There is a saying within the US Navy Seals special forces community: “…under pressure you do not rise to the occasion, you sink to the level of your training,...
There is a saying within the US Navy Seals special forces community: “…under pressure you do not rise to the occasion, you sink to the level of your training, which is why we train so hard.” The success, or otherwise, of their operations is determined by how well prepared they are for all eventualities and contingencies.
Historically, this has been the opposite of how lawyers in the commercial world train for their day job. Of course, there is some classroom learning, but the reality is that the partners of today at the leading law firms learned by doing and getting their hands dirty on real world cases and transactions. Reviewing and amending hundreds of documents meant that they learned what the key provisions were, where they were in the multitude of pages and why they were contained there in the first place. This meant that when the time came to negotiate deals and transactions as they became more senior, they knew the implications in the documents of the key issues that were being debated by their respective clients. This allowed them to give informed, commercial advice where they mapped the needs of their clients to the documents. The training ground for lawyers was live deals and not rehearsing things through training, unlike Navy Seals.
What could change in the future?
The general counsel of a leading technology company recently stood up at the partner conference of one of the world’s largest law firms and told the assembled legal highflyers that the value of the commoditised work provided by their firm and for which they currently charge their clients will shortly be zero. Why? He was referring to the implications of artificial intelligence for law firms and how they operate. Historically the leading commercial law firms have charged their clients a lot of fees for deploying a large phalanx of junior lawyers to undertake what can broadly be called data checking or process driven activities. In a large litigation case, this could be a discovery exercise, in a merger or acquisitions deal, this could be the verification of warranties in the sale and purchase agreement and in a finance transaction, this could be the satisfaction of conditions precedent. The margins earned by law firms for this sort of work has been under attack for some time as clients have required that these sorts of activities should be done more cheaply, for example using offshore or onshore para-legals in urban centres where the cost of living is cheaper and hence the wages that need to be paid are lower.
However artificial intelligence threatens to take this attack to a new level. The use of this technology in law firms is in its infancy, partly because they pay out almost all their annual profits to the partners so have no war chest for IT investment and partly because these institutions are conservative when it comes to borrowing to invest in such areas. However, when one sees the current capabilities of Chat GPT or equivalent products it is clear that these data checking or process driven activities are fully capable of being undertaken by a machine learning platform. As AI begins to increasingly do this type of work, law firms may seek to avoid passing on this cost saving, but clients are too sophisticated for this to be a sustainable position, very quickly this will lead to no meaningful charge being levied for this work.
What implications will this have for law firms? They will have to reassess their business model. They will not need as many lawyers as AI will be undertaking a lot of the data checking and document drafting and reviewing. This will mean that there will be an inability to charge for the time of lots of lawyers which implies that law firms will need to charge much more for the value-added advice, for example partner time on the key strategy or negotiation issues. Think of the current model of seeking the advice of a KC on litigation matters. And for junior lawyers? Well, there are likely to be fewer of them because they will not be needed for the historic data checking and process driven activities and there will be far fewer opportunities for them to learn on the job by getting their hands dirty. They will handle entire documents far less so will lose sight of the architecture of their trade albeit they will need to focus on the key, value-add parts that are relevant to the case or transaction in hand. As a result, it is likely that law firms will have to fundamentally change their approach to training. They will need to take a leaf out of the book of the special forces communities and spend far more time on training their junior lawyers so that the partners of tomorrow have the sufficient depth of knowledge to justify their high charge out rates.
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