AI/Tech Series - Impact on the Legal Industry (1 of X)
Are inhouse the future of the legal profession?
Introduction to the Series - why and what I’m writing about AI
I’ve been spending quite a bit of my free time getting up on AI in general - there’s so much hype on it I felt I had to check out if it’s truly as transformative as they hype is, what it means for me and my friends and family and whether this is a new field I could work in. As an added bonus, it sounded like fun to my inner fantasy/sci-fi nerd self.
So here’s the first of probably several posts on my takeaways and thoughts as I try to wrap my arms around AI and other rising Tech. These are not going to be explainers or summaries on what is AI/GPT unless I think I have some value-add on that. I’m a layperson/novice on the tech and there are much better explainers and experts who have written explainers/summaries. I may refer to any good posts/podcasts/books along the way.
This first post will cover some of my inital takeaways and thoughts on AI/Tech’s potential impact on the legal industry - a synthesis of what I’ve read, listened and watched so far including at the recent SCCA APAC Legal Congress 2023.
I’ll discuss: (1) whether AI and Tech will replace lawyers, (2) what this means for inhouse, (3) what does this mean for law firms, (4) are we turkeys voting for Christmas in embracing AI/Tech, and (5) whether AI will propel inhouse to be the future of the legal profession. Caveat: I am personally bullish AI/Tech and agnostic humans.
AI/Tech’s Impact on Lawyers
General Counsels (GCs)/inhouse lawyers are: (1) under increasing pressure to support CEO priorities and (2) yet face challenges to maximise legal's value to business. Keep this in mind as you read about AI/Tech and this and other posts.
(1) Will AI and Technology replace lawyers?
The favourite answer of lawyers is “yes and no” or “it depends”. I think it will replace lawyers to some extent, especially certain types of work. On the other hand, certain types of lawyers and skills/work will become increasingly valuable. Time-wise, I’m looking at from between now and 10 years later.
Yes - you will be replaced (now and next 5-10 years):
Low value work will be / is being replaced - it is only a question of when and how fast, if not already. Examples of such low value work include: proof-reading, reference checks and anything involving reading and digesting large volume of documents e.g. e-Discovery, due diligence, reviewing and clearing simple contracts e.g. NDAs, preparing simple, fact based memos and summaries on law.
Prior to GPT-3 in Nov 2022, there was already alot of legal tech out there that does this work. AI (especially GPT) has supercharged this with natural language processing and prompts. Frankly, I wouldn’t be surprised if some of these legal tech solutions are themselves replaced and made obsolete by AI.
The same goes for any work that is repeative and rules-based: RPA (Robotic Process Automation) and/or AI can, have and will deal with these much quicker and efficiently than humans. Examples include form-filling, regular searches/checks on websites and databases for regulatory or compliance filings and so on.
Why do I think so? Because AI and RPA can do this cheaper, faster, more accurate and so on than a human or humans. For example: a fast review of your library of contracts for exceptional clauses or specific conditions (e.g. limitation of liability >$100,000) - this would normally take a week or weeks for a human team to do with similar or lower accuracy but could take a day or less for the AI. Or something even simpler, pulling out 10-Ks and 10-Qs and checking for certain information for regulatory reporting or filings.
This is the type of work are basically the type of work you’d have an Intern/Trainee/Junior Associate level1 do and which AI or RPA can now do as good or an even better job in quality and speed. See basically any good commercial GPT and/or RPA, perhaps even something as basic as PowerAutomate on Microsoft AutoGPT.
Mid-value work may be replaced: These are the more complex work where some critical thinking or judgement calls apply. Similar to the above, there was already alot of legal tech out there that does or purport to this work especially on contract review and negotiations. But while it’s only 6 months since the soft launch of GPT in Nov 22, there is already AI/Tech that tout abilities close to the more complex work done by lawyers in law firms and law firms. See for example2:
Law ChatGPT : which purports to generate a whole plethora of contracts, pleadings, memos and other legal documentation for what seems to be a very low cost. It may not be the perfect document, but it’s probably a good enought first draft for most simple contracts.
Latch App: takes this several steps further:
it can generate playbooks based on your historical contracts
it can review your/counterparts drafts and not just identify the differences
it provides “suggestions for how the contract should be updated, and decide which suggestions to incorporate into the generated redline”
most excitingly it’s not just a cut and paste but carries out “surgical redlines that selectively insert and delete the counterparty's wording where necessary to preserve your standard or fallback positions”.
If AI,RPA and Tech advance further in the future, you’d even have “the law firm in your pocket”.
This covers work that is typically carried out by a Junior or Mid-level Associate before (sometimes) review by a partner, counsel or senior associate. Depending on how good the product is, this could actually replace the work of a pretty smart Junior Associate or underperforming Mid-level Associate.
No, you won’t be replaced, you’re even more valuable:
On the flip side, absent the rise of AI and Tech, there’s always been and increasing demand for high-value/level lawyering. This includes:
marrying the legal analysis and work to business goals/objectives -> the ability to be a real business partner.
risk calibration and judgement calls - making decisions at the edges/gray areas of law and regulations
problem solving - again at the edges and in gray areas or simply pure creativity in finding a new structure or solution3.
most importantly, "white space" and legal strategy - look at risk trends, risk areas, understand the business, contribute to business values/goals, predict and prepare for the next big thing instead of constantly reacting behind the curve
(2) What does this mean for me (inhouse lawyer)?
Embrace the Tech and do high-value work: There is opportunity in the crisis: AI and Tech saves you time from grunt work to do the high-value work. Instead of turning around a NDA or other document within two hours, you can spend that time to truly understand the business goals or investment thesis and analysing risks through that lens.
On the flip side, there will likely be increasing expectation for "instant" service or response.
Use Tech to not only "Do more with less" but"Do more and better!":
Review existing policies and workflows: what risks are they guarding against, do these risks even still exist today? Can we mitigate these risks in a simpler way?
Workflows: Can we automate some of these processes? Save time and effort not just for legal but also the business?
Why? So we have more time for ourselves to do the high value work and skill up on key skills (see below). As an added bonus: we also get more fans and buy-in from business as we've improved their quality of life - better standing and influence with business.
Stay current on AI/Tech: The rise of AI/tech means legal must keep abreast of developments - you need the knowledge and information to make effective and timely decisions about tech - decisions which are often strategic in nature. However, the reality is that most people do not try new things due to lack of time or inclination - it's only a small percentage of lawyers that are early adopters or experimenters. For example, although everyone is talking about GPT - but many only have skin-deep knowledge and often have not even tried it themselves.
Suggestion: A little bit can go a long way. Spend some time each week, say 1 hour, to see and try what is out there in new tech or developments. Spend more time if soemthing looks particularly interesting or exciting.
What can we bring to the table that AI and Tech cannot?
The hard questions we have to ask ourselves are the same - except skewed with the potentially big game-changer of AI and Tech:
What is my (individual or legal dept/law firm) comparative advantage against AI/Tech solutions (not just law firms)?
What is my (individual or legal dept/law firm) value add and contribution to the business?
What is my (individual or legal dept/law firm) core competence?
What do I have to upskill and learn?
Which skills are amplified in importance?
We will really have to up our game. Legal knowledge is being democratised and so you either need to (1) know more than what GPT can spit out in seconds (an impossible task); or (2) provide advice, skills or value beyond what GPT can produce.
As a result, the following skills are amplified in importance.
Critical Thinking ability and skill
Advocacy and storytelling, the ability to persuade and run a narrative is even more crucial than before.
Responsibility/Accountability/Ethics: AI cannot be responsible / held accountable if something goes wrong. A human still needs to stand in front of the output and advice and decisions. There will be human principles, ethics, judgement calls that AI cannot do - it can only provide the options.
Integration: the ability to integrate the above, technology, business goals/objectives and to bring it altogether.
Amplified creativity: AI and Tech tools enrich and enhance human creativity whether in structuring a deal, a pleading, etc.
(3) What does this mean for Law Firms
Do it yourself v. Trusted Partners. The increase in good and cheap technology in law means that inhouse will increasingly have to ask themselves should we do somethings ourselves or farm it out to law firms or other trusted partners. And the value proposition from law firms is also changing.
(Yet another) Attack on Law Firms and the Billable Hour model: AI and its time savings pose a direct challenge to the billable hour model.
Law firms are increasingly at risk of disruption by new AI/Tech that provides real competition or alternatives to law firms (e.g. LawChatGPT and LatchApp mentioned above). AI already produces some "good enough" first drafts or advice that beat out law firms in speed and cost as mentioned above.
I predict that:
Law firms will find that clients increasingly either self-service or are unwilling to pay for this regular/low value legal work - clients expect technology savings to be passed on - just like how inflation and salary increases were passed on!
Traditionally use of law firms by inhouse covers (1) advice in specialist/expert domains; and (2) plugging capacity gaps or resourcing gaps. (2) will drop as an use case.
The work in (2) will be increasingly replaced with AI/RPA/Tech including document reviews, mark-ups, even basic legal research and advice - things that can be automated, that AI can produce that is good enough or as good as any law firm.
As an ex M&A lawyer, it’s still unclear to me to what extent private M&A and investment work will fall under (1) and (2). I think it’s likely to be a mixed bag as some commoditized work are susceptible to heavy AI use while complex M&A due to deal structure or a heavily regulated industry will still be the province of experts.
Law firms use will increasingly be limited to (1) specialist domains where it has proprietary data or knowhow or (2) which are at the edges/gray areas that require a judgement call or (3) where someone needs to be accountable/responsible for a decision.
For the law firms, this proprietary knowhow and data will increasingly be key: what expertise/data does a particular firm have that other law firms do not? Do I have enough deals to feed my own AI in my firm to generate good clauses, reads on what is market, what is not?
Will this happen overnight? No, not in the next five years and perhaps not even in the next ten years - there are too many regulatory hurdles and vested interests in law firms for law firms to fully embrace AI. The change will be extrinsically driven: from clients who start utilising AI for their own legal needs, from legal start-ups who provide cheap and easy legal solutions to the masses.
Perhaps it may one day even be malpractice not to use AI - after all, are you truly discharging your fiduciary duty if you've not used such a cheap, readily available and effective tool? Some firms, such as Allen & Overy with “Harvey”, have embraced AI in law - it would be really interesting to speak with them.
(4) Are we turkeys voting for Christmas if we embrace AI/Tech?
Some of you will ask are we (inhouse, law firms) engineering ourselves out of a job by adopting or embracing AI/Tech? The reality is that if you don't adapt and change, someone else will and you'll be on the backfoot. And that someone else may not even be in the legal industry. This has been the case for every transformative technology since the Luddites protested against mechanized looms and knitting frame. The odds are stacked for capitalism, “cheap and good enough” and free market.
Consider two scenarios in the near future (or perhaps it's already happened):
Scenario 1: your business/deal team uses GPT or similar to look up the regulatory or legal positions, in seconds, to argue their view or position on a piece of law or regulation and for added difficulty, since we don't know everything, this is a piece of law or regulation you or external counsel is unfamiliar with. What are we going to do? Ban the use of GPT?
Scenario 2: a counterparty effectively using AI and Tech to complete due diligence or documents review faster and better: beating you out in time in negotiations and responding faster, with better insights on market terms and a better view on legal and other risks. At best, you get complaints from business on being slow. In the worst case, your company loses the bid or deal.
I submit that the correct answer is not to be a turkey at all - embrace the tech and make it work for you, not against you.
(5) Are inhouse lawyers the future of the legal profession?
It occurs to me that there is potentially a big oppourtunity for inhouse lawyers. AI/Tech frees up time spent on low value to work to focus on other higher value/level work and areas. To repeat, the work that a human lawyer can do, that AI can't or can't do as well or as cheaply/efficiently, are in the areas of critical thinking, special insights/access, advocacy and the human connection.
Inhouse lawyers have (versus law firms):
the advantage of being plugged into the business, understanding the business goals and objectives, the ability and proximity to provide bespoke and applied advice and views, value add and even making decisions; and
the personal relationship and trust of business (even if you don't, business is essentially a captive market to inhouse).
These are unique to inhouse lawyers and is their biggest comparative advantage against lawyers in law firms, who currently have a different cost structure and are unable to invest so much time and costs on individual business clients.
I’d argue that inhouse lawyers are much better situated than law firms/external counsel to capitalise on the changes brought by AI and tech. If so, the AI/Tech future looks pretty good for inhouse lawyers!
Are inhouse lawyers the future of the legal profession? What do you think?
These terms and the association with “low value” and other value statements are not meant to be perjorative whether to the work, the titles or the people who do it. I see it as a reflection of reality - what clients will pay for or consider valuable and also what actually happens in law firms and corporates.
Caveat: I’ve not actually tried these products yet- I do plan to spend some money and time to give them a spin But given the success got GPT-3 and GPT-4, I’d say the technology/capability is definitely there. That aside, there’s also the question of how scalable and commercialisable this is. But clearly some people are trying very hard to make it work.
My favourite example of this is the “poison pill” defence invented by Martin Lipton. So simple, elegant and obvious that most lawyers would go: “Yes, so obvious, obvious. Now, why didn’t I think of that?”