much revenue and profit without the leverage model?
And this may be the model for the future. Wait, you say. Those other lawyers and paralegals can now do other things like strategy etc. There’s only one problem. I hate to say it, but in my experience, there weren’t that many legal professionals with the ability and knowledge to do that vision thing. That didn’t know how to do it or didn’t want to. That’s why they weren’t lead lawyers on significant cases. Yes, the role of the nonvisionary lawyer may change, alright. Like secretaries, they may not be needed any longer.
And there is another danger. If the leverage model is dying, then the lead lawyer-the strategist-should be worth a lot more. That lawyer may be more valuable, but the big question will be whether clients will be willing to pay more. Can law firms continue to pull in as much revenue and profit without the leverage model? One lawsuit, one lawyer may mean less money.
What About Alternative Fees?
But you say, if leverage dies will the billable hour model die with it? Perhaps. But that doesn’t solve the problem of too many lawyers and not enough work. The backbone of profitability from alternative fees hinges on doing more with less. That’s how you make money with them. So when you move to an alternative fee model, you must embrace technology and automation if you want it to be profitable. And at least at present, most law firms are not culturally able to embrace alternative fees, doing less with more. Compensation and advancement are tied to doing more, not less. It’s a hard pivot.
And clients have been slow to adopt the concept too. It’s ingrained in law firm culture. The result of pivoting to an alternative structure is not easy. If firms don’t pivot, clients will nevertheless demand more for less. If you do pivot, your profitability hinges on doing more with less. Either way, the leverage model-the goose that laid the golden egg—may be gone.
Will This Really Happen?
Will this be our dystopian future? All too often, pundits have predicted a wholesale change in the legal industry. But it didn’t happen. Lawyers are slow to change. In house clients-who often worked for law firms before they went in-house—are slow to demand change. And, of course, inherent skepticism of lawyers of all things but especially technology may limit or at least slow change.
Logic suggests that in the long term, having work done by computers instead of lawyers will inevitably lead to less need for lawyers
And, of course, one lawsuit, one lawyer may be a great business model if there are more cases. But technology may endanger even that. Technology, data analytics, and AI may work to reduce the number of disputes, not increase them.
We can only hope that new legal issues like privacy, increased ip cases and compliance requirements, and issues flowing out of AI may fill in the gaps. If it does, then the demand for really good lawyers could increase and drive up their value exponentially. But will increased caseload yield greater revenues than those produced by the leverage model?
Is the sky falling? Bill Gates famously said we overestimate the effect of technology in the short term but underestimate the long range impact. And logic suggests that in the long term, having work done by computers instead of lawyers will inevitably lead to less need for lawyers. And perhaps the demise of the leverage model that has made so many lawyers so wealthy.
Yes, change in legal is slow. But I’m not sure I would advise my grandkids to become lawyers.