Posted on March 1, 2020 by Ron Friedmann
Introduction: Despite five years of legal artificial intelligence hubbub, its impact has been fairly limited. Putting AI in the context of many other long-term legal market trends, however, I can envision a much bigger impact in the future. My goal here is to paint a picture - an Impressionist one - of a future where law is rewired. As with all Impressionist paintings, you will need to use your imagination to fill in the details. But before I start, I need to prepare the canvas, so to speak.
More on the Limited Legal AI Impact to Date: Investment dollars have flowed to legal AI companies and many law firms and law departments have licensed their products. Yet the most rigorous study I have seen of legal AI found a limited impact: Can Robots Be Lawyers? Computers, Lawyers, and the Practice of Law (Remus and Levy, 2015). It explains that the where AI works best, and lawyers most use it, comprises just a sliver of what lawyers do. Even updating its data to 2019, I doubt the findings would change much. Let’s unpack that a bit. In law firms, machine learning products for due diligence are the most widely licensed AI product. This product category affects only a small percent of legal work. Even if used to its fullest extent, it remains a small component of overall legal work. In law departments, we know from the 2019 CLOC study that only 12% use AI. Even if penetration were higher, the scope of AI products (analyzing bills and contract management), as in law firms, affects on a small slice of total law department work.
Pigments for a Brighter and Rewired Future: I list here the color palette (in alpha order) to paint an Impressionistic picture of the future. After this list, I describe what the painting might look like.
Standardization of legal work will serve as a foundation for many changes, including more use of legal AI. I see two related trends here. First, the SALI initiative offers standards for defining a wide range of legal work. These standards will, over time, generate the consistent and rich data that AI systems need to work, data that lack today. Separately, SALI standards will help clients price shop among law firms. Price shopping will create cost pressure, which will motivate law firms to automate more work with AI. The second standardization trend turns on contract management. More and more law departments will simplify their contracts, use playbooks to negotiate them, and create a more uniform overall approach to contracting. That type of standardizing can occur only with reliance on AI tools. Those tools exist now and in the future, more organizations will use them.
Litigation finance, a strong but underrated trend in legal today, will encourage a more data-driven and analytic approach to practice. Funders want to pick winning matters. As they accumulate data, a combination of data analytics and AI will help them pick winners. And as more clients and firms turn to litigation finance, funders will look harder at how lawyers handle matters. Over time, they will see that lawyers who use rich data and AI effectively win more matters. And that creates additional pressure for AI adoption by both firms and departments.
Legal tech investors will wise up and focus more on impact. Whether today’s frenzied investment in legal AI causes a bubble bursting or not, AI vendor consolidation will occur. That likely will spur wider adoption. With fewer players, each with more funding, providers will have better marketing and more proof points. That will simplify the market and make purchasing legal AI simpler, allowing it to penetrate more firms, including smaller ones. Separately, legal AI provider consolidation has a hidden benefit: scale. Scale will allow the survivors to invest bigger bucks to provide more training out of the box. Too many forget that AI requires both large volumes of data and human training to work effectively. Consolidation makes both easier. And that will make products more valuable in a virtuous circle where lawyers buy and use them more, creating yet more data and more training.
Alternative Legal Service Providers (ALSP, including the Big 4 and New Law) will continue promoting the use of AI. Their business model, unlike Big Law, depends on deploying streamlined processes, using more tech, and leveraging a wider range of skills than just lawyers. The advent of ALSP has pushed law firms to replicate elements of the model, for example, either by partnering with ALSPs or by setting up their own lower cost centers that mimic an ALSP. Without placing bets on the relative success of ALSP and Big Law, the former create pressure on the latter to adopt more AI.
Gen Z lawyers love tech and look for more efficient ways to work. At least that’s what the articles say (see, e.g., Are Law Firms Ready for Generation Z? They'd Better Be and Gen Z Lawyers Reshaping How Law Firms Think About Technology In Their Recruiting Strategy). If true, then as Gen Z lawyers gain experience and clout, they will drive smarter ways of working and better adoption of existing and yet-to-come technologies and processes. They may even get hands-on with low code and no code tools and create their own AI (or at least workflow) systems. So the rise of Gen Z lawyers favors more and better AI tools and AI adoption. We see glimmerings of that already with Clifford Chance’s recent no-code training initiative for new trainees (see CC Links With Low Code Fliplet For Trainee Tech Engagement).
Re-regulation allows outside investors and capital investment in law firms. In 2019, several US states considered allowing outside ownership of law firms. Investors bring more capital and a longer term perspective than the current owners, law firm partners. While outside investors in the UKhad less impact than I expected, let’s assume the US re-regulates and posit we see bigger changes in the US. Some investor-owned firms will see opportunity in improving efficiency with AI and in productizing legal advice via AI-powered systems. That will pressure traditionally owned firms to do more.
Client pressure for value continues. General Counsels will drive more AI in two ways. First, continue standardizing contracts (see above). Second, practice preventive law. Prevention, which I lump under #DoLessLaw at Twitter, includes data analytics. It also means arming corporate business clients with self-serve, AI-powered systems to dispense advice and generate documents. That helps avoid future legal problems. It would be easy to gloss over this so let me expand. Corporate cost pressures will not abate. Building self-service systems becomes easier each year. Together, the two trends will move us from our current state of fixing problems with ad hoc legal work to a future state of investing heavily to create systems that prevent problems.
Rewire Law: virtuous circles start spinning. Put all the above trends together for some Impressionism, not prediction… Re-regulation leads to law firm investment in building systems. Legal tech vendors consolidate and tools mature, which encourages greater adoption. SALI standardizes, making AI economics more favorable. Gen Z lawyers use and build tech tools, feeding more vendor investment. Business clients, if not their GCs, gobble up self serve systems, driving yet more productizing based on AI. Alternative providers continue using more AI. Law firms see all these changes and, to avoid market share loss, invest more in AI. And so on.
What Law Rewired might mean for people. The big AI impact painted here both requires and leads to a requirement of a broader range of skills than just lawyers. That means other professionals earn seats at the table, and no longer just high chairs. For clients, it’s all good: better outcomes for less money. For law firms, it means strap-in for real change. A few top firms working only bet-the-company and extremely high stakes cases will flourish, with or without AI. For all other firms, staying in business will require AI, more efficiency, and cost effectiveness. A handful of firms will pull ahead by investing heavily in AI, process improvement, and fielding multidisciplinary teams without a caste system. As with any big change, there will be winners and losers.
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