August 26, 2024 • 27 mins
Richard Tromans is the Founder of Artificial Lawyer.
Artificial Lawyer is a news site focused on changing the business of law, through technology, people and process. It provides news, views, jobs, information on legal tech courses, and a tech directory. Artificial Lawyer also organizes events related to innovation + legal technology.
Connect with Richard on LinkedIn: https://www.linkedin.com/in/artificiallawyer/
Visit Artificial Lawyer: https://www.artificiallawyer.com/
On This Episode, We Discuss…
Artificial Lawyer is a news site focused on changing the business of law, through technology, people and process. It provides news, views, jobs, information on legal tech courses, and a tech directory. Artificial Lawyer also organizes events related to innovation + legal technology.
Connect with Richard on LinkedIn: https://www.linkedin.com/in/artificiallawyer/
Visit Artificial Lawyer: https://www.artificiallawyer.com/
On This Episode, We Discuss…
- What AI Means for Law Firms of All Sizes
- The Importance of AI Accuracy
- Why Smaller Firms Might Have an Advantage in the AI Race
- The Continual Evolution of Legal Tech
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:01):
A lot of legal tech world had gone to sleep.
It was quite content. He was doing well, was making
money and growing nicely, and the climbs rackby. It was
a classic innovators dilemma situation in that both both the
UH once great innovators and the clients and become quite
happy with each other, and to radically change would have
(00:24):
meant not only disrupting their own business, but disrupting the
expectations of their clients.
Speaker 2 (00:29):
You're listening to the Legal Mastermind podcast presented by Market
My Market with your hosts Eric Bersono, Ryan Klein, and
Chase Williams, the go to podcast for learning from the
experts in the legal community about effective ways to grow
and manage your law firm.
Speaker 3 (00:47):
Hello and welcome to another episode of the Legal Mastermind podcast.
Today my guest is Richard Traumanz, who is the founder
of Artificial Lawyer. Richard, Welcome to the pod.
Speaker 1 (01:01):
Hi, Erica, thanks for having me.
Speaker 3 (01:03):
So, I you know from the title, we can kind
of guess what it is that you've put together here,
But can you give me a little bit of background
on you and how you came to develop Artificial Lawyer.
Speaker 1 (01:16):
Yeah? Sure, So I'm based in the UK, as your
listeners have probably figured out by now. I started Artificial
Lawyer in twenty sixteen. I'd worked as a journalist and
then I moved into management consulting and I worked in
the legal sector for more than a couple of decades,
(01:37):
and I was at a point in my management consulting
career mostly advising law firms on big strategic issues, future issues,
and one of the things that came up a lot
is you know what's going to happen next, So technology
obviously was part of it. I think around twenty fifteen
I started reading and studying legal aspects of AI. It
(01:58):
was really starting to beg as a real subject then,
I mean on the fringes, but still it was emerging.
Most law firms hadn't even heard of it, didn't take
it particularly seriously, but I kind of got a sense
that something was going to happen. It just felt it
felt real, And in early twenty sixteen I went to
visit a legal tech company in London that has now
(02:23):
what many years ago since then, was bought by a
large American company. I went to have a look and
they were showing how their AI system, which in those
days was old fashioned natural language processing, machine learning, and
it was going through a load of real estate documents
and they said, well, it's going to ingest one hundred
(02:46):
real estate documents. It's going to read them and it's
going to pull out key facts. And I was like, wow,
one hundred. They were like fifty pages each. I was like,
so should I go and get a coffee because there
was a really good coffee shop on the corner. And
I thought, I'll go get a coffee and across once
or something and I'll come back when I've had my breakfast.
And he said no, no, it'll just just sit there.
Just don't go, just stay there, and like two minutes
(03:09):
later it went ping. It was done, and he said,
right here we go. Here, all the key clauses here,
all the key things that are happening. And I think wow,
and it just blew my mind. And I went home
and I wrote an article on LinkedIn back in the
day when LinkedIn had about three people on it, and said,
you know, I have seen the future in a warehouse
(03:31):
in Shoreditch. Shoreditch it is kind of maybe a little
bit like Brooklyn, perhaps kind of the cool part of London,
or at least it was back then. In twenty sixteen,
and you know, usually in those days they used to
get a fair amount of interaction on LinkedIn. That that
piece went stratospheric, a lot of interest and a lot
(03:51):
of a lot of big people, you know, were like, hmm,
this is important. And I thought, yeah, I'm onto something here.
And what also surprised me was that many of the
you know, other outlets, channels, media, whatever, weren't really paying
it much attention. There were some sites who were dipping
an out, but no one who was like going, yeah,
(04:13):
this is it, this is the future, this is going
to change everything. And I was I just went all in.
I was like, this is it. So I got the
domain artificial Lawyer and I just went for it and
it just went from there. It just grew and grew
and grew.
Speaker 3 (04:25):
Yeah, it's funny you say that. You know, I worked
in legal for a while and I didn't really see
it coming either. You know, when I heard about AI.
Let's talk about back in twenty sixteen, everybody was talking
about truck drivers are going to get replaced and people
who are no going long, you're going to flip burgers
anymore because Flippy, the Hamburger they know, was talking about
legal No one was talking about accounting and how this
(04:47):
was going to be so disruptive to that. So, like
you said, back in twenty sixteen, I didn't see this
wave coming. So you obviously got impressed by the technology
at a super early stage. What Chat, GPT and these
other language models are doing now is unbelievable, but you
saw early signs of it. Did you see like where
(05:08):
those applications were going to go? What were you kind
of thinking at that time?
Speaker 1 (05:12):
Yeah, I mean what was What's particularly different between now
and then is that the startups, And I think that's
the other aspect of artificial law. I was super, super
focused on the startups. And the reason why is because
the start because to some degree, and it's hard to
believe it now, but if you go back to twenty
fourteen twenty fifteen, a lot of legal tech world had
(05:33):
gone to sleep. It was quite content, it was doing well,
was making money and growing nicely, and the clients were happy.
It was a classic innovators dilemma situation in that both
both the once great innovators and the clients and become
quite happy with each other, and to radically change would
(05:56):
have meant not only disrupting their own business, but disrupting
the expectations of their clients. So it's way way easier
just to carry on as they are. And it really
was the startups who were, you know, kicking up all
the uts, who were making real changes. And the thing
is they had actually been going for some years. I mean,
like companies like e Brevia can trace its roots all
(06:19):
the way back to twenty eleven, you know, before it
really even hit the big time Hera which many people
obviously know now, which is now part of Li Terra.
I mean, it can trace its roots, you know, several
years before twenty fifteen, twenty sixteen, and on and on.
The reality was is that they'd been building up very
(06:40):
very slowly, but it had been very much on the
startup side. Of the large companies, like I say, it
had kind of got a little bit complacent, taking their
eye off the ball, and so it was like this
perfect fusion. And for me, it's like I was covering
all the startups and the startups were for real challenging
the status quoe. It was really it was an incredibly
exciting time and it was doubly exciting because most of
(07:01):
the legal media and contariat even though they were they
were dipping, like I say, dipping in and out of
they I there wasn't much real coverage of these startups
and I just kind of like walked in there. It's
like it was fantastic. Now it's very different. And then
there are dozens and dozens and dozens and dozens of
what you might call LLM rappers, which is where you'd
(07:22):
have SA GPT four and a rapper of software around that,
including lots of refinements and prompt engineering. The fundamentally, eighty
ninety percent of the output is just GPT four, right,
It's not it's not completely original. And that's the fact
with the difference is that that first wave, the infrastructure
(07:46):
of the engineering was very heavy. It was it was
a lot of investment relatively compared to now, and so
a lot of companies just avoided it. And so those
startups really were game changers. Their challenge was getting the
lawyers to buy into it, which was difficult. And of course,
you know, slowly things evolved and eventually go startups crew
and most of them got bought up or integrated in
(08:09):
some way, and then you know, the world kind of
settled down a bit, and I remember going to a
big conference in London in twenty twenty two and coming
away and thinking, man, that was boring, which I really
shouldn't have thoughts, but I just thought, man, could this
(08:30):
conference could have been two years ago, could have been
a note, could have been last year? And I was thinking,
is this it is this it? Have we topped out?
Have we plateaued? And I wrote an article about I
mean it has legal take here a plateau because it
kind of felt like all of these early AI tools
had done as much as they can They'd been adopted
at a scale as much as possible, which was not
particularly massive, to be honest. And you know, blockchain came
(08:55):
and went, smart contracts came and went, doc automation and
was making steady incremental inroads, plugging away doing it, you know,
fighting the good fight, but not again completely changing the world.
You'd got no code systems, which again we're trying to
make little inroads into the way that things operated, but
(09:15):
again not massively changing the whole world. And one of
the ways you could do is just simply looking at
revenue of these companies, you know, so like if a
company is saying that they're going to change the legal world,
and they've still got a revenue of, like, I don't know,
a million dollars and twenty staff after five years. Well,
they probably haven't changed the world, because these companies that
(09:35):
change the world tend to go from one million to
one hundred million real fast, right. That happens a very
rarely in the legal world, very very rarely. And then
of course it's score forward to now chat GPT November
twenty two, twenty twenty three was basically mostly just talk
really and fiddling around twenty twenty four, it's really started
(09:57):
to kick off. It's for real now, and it's the
real question is will it overcome the systemic barriers to
real change which are integrated into the legal market in
the same way that the use of oil is integrated
into the transportation market. Can you separate these things?
Speaker 3 (10:19):
Yeah, So, for someone who has their finger on the
pulse of this type of technology, and you know, for
anybody who hasn't gone yet to artificial lawyer dot com,
you know, there's lots of articles that talk about these
these different technologies. What do you see, what would you
say that is very close to being real in this
that people should be on the lookout for. You know
(10:41):
how people are going to be using this tech to
change or disrupt this this space.
Speaker 1 (10:46):
Yeah, I'd say it's all real. It's all real. I mean,
there are issues around accuracy that people are working really
hard right now. There are hundreds of software engineers all
around the world working like crazy on improving rat which
is a method to improve the results and confirm the
(11:08):
accuracy of l M responses. It's going to improve very
very fast. As talking to someone very senior from Lexis
Nexus the other day and they just said, you know,
this technology is incredible because one, the infrastructure is so light,
you can without a huge investment in the infrastructure, software infrastructure,
you can move so fast. And also the technology itself
(11:28):
is moving every quarter, is jumping every quarter in it's extraordinary.
So all of it is real. That the question is
how far will people use it? How far will lawyers
use it? So at the moment, lawyers are using it
around the edges. Really they're doing things like, you know,
they're looking at a new act and they're running it
(11:50):
through their version of GPT four, you know, with obviously
you know, correct security barriers and so forth, and they're
asking it, you know, relatively you know, sort of interesting
questions and getting interesting answers back, But that doesn't really
alter the billable hower very much. In house, they're starting
to use it around contract management, you know, redrafting, handling
(12:13):
third party paper. But again it's relatively small. There's a
whole bunch of use cases. Different use cases will have
different levels of accuracy demands, but the fundamental barrier always
remains the same, which is that big law sells time
and the fortune five hundred buys time. And as long
(12:37):
as that is the case, generally of AI's potential will
always be limited. The great hope is that effectively the
time based business model effectively just gets surrounded by the
reality of what generaty of AI can do. Cristy goes
(13:00):
up so high that no one can quibble it, no
one can doubt it. That the ease of use is
just so well easy, you know, it's just so it's
such a great utility. It just overpowers the opposition. And
at that point the clients just start to say, look,
it pains me, it pains me to move away from
(13:20):
the billable. How I know you want to use the
billble hour And I was brought up in the billable
because I used to go to the same firm that
you did, which is why I still instruct you. But
frankly I was talking to the CFO and he or
she has said, sorry, guys, normal billable time except for
the most exceptional IPO, big M and a big litigation matters.
(13:42):
If it can be rationalized, it will be and then
the whole thing goes. It's like a domino toppling effect.
The whole thing changes, the whole thing changes, and it's
going to be extraordinary. But we're not there yet. We're
not there yet. You know, the first wave of the legal
AI twenty fifteen, twenty sixteen wasn't I would I wouldn't
(14:02):
say it was a false dawn, but it was a
shape of things to come. You know. It is rather
like the first electric vehicles, you know, the first Tesla.
You know, the amount of column InChI is written by
a thousand journalists about how Tesla was going to change
the entire world, and then five years later, like the
quantity of electric vehicles in America was about two percent. Right,
(14:24):
If you're in that, if you're in the electric vehicle bubble,
it does feel like the world has changed. All of
your friends drive Tesla's right. You know, maybe you work
at Tesla, you know, you read magazines about Tesla. Everything
is about electric vehicles. The truth is, if you take
a broad view across the entire country, electric vehicles are
pretty small still, but that is changing, and then eventually,
(14:45):
eventually it build up ahead of steam and then the
systemic barriers like the oil industry just go, ah, okay,
we give up. We're going to become battery makers, and
then the whole thing turns over.
Speaker 3 (14:57):
Right, Yeah, so we're almost out of time here. But
where do you see this? Where do you see, say,
the early adopters, because there's going to be something, so
there might be the old guard that are the biggest
and they're not going to give up the billible hour
because that's just entrenched into their blood. Where do you
see these early adopters, like, is there a specific size
(15:19):
of firm that's going to do this because this technology
is so disruptive, Like you said, you thought you were
gonna be able to go have coffee and a sandwich,
and they're like, don't leave, because this is going to
be done before you get to the door. That type
of you know, mind bending, you know, efficiency, let's just
say that the accuracy is improving rapidly. As you said,
(15:42):
where do you see this in like a year to
two years. What are going to be those earliest things
that are adopted that are going to change this industry.
Speaker 1 (15:51):
I think the smaller firms, in a funny way, actually
have an advantage because not because they have large IT teams.
They don't. They have the opposite. They usually have no
ITEA team at all. It's not because they have more money.
Smaller firms generally have less spare cash. It's because they're
more likely to do fixed fee work. If you're doing
(16:12):
property sales, if you're doing run of the mill disputes
between you know, neighbors, or very very very non contentious
divorce work, then you're more likely more likely, at least
in the UK. I don't know how it is in
the US, but generally you're more likely to be working
on a fixed fee, a standard fee that maybe variability
(16:32):
around it. So you've moved out of the selling time conundrum. Now,
let's say I own a law firm. I've got ten
lawyers junior lawyers working under me. We generally just do
property sales. We work on a fixed fee mostly unless
it gets very complicated. I'm looking at the numbers and
I'm like, hold on, So you're telling me, if I
use this technology, which is not particularly expensive, I can
(16:53):
now take on twice as many cases and the accuracy
level of the output is about the same as it
was before. And I don't know, I'm not going to
sack any my junior lawyerscause I still need them because
you know, you still need a human mooop in all
of this stuff. But now I can take on twice
as much work. Are you kidding me? This is brilliant.
You know, the bigger firms they got that. They ironically
they've got the biggest problem because they are more wedded
(17:16):
to the hour. However, what is in their favor is
a they have way more resources. Some of the firms
have huge innovation in IT teams, and they have a
lot of lawyers who are thinking about these issues, and
they have a lot of clients who are thinking about
these issues. So let's say you're in the insurance industry.
The insurance industry is very, very focused on costs. If
(17:40):
you can work with an insurance client to bring down
some of those costs using technology, they're more likely to
send more work your way. However, there would always be
a partner at the back of the room who puts
his or her hand up and says, hold on a minute,
hol on a minute. But I get paid by the
(18:00):
hor you know, I'm not saying I'm not I'm not
trying to say I go slow. I work as hard
as I can. I work twelve hour days. You know
I'm a hard worker. I just don't want that to
be undermined. And then you get to a very difficult
conversation and then life care is on as usual, and
I think that is the fundamental issue. Is a fundamental issue.
It's a piece. I wrote a piece for Walter's clur
(18:21):
last year and it was one of those things where
they ask you a question and you can kind of
tell by the way they ask a question that you're
expected to agree with the question. And it was like,
you know, how far has technology transformed the legal world?
And obviously very expecting me to say, yes, it's amazing,
everything's changed, and I just went very little has changed.
(18:41):
Hasn't changed all? Really, I only read an e discovery
and perhaps around legal research, but if you're actually looking
around a workstream, E discovery has changed because there was
such a volume of data. E discovery was just necessary.
And also it's interesting as well because litigation and e discovery.
It's one of those fewere is where a judge, a
third party who has real power can intervene in law firms,
(19:05):
normal functioning can say, hold on a minute, goes, you
cannot do that by hand. You know the Enron case,
twenty five gazillion documents and emails. You are not doing
that by hand. You know we'll still be here in
twenty thirty if you do it by hand, and it
will cost more than Enron lost, you know it's not feasible.
So that's an interesting one. We haven't got to that
(19:27):
point in transactions. I've never seen a third party step
in and god knows who the third party could be
a transactional piece of work and say, sorry, Coca Cola
and Pepsi, but this amazing merger that you're about to do.
Obviously they're not really as you've probably figured, but if
they were to, would if third party step in and say, look,
(19:48):
you've got to use AI because the due diligence for
this merger is so gargantuan, it's not in anyone's interest
not to use AI we've never seen that. We've never
seen in that And again I don't even know who
the third party would be in this case, but it's coming.
Perhaps perhaps perhaps the ftc Perhaps it's just the environment.
(20:10):
It's for broader it becomes a social expectation. I mean,
you know, no one ever said you can't wear flared trousers. Right,
there's no law. I mean you know, there's no Congress
in the pass the law. So you can't wear flared
trousers if you want, you can, right. It just became
socially unacceptable to go to a business meeting wearing a
pair of bright green flares.
Speaker 2 (20:31):
Right.
Speaker 3 (20:31):
Yeah, well you gave the example of the electric car.
And this reminds me of you know, Blockbuster versus Netflix
back in the day, and Blockbuster just completely let Netflix
sweep out their business out from underruner because they go,
No one's going to wait three days to get their movie.
Everybody wants to go to a store, Everybody wants to
pick something that night of exactly what they feel like.
And they slept on Netflix for so long that Netflix
(20:55):
just came in and devoured everything. So I think something
similar could happen here where you've got your small to
medium sized firms who are going to adopt this out
of necessity, and your large firms could get caught sleeping,
you know, because they say, we're a billable hour and
we have the name that people trust, and it's not
going to be overnight. It may seem that way, you know,
(21:16):
five years from now, that it's overnight, but you've been
in this since twenty sixteen, so it'll be that you know,
ten year overnight success story that you hear about. But
that's that's kind of the way I think it would
possibly happen because some people will see this as their
secret weapon, and some people will just not jump on
board because they're too large and there's too many chefs
in the kitchen to say, yeah, let's give this a go.
(21:38):
They're going to say, there's too many people that we
need to adopt this. It would take us too long.
We're doing just fine.
Speaker 1 (21:44):
Yeah, I mean, it's an interesting thought, isn't it. Like
where does the competition when you have I mean, the
legal market is tiered, right, So in New York, if
you're doing top tier M and A work you know,
to buyout and the finances coming from golden sacks, right
JP Moore and whatever, various other top tier advisors and
accountants and so forth, and you've got this kind of
(22:05):
white shoe group of elite law firms in Manhattan. The
truth is, you're probably not going to go outside of their,
outside of that group. So if you're not going to
go outside of our group, where does the competition come from?
It's an interesting point. So what does does what do
we get like a sort of cleary effect sorry a
cravaf sorry conclu cravat back in the old days, where
(22:28):
somebody breaks ranks, changes how they do things, and suddenly
everybody else is, you know, completely surprised. They're just like, yeah,
but we we thought you were in the club. You know,
we all stick together. We do it all the same way.
You obviously this is not an anti trust issue by
any means, but we all we all charge the same.
Every time you put up your race, we put our
rates if you put it. If you pay more for
(22:49):
a junior associate, we will pay more. You know, we
will go to the same clubs, to go to the
same tennis clubs, kids go to same cool schools. Blah
blah blah. You know, we're like a little tribe together.
We will live together.
Speaker 3 (22:57):
You know.
Speaker 1 (22:58):
It's it's like this kind of super integration unit. Don't
expect anyone to step out of line. And then suddenly
someone goes, you know what, and this is the innovator's dilemma.
Soone goes, sorry, guys, but this is over. You don't
realize it, but this way of doing things is over.
And we don't mean to upset you, but we're breaking
with tradition. We're going to go our own way. And
(23:20):
then wham. You know, the changes will happen so fast
because everybody, everybody will be desperate not to be last. Yeah,
and suddenly it all changes. There's that scenario. And then
of course your scenario, which is also a great one,
which is that law films, which are in a different
tier start to nibble away at so much of the
(23:43):
more commoditized work or less super high value work. I mean,
you know Whatcktail's going to hold on to that super
high value work till the end of time, until I
decide to close the firm down, right, I mean, it's
just like pretty much given right, But there's a ton
of other work they may not be able to hold
on to, and can can firms which are not in
that super elite bracket. Just start to just just rationalize
(24:06):
with the clients and just say, look, you know you
need to triage this, you need to unbundle this. Okay,
give the super advisor who works to this firm, but
everything else you should give to us, because we're using AI.
We do fixed fees. You want fixed fees. Your CEO
was on Bloomberg TV the other day saying that he
wanted all of his professional advisors to use fixed fees
and AI from now on. Well, we're your firm, and
(24:30):
so things start to work that way. And then, of
course there's a third third option, which is that spirals
finally change on mass in America and they allow the
Big four to really start offering legal services, which is
unlikely considering we've been talking about that for about thirty
(24:52):
years and it hasn't happened yet, and the limited limited
liberalization in places like Arizona and Utah, but obviously different
kettle of fish. So yeah, this idea that a completely
new entrant comes in, well relatively new entrant comes in
and just completely shakes up the whole game, rather like
Tesla in the automobile industry. That actually is despite the
(25:17):
tech world, normally seeing that as the most likely outcome,
I think in the legal world that's actually the least
likely outcome. I think the most likely outcome is that
simply erosion of traditional business models eventually leads to someone
just dumping it and going in a new direction. I
mean everybody panics and follows suits.
Speaker 3 (25:37):
Yeah. Yeah, I think that's a great analogy the erosion,
because if they are nibbling away at, you know, some
of these more commoditized areas of legal and the larger
firms aren't going to notice it for months, years, and
then all of a sudden, you know what was a
great overhead you know, reducer for them, you know, something
to just keep the lights on while they're doing all
(25:58):
their big work. Now, as that you know, the termites
have eaten most of the lumber, they're gonna all of
a sudden wake up one day and go, uh oh,
we've lost a significant amount of our profitability from these
other areas that we didn't pay as much attention to.
So that's an it's an it's an interesting time and
it'll just be interesting. And how long it takes for
(26:19):
that that actually happen.
Speaker 1 (26:21):
Yeah, I mean, I mean, I guess the key question
is have we reached peak big law in its current formation?
And when I see junior associates getting salaries the likes
of which, you know, even people who are quite wealthy
look at and go, my god. Really, you know, when
we get to that point, you've got to ask yourself
(26:43):
have we reached peak big law?
Speaker 2 (26:45):
Not?
Speaker 1 (26:45):
I mean, big law will always exist because big law
is needed because we have large companies. You need large
law firms with full of sophisticated experts to help on
both issues. But big laws is currently structured. You know,
have wea you for peak of it? Yeah?
Speaker 3 (27:03):
Well, Richard, thank you so much for sharing your expertise
on this as somebody who was really early on in
this industry. Where can people go to find more of
your work and connect with you?
Speaker 1 (27:14):
Yes, thank you. It's very simple, just Artificial Lawyer dot com.
It's a website. I usually publish most work days, one
or two stories a day. The themes are legal technology,
innovation AI obviously and of related issues.
Speaker 3 (27:32):
Well, we appreciate your time.
Speaker 1 (27:35):
Thank you, Eric Real Pleasure.
Speaker 2 (27:36):
Thank you thanks for listening to the Legal Mastermind podcast
presented by Market my Market. You can check out additional
episodes and recaps at Legalmastermind podcast dot com.
A lot of legal tech world had gone to sleep.
It was quite content. He was doing well, was making
money and growing nicely, and the climbs rackby. It was
a classic innovators dilemma situation in that both both the
UH once great innovators and the clients and become quite
happy with each other, and to radically change would have
(00:24):
meant not only disrupting their own business, but disrupting the
expectations of their clients.
Speaker 2 (00:29):
You're listening to the Legal Mastermind podcast presented by Market
My Market with your hosts Eric Bersono, Ryan Klein, and
Chase Williams, the go to podcast for learning from the
experts in the legal community about effective ways to grow
and manage your law firm.
Speaker 3 (00:47):
Hello and welcome to another episode of the Legal Mastermind podcast.
Today my guest is Richard Traumanz, who is the founder
of Artificial Lawyer. Richard, Welcome to the pod.
Speaker 1 (01:01):
Hi, Erica, thanks for having me.
Speaker 3 (01:03):
So, I you know from the title, we can kind
of guess what it is that you've put together here,
But can you give me a little bit of background
on you and how you came to develop Artificial Lawyer.
Speaker 1 (01:16):
Yeah? Sure, So I'm based in the UK, as your
listeners have probably figured out by now. I started Artificial
Lawyer in twenty sixteen. I'd worked as a journalist and
then I moved into management consulting and I worked in
the legal sector for more than a couple of decades,
(01:37):
and I was at a point in my management consulting
career mostly advising law firms on big strategic issues, future issues,
and one of the things that came up a lot
is you know what's going to happen next, So technology
obviously was part of it. I think around twenty fifteen
I started reading and studying legal aspects of AI. It
(01:58):
was really starting to beg as a real subject then,
I mean on the fringes, but still it was emerging.
Most law firms hadn't even heard of it, didn't take
it particularly seriously, but I kind of got a sense
that something was going to happen. It just felt it
felt real, And in early twenty sixteen I went to
visit a legal tech company in London that has now
(02:23):
what many years ago since then, was bought by a
large American company. I went to have a look and
they were showing how their AI system, which in those
days was old fashioned natural language processing, machine learning, and
it was going through a load of real estate documents
and they said, well, it's going to ingest one hundred
(02:46):
real estate documents. It's going to read them and it's
going to pull out key facts. And I was like, wow,
one hundred. They were like fifty pages each. I was like,
so should I go and get a coffee because there
was a really good coffee shop on the corner. And
I thought, I'll go get a coffee and across once
or something and I'll come back when I've had my breakfast.
And he said no, no, it'll just just sit there.
Just don't go, just stay there, and like two minutes
(03:09):
later it went ping. It was done, and he said,
right here we go. Here, all the key clauses here,
all the key things that are happening. And I think wow,
and it just blew my mind. And I went home
and I wrote an article on LinkedIn back in the
day when LinkedIn had about three people on it, and said,
you know, I have seen the future in a warehouse
(03:31):
in Shoreditch. Shoreditch it is kind of maybe a little
bit like Brooklyn, perhaps kind of the cool part of London,
or at least it was back then. In twenty sixteen,
and you know, usually in those days they used to
get a fair amount of interaction on LinkedIn. That that
piece went stratospheric, a lot of interest and a lot
(03:51):
of a lot of big people, you know, were like, hmm,
this is important. And I thought, yeah, I'm onto something here.
And what also surprised me was that many of the
you know, other outlets, channels, media, whatever, weren't really paying
it much attention. There were some sites who were dipping
an out, but no one who was like going, yeah,
(04:13):
this is it, this is the future, this is going
to change everything. And I was I just went all in.
I was like, this is it. So I got the
domain artificial Lawyer and I just went for it and
it just went from there. It just grew and grew
and grew.
Speaker 3 (04:25):
Yeah, it's funny you say that. You know, I worked
in legal for a while and I didn't really see
it coming either. You know, when I heard about AI.
Let's talk about back in twenty sixteen, everybody was talking
about truck drivers are going to get replaced and people
who are no going long, you're going to flip burgers
anymore because Flippy, the Hamburger they know, was talking about
legal No one was talking about accounting and how this
(04:47):
was going to be so disruptive to that. So, like
you said, back in twenty sixteen, I didn't see this
wave coming. So you obviously got impressed by the technology
at a super early stage. What Chat, GPT and these
other language models are doing now is unbelievable, but you
saw early signs of it. Did you see like where
(05:08):
those applications were going to go? What were you kind
of thinking at that time?
Speaker 1 (05:12):
Yeah, I mean what was What's particularly different between now
and then is that the startups, And I think that's
the other aspect of artificial law. I was super, super
focused on the startups. And the reason why is because
the start because to some degree, and it's hard to
believe it now, but if you go back to twenty
fourteen twenty fifteen, a lot of legal tech world had
(05:33):
gone to sleep. It was quite content, it was doing well,
was making money and growing nicely, and the clients were happy.
It was a classic innovators dilemma situation in that both
both the once great innovators and the clients and become
quite happy with each other, and to radically change would
(05:56):
have meant not only disrupting their own business, but disrupting
the expectations of their clients. So it's way way easier
just to carry on as they are. And it really
was the startups who were, you know, kicking up all
the uts, who were making real changes. And the thing
is they had actually been going for some years. I mean,
like companies like e Brevia can trace its roots all
(06:19):
the way back to twenty eleven, you know, before it
really even hit the big time Hera which many people
obviously know now, which is now part of Li Terra.
I mean, it can trace its roots, you know, several
years before twenty fifteen, twenty sixteen, and on and on.
The reality was is that they'd been building up very
(06:40):
very slowly, but it had been very much on the
startup side. Of the large companies, like I say, it
had kind of got a little bit complacent, taking their
eye off the ball, and so it was like this
perfect fusion. And for me, it's like I was covering
all the startups and the startups were for real challenging
the status quoe. It was really it was an incredibly
exciting time and it was doubly exciting because most of
(07:01):
the legal media and contariat even though they were they
were dipping, like I say, dipping in and out of
they I there wasn't much real coverage of these startups
and I just kind of like walked in there. It's
like it was fantastic. Now it's very different. And then
there are dozens and dozens and dozens and dozens of
what you might call LLM rappers, which is where you'd
(07:22):
have SA GPT four and a rapper of software around that,
including lots of refinements and prompt engineering. The fundamentally, eighty
ninety percent of the output is just GPT four, right,
It's not it's not completely original. And that's the fact
with the difference is that that first wave, the infrastructure
(07:46):
of the engineering was very heavy. It was it was
a lot of investment relatively compared to now, and so
a lot of companies just avoided it. And so those
startups really were game changers. Their challenge was getting the
lawyers to buy into it, which was difficult. And of course,
you know, slowly things evolved and eventually go startups crew
and most of them got bought up or integrated in
(08:09):
some way, and then you know, the world kind of
settled down a bit, and I remember going to a
big conference in London in twenty twenty two and coming
away and thinking, man, that was boring, which I really
shouldn't have thoughts, but I just thought, man, could this
(08:30):
conference could have been two years ago, could have been
a note, could have been last year? And I was thinking,
is this it is this it? Have we topped out?
Have we plateaued? And I wrote an article about I
mean it has legal take here a plateau because it
kind of felt like all of these early AI tools
had done as much as they can They'd been adopted
at a scale as much as possible, which was not
particularly massive, to be honest. And you know, blockchain came
(08:55):
and went, smart contracts came and went, doc automation and
was making steady incremental inroads, plugging away doing it, you know,
fighting the good fight, but not again completely changing the world.
You'd got no code systems, which again we're trying to
make little inroads into the way that things operated, but
(09:15):
again not massively changing the whole world. And one of
the ways you could do is just simply looking at
revenue of these companies, you know, so like if a
company is saying that they're going to change the legal world,
and they've still got a revenue of, like, I don't know,
a million dollars and twenty staff after five years. Well,
they probably haven't changed the world, because these companies that
(09:35):
change the world tend to go from one million to
one hundred million real fast, right. That happens a very
rarely in the legal world, very very rarely. And then
of course it's score forward to now chat GPT November
twenty two, twenty twenty three was basically mostly just talk
really and fiddling around twenty twenty four, it's really started
(09:57):
to kick off. It's for real now, and it's the
real question is will it overcome the systemic barriers to
real change which are integrated into the legal market in
the same way that the use of oil is integrated
into the transportation market. Can you separate these things?
Speaker 3 (10:19):
Yeah, So, for someone who has their finger on the
pulse of this type of technology, and you know, for
anybody who hasn't gone yet to artificial lawyer dot com,
you know, there's lots of articles that talk about these
these different technologies. What do you see, what would you
say that is very close to being real in this
that people should be on the lookout for. You know
(10:41):
how people are going to be using this tech to
change or disrupt this this space.
Speaker 1 (10:46):
Yeah, I'd say it's all real. It's all real. I mean,
there are issues around accuracy that people are working really
hard right now. There are hundreds of software engineers all
around the world working like crazy on improving rat which
is a method to improve the results and confirm the
(11:08):
accuracy of l M responses. It's going to improve very
very fast. As talking to someone very senior from Lexis
Nexus the other day and they just said, you know,
this technology is incredible because one, the infrastructure is so light,
you can without a huge investment in the infrastructure, software infrastructure,
you can move so fast. And also the technology itself
(11:28):
is moving every quarter, is jumping every quarter in it's extraordinary.
So all of it is real. That the question is
how far will people use it? How far will lawyers
use it? So at the moment, lawyers are using it
around the edges. Really they're doing things like, you know,
they're looking at a new act and they're running it
(11:50):
through their version of GPT four, you know, with obviously
you know, correct security barriers and so forth, and they're
asking it, you know, relatively you know, sort of interesting
questions and getting interesting answers back, But that doesn't really
alter the billable hower very much. In house, they're starting
to use it around contract management, you know, redrafting, handling
(12:13):
third party paper. But again it's relatively small. There's a
whole bunch of use cases. Different use cases will have
different levels of accuracy demands, but the fundamental barrier always
remains the same, which is that big law sells time
and the fortune five hundred buys time. And as long
(12:37):
as that is the case, generally of AI's potential will
always be limited. The great hope is that effectively the
time based business model effectively just gets surrounded by the
reality of what generaty of AI can do. Cristy goes
(13:00):
up so high that no one can quibble it, no
one can doubt it. That the ease of use is
just so well easy, you know, it's just so it's
such a great utility. It just overpowers the opposition. And
at that point the clients just start to say, look,
it pains me, it pains me to move away from
(13:20):
the billable. How I know you want to use the
billble hour And I was brought up in the billable
because I used to go to the same firm that
you did, which is why I still instruct you. But
frankly I was talking to the CFO and he or
she has said, sorry, guys, normal billable time except for
the most exceptional IPO, big M and a big litigation matters.
(13:42):
If it can be rationalized, it will be and then
the whole thing goes. It's like a domino toppling effect.
The whole thing changes, the whole thing changes, and it's
going to be extraordinary. But we're not there yet. We're
not there yet. You know, the first wave of the legal
AI twenty fifteen, twenty sixteen wasn't I would I wouldn't
(14:02):
say it was a false dawn, but it was a
shape of things to come. You know. It is rather
like the first electric vehicles, you know, the first Tesla.
You know, the amount of column InChI is written by
a thousand journalists about how Tesla was going to change
the entire world, and then five years later, like the
quantity of electric vehicles in America was about two percent. Right,
(14:24):
If you're in that, if you're in the electric vehicle bubble,
it does feel like the world has changed. All of
your friends drive Tesla's right. You know, maybe you work
at Tesla, you know, you read magazines about Tesla. Everything
is about electric vehicles. The truth is, if you take
a broad view across the entire country, electric vehicles are
pretty small still, but that is changing, and then eventually,
(14:45):
eventually it build up ahead of steam and then the
systemic barriers like the oil industry just go, ah, okay,
we give up. We're going to become battery makers, and
then the whole thing turns over.
Speaker 3 (14:57):
Right, Yeah, so we're almost out of time here. But
where do you see this? Where do you see, say,
the early adopters, because there's going to be something, so
there might be the old guard that are the biggest
and they're not going to give up the billible hour
because that's just entrenched into their blood. Where do you
see these early adopters, like, is there a specific size
(15:19):
of firm that's going to do this because this technology
is so disruptive, Like you said, you thought you were
gonna be able to go have coffee and a sandwich,
and they're like, don't leave, because this is going to
be done before you get to the door. That type
of you know, mind bending, you know, efficiency, let's just
say that the accuracy is improving rapidly. As you said,
(15:42):
where do you see this in like a year to
two years. What are going to be those earliest things
that are adopted that are going to change this industry.
Speaker 1 (15:51):
I think the smaller firms, in a funny way, actually
have an advantage because not because they have large IT teams.
They don't. They have the opposite. They usually have no
ITEA team at all. It's not because they have more money.
Smaller firms generally have less spare cash. It's because they're
more likely to do fixed fee work. If you're doing
(16:12):
property sales, if you're doing run of the mill disputes
between you know, neighbors, or very very very non contentious
divorce work, then you're more likely more likely, at least
in the UK. I don't know how it is in
the US, but generally you're more likely to be working
on a fixed fee, a standard fee that maybe variability
(16:32):
around it. So you've moved out of the selling time conundrum. Now,
let's say I own a law firm. I've got ten
lawyers junior lawyers working under me. We generally just do
property sales. We work on a fixed fee mostly unless
it gets very complicated. I'm looking at the numbers and
I'm like, hold on, So you're telling me, if I
use this technology, which is not particularly expensive, I can
(16:53):
now take on twice as many cases and the accuracy
level of the output is about the same as it
was before. And I don't know, I'm not going to
sack any my junior lawyerscause I still need them because
you know, you still need a human mooop in all
of this stuff. But now I can take on twice
as much work. Are you kidding me? This is brilliant.
You know, the bigger firms they got that. They ironically
they've got the biggest problem because they are more wedded
(17:16):
to the hour. However, what is in their favor is
a they have way more resources. Some of the firms
have huge innovation in IT teams, and they have a
lot of lawyers who are thinking about these issues, and
they have a lot of clients who are thinking about
these issues. So let's say you're in the insurance industry.
The insurance industry is very, very focused on costs. If
(17:40):
you can work with an insurance client to bring down
some of those costs using technology, they're more likely to
send more work your way. However, there would always be
a partner at the back of the room who puts
his or her hand up and says, hold on a minute,
hol on a minute. But I get paid by the
(18:00):
hor you know, I'm not saying I'm not I'm not
trying to say I go slow. I work as hard
as I can. I work twelve hour days. You know
I'm a hard worker. I just don't want that to
be undermined. And then you get to a very difficult
conversation and then life care is on as usual, and
I think that is the fundamental issue. Is a fundamental issue.
It's a piece. I wrote a piece for Walter's clur
(18:21):
last year and it was one of those things where
they ask you a question and you can kind of
tell by the way they ask a question that you're
expected to agree with the question. And it was like,
you know, how far has technology transformed the legal world?
And obviously very expecting me to say, yes, it's amazing,
everything's changed, and I just went very little has changed.
(18:41):
Hasn't changed all? Really, I only read an e discovery
and perhaps around legal research, but if you're actually looking
around a workstream, E discovery has changed because there was
such a volume of data. E discovery was just necessary.
And also it's interesting as well because litigation and e discovery.
It's one of those fewere is where a judge, a
third party who has real power can intervene in law firms,
(19:05):
normal functioning can say, hold on a minute, goes, you
cannot do that by hand. You know the Enron case,
twenty five gazillion documents and emails. You are not doing
that by hand. You know we'll still be here in
twenty thirty if you do it by hand, and it
will cost more than Enron lost, you know it's not feasible.
So that's an interesting one. We haven't got to that
(19:27):
point in transactions. I've never seen a third party step
in and god knows who the third party could be
a transactional piece of work and say, sorry, Coca Cola
and Pepsi, but this amazing merger that you're about to do.
Obviously they're not really as you've probably figured, but if
they were to, would if third party step in and say, look,
(19:48):
you've got to use AI because the due diligence for
this merger is so gargantuan, it's not in anyone's interest
not to use AI we've never seen that. We've never
seen in that And again I don't even know who
the third party would be in this case, but it's coming.
Perhaps perhaps perhaps the ftc Perhaps it's just the environment.
(20:10):
It's for broader it becomes a social expectation. I mean,
you know, no one ever said you can't wear flared trousers. Right,
there's no law. I mean you know, there's no Congress
in the pass the law. So you can't wear flared
trousers if you want, you can, right. It just became
socially unacceptable to go to a business meeting wearing a
pair of bright green flares.
Speaker 2 (20:31):
Right.
Speaker 3 (20:31):
Yeah, well you gave the example of the electric car.
And this reminds me of you know, Blockbuster versus Netflix
back in the day, and Blockbuster just completely let Netflix
sweep out their business out from underruner because they go,
No one's going to wait three days to get their movie.
Everybody wants to go to a store, Everybody wants to
pick something that night of exactly what they feel like.
And they slept on Netflix for so long that Netflix
(20:55):
just came in and devoured everything. So I think something
similar could happen here where you've got your small to
medium sized firms who are going to adopt this out
of necessity, and your large firms could get caught sleeping,
you know, because they say, we're a billable hour and
we have the name that people trust, and it's not
going to be overnight. It may seem that way, you know,
(21:16):
five years from now, that it's overnight, but you've been
in this since twenty sixteen, so it'll be that you know,
ten year overnight success story that you hear about. But
that's that's kind of the way I think it would
possibly happen because some people will see this as their
secret weapon, and some people will just not jump on
board because they're too large and there's too many chefs
in the kitchen to say, yeah, let's give this a go.
(21:38):
They're going to say, there's too many people that we
need to adopt this. It would take us too long.
We're doing just fine.
Speaker 1 (21:44):
Yeah, I mean, it's an interesting thought, isn't it. Like
where does the competition when you have I mean, the
legal market is tiered, right, So in New York, if
you're doing top tier M and A work you know,
to buyout and the finances coming from golden sacks, right
JP Moore and whatever, various other top tier advisors and
accountants and so forth, and you've got this kind of
(22:05):
white shoe group of elite law firms in Manhattan. The
truth is, you're probably not going to go outside of their,
outside of that group. So if you're not going to
go outside of our group, where does the competition come from?
It's an interesting point. So what does does what do
we get like a sort of cleary effect sorry a
cravaf sorry conclu cravat back in the old days, where
(22:28):
somebody breaks ranks, changes how they do things, and suddenly
everybody else is, you know, completely surprised. They're just like, yeah,
but we we thought you were in the club. You know,
we all stick together. We do it all the same way.
You obviously this is not an anti trust issue by
any means, but we all we all charge the same.
Every time you put up your race, we put our
rates if you put it. If you pay more for
(22:49):
a junior associate, we will pay more. You know, we
will go to the same clubs, to go to the
same tennis clubs, kids go to same cool schools. Blah
blah blah. You know, we're like a little tribe together.
We will live together.
Speaker 3 (22:57):
You know.
Speaker 1 (22:58):
It's it's like this kind of super integration unit. Don't
expect anyone to step out of line. And then suddenly
someone goes, you know what, and this is the innovator's dilemma.
Soone goes, sorry, guys, but this is over. You don't
realize it, but this way of doing things is over.
And we don't mean to upset you, but we're breaking
with tradition. We're going to go our own way. And
(23:20):
then wham. You know, the changes will happen so fast
because everybody, everybody will be desperate not to be last. Yeah,
and suddenly it all changes. There's that scenario. And then
of course your scenario, which is also a great one,
which is that law films, which are in a different
tier start to nibble away at so much of the
(23:43):
more commoditized work or less super high value work. I mean,
you know Whatcktail's going to hold on to that super
high value work till the end of time, until I
decide to close the firm down, right, I mean, it's
just like pretty much given right, But there's a ton
of other work they may not be able to hold
on to, and can can firms which are not in
that super elite bracket. Just start to just just rationalize
(24:06):
with the clients and just say, look, you know you
need to triage this, you need to unbundle this. Okay,
give the super advisor who works to this firm, but
everything else you should give to us, because we're using AI.
We do fixed fees. You want fixed fees. Your CEO
was on Bloomberg TV the other day saying that he
wanted all of his professional advisors to use fixed fees
and AI from now on. Well, we're your firm, and
(24:30):
so things start to work that way. And then, of
course there's a third third option, which is that spirals
finally change on mass in America and they allow the
Big four to really start offering legal services, which is
unlikely considering we've been talking about that for about thirty
(24:52):
years and it hasn't happened yet, and the limited limited
liberalization in places like Arizona and Utah, but obviously different
kettle of fish. So yeah, this idea that a completely
new entrant comes in, well relatively new entrant comes in
and just completely shakes up the whole game, rather like
Tesla in the automobile industry. That actually is despite the
(25:17):
tech world, normally seeing that as the most likely outcome,
I think in the legal world that's actually the least
likely outcome. I think the most likely outcome is that
simply erosion of traditional business models eventually leads to someone
just dumping it and going in a new direction. I
mean everybody panics and follows suits.
Speaker 3 (25:37):
Yeah. Yeah, I think that's a great analogy the erosion,
because if they are nibbling away at, you know, some
of these more commoditized areas of legal and the larger
firms aren't going to notice it for months, years, and
then all of a sudden, you know what was a
great overhead you know, reducer for them, you know, something
to just keep the lights on while they're doing all
(25:58):
their big work. Now, as that you know, the termites
have eaten most of the lumber, they're gonna all of
a sudden wake up one day and go, uh oh,
we've lost a significant amount of our profitability from these
other areas that we didn't pay as much attention to.
So that's an it's an it's an interesting time and
it'll just be interesting. And how long it takes for
(26:19):
that that actually happen.
Speaker 1 (26:21):
Yeah, I mean, I mean, I guess the key question
is have we reached peak big law in its current formation?
And when I see junior associates getting salaries the likes
of which, you know, even people who are quite wealthy
look at and go, my god. Really, you know, when
we get to that point, you've got to ask yourself
(26:43):
have we reached peak big law?
Speaker 2 (26:45):
Not?
Speaker 1 (26:45):
I mean, big law will always exist because big law
is needed because we have large companies. You need large
law firms with full of sophisticated experts to help on
both issues. But big laws is currently structured. You know,
have wea you for peak of it? Yeah?
Speaker 3 (27:03):
Well, Richard, thank you so much for sharing your expertise
on this as somebody who was really early on in
this industry. Where can people go to find more of
your work and connect with you?
Speaker 1 (27:14):
Yes, thank you. It's very simple, just Artificial Lawyer dot com.
It's a website. I usually publish most work days, one
or two stories a day. The themes are legal technology,
innovation AI obviously and of related issues.
Speaker 3 (27:32):
Well, we appreciate your time.
Speaker 1 (27:35):
Thank you, Eric Real Pleasure.
Speaker 2 (27:36):
Thank you thanks for listening to the Legal Mastermind podcast
presented by Market my Market. You can check out additional
episodes and recaps at Legalmastermind podcast dot com.
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It’s 1996 in rural North Carolina, and an oddball crew makes history when they pull off America’s third largest cash heist. But it’s all downhill from there. Join host Johnny Knoxville as he unspools a wild and woolly tale about a group of regular ‘ol folks who risked it all for a chance at a better life. CrimeLess: Hillbilly Heist answers the question: what would you do with 17.3 million dollars? The answer includes diamond rings, mansions, velvet Elvis paintings, plus a run for the border, murder-for-hire-plots, and FBI busts.
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