I’ve written a number of posts on topics related to legal tech. Here are links to those posts:
Some Thoughts on Legal Tech
Smart Contracts and Contracts as Code
Computer Generated Tax Advice
Improving the VAT Audit Trail
That’s great, and you should read those posts, but they don’t really say much about what law firms should be doing. At least, they don’t provide any specifics. If a law firm wants to be innovative and keep up with the times, should it set up a VC arm, an accelerator, or an incubator? Should it partner with local legal tech startups? What type of ideas should it be pursuing? These are questions that I think a lot of law firms are actually asking, and I want to use this post to provide my input.
Partners and associates read newspaper articles about big data, AI, machine learning, and digitalization, and they wonder if their jobs (or more accurately, their high salaries) are at risk. Being the risk averse agents that they are, they then try to figure out how to protect themselves.
You might expect that in an attempt to protect their positions, lawyers would all try to be ahead of the curve on legal tech. They wouldn’t be investing in moonshot legal tech startups, as that’d be risk-taking behavior, but they would at least try to do something. However, we don’t really see that happening. Law firms are just now starting to think seriously about legal tech. Even a few years ago, when the same trends were obviously present, law firms were far less interested.
This is the legal tech puzzle: given that lawyers are risk averse, why have they been so slow on legal tech?
One answer is that lawyers simply don’t believe they are at risk. I find that answer unconvincing, though, as I’ve never met a lawyer who thinks that way. Of the lawyers I know who aren’t retiring within the next five years, they all seem to accept that technology might negatively affect the amount of money they make.
A second answer is that while lawyers believe there is a risk, they don’t believe there is anything they can do about it. If technology is going to reduce their earnings, it’s going to do so no matter what. Law firms, in this view, are simply hapless bystanders. However, I don’t think many lawyers believe this. Many think they can’t possibly develop legal tech in-house, but they are convinced enough by their own skills that they know that lawyers will play an active role in a legal tech revolution.
A third answer is that there are institutional challenges: younger lawyers know this is a risk, but the senior partners don’t care because they will be retiring (this is a classic problem with the partnership model and long-term investment). I definitely think this is a problem, and there are other challenges as well (see “Some Thoughts on Legal Tech”), but I don’t think this is an insurmountable problem. In addition, lawyers are great at solving problems like these, where parties have different interests but need to find a mutually acceptable solution. I therefore don’t think this solves answer the puzzle.
So lawyers know that there is some risk, they believe they could do something to mitigate the risk and would like to, and they know the institutional challenges can be overcome. Here is my answer to the legal tech puzzle: lawyers don’t have a concrete sense of where the risk is coming from, and therefore they don’t know how to address it.
Every time I see a law firm (or a company that is strongly related to legal services) exploring legal tech, it feels like the initiative should end in a question mark and a shrug. Sort of like, “I don’t know, maybe we should use IBM Watson to do something ¯\_(ツ)_/¯?” or “We could set up some office space for legal tech startups, and demo their products ¯\_(ツ)_/¯?” There are two problems here, a tactical problem and a strategic problem.
To start with the tactical problem: Lawyers don’t know what technology has potential, or where the risk is coming from, so they choose what avenues to pursue more or less based on convenience. I hate that I am saying this, but these law firms lack vision. They explore legal tech solutions without being able to clearly articulate the rationale for doing so. The lawyers involved can’t tell me why some technology interests them, or how it might affect them in the future, or how being involved now helps the firm. Every legal tech initiative is just a shot in the dark.
The strategic problem is that every firm’s strategy is basically just fear of missing out (FOMO). In every case, the goal is to be involved. They don’t want legal tech to pass them by, so firms make sure that for the specific tech they’ve chosen to explore (i.e. the tactical choices above), they’re in some way involved. Maybe they have an agreement to share data, or utilize the product, or contribute some funding. The goal is to be present.
But FOMO isn’t a strategy; it’s a lack of one. If a firm doesn’t have a roadmap for how some technology might affect it, it can’t have a plan for mitigating that risk. Instead, it can only have FOMO. The firm opts to just “be involved” without knowing if its involvement is going to help it even if that technology becomes a big deal.
So FOMO isn’t in a strategy, and there is no way to make rational tactical decisions without a roadmap of potential scenarios. So what should firms be doing?
The aim is to find each aspect of legal tech that the firm is concerned about, and only take actions that will protect the firm in the event that the firm’s concerns are realized. This is about having a clear vision, and taking actions that are in line with that vision.
For each piece of legal technology that the firm is considering, three questions need to be answered:
1. What might this technology be used for in the future?
2. How might that negatively affect this firm’s business?
3. What course of action would serve to protect against that negative effect?
Of course, the firm then needs to decide if it is worth it. It might not be. But these are the questions a firm needs to be asking. If you can’t explain the scenario you envisage for some piece of legal tech, there is no point in doing anything.