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Another “It’s the Data, Stupid!” Essay

Posted in Change

DataStupidIt was the 1992 election campaign, and James Carvill, candidate Bill Clinton’s campaign strategist, was fighting to keep the troops focused on what mattered. He hung a sign in the campaign’s Little Rock, Arkansas campaign headquarters with three messages:

1. Change vs. more of the same

2. The economy, stupid

3. Don’t forget health care.

Nothing stays quiet in politics, the contents of the sign made it out, and now we all know the phrase “[it’s] the economy, stupid.” The phrase has been modified and used in many situations, including: it’s the data, stupid!

The Four Revolutions of Legal Materials

We can segment the history of legal materials using several dimensions. I divide the history into four phases:

  • Parchment to paper
  • Paper to published
  • Published to digitized
  • Digitized to data

At one time, legal materials meant writs penned by lawyers or scriveners. The few things written were put on parchment (sometimes called vellum, an animal skin paper). While it is easy to think we are far past this phase, the House of Commons and House of Lords in the UK recently debated whether official acts should now be recorded on paper instead of vellum (answer: no, vellum will still be used).

The next step was from paper (by now, wood pulp or cotton based) to published. Books of cases, closing binders, treatises, all became the place to go for collections of documents.

In the latter part of the 20th century, we moved from published to digitized. Documents were created and stored on computers and case books became online research databases. Today, we live mostly in the digitized era. But in law, even though documents are digitized they aren’t very useful.

The Era of Legal Data

Digitization still represents state-of-the-art for law firms and law departments. But the next revolution is digitized data, and that move already has started.

The world of law is the world of unstructured documents. Imagine working on a document with the following sentences:

Grainger accepted payment from Duncan. Duncan delivered the payment to Grainger by handing him a check made payable to “Grainger Consulting, Ltd.” in the amount of $2,150.00, dated April 21, 2014.

The sentences mean nothing to the computer. They could as easily be written this way:

Xxxxxxxx xxxxxxxx xxxxxxx xxxx Xxxxxx. Xxxxxx xxxxxxxxx xxx xxxxxxx xxxx Xxxxxx. Xxxxxx xxxxxxxxx xxx xxxxxxx xx Xxxxxxxx xx xxxxxxx xxx x xxxxx xxxx xxxxxxx xx “Xxxxxxxx Xxxxxxxxxx, Xxx.” Xx xxx xxxxxx xx xx,xxx.xx, xxxxx Xxxxx xx, xxxx.

This is unstructured text. The computer does not have information about the characters or words telling it, for example, that “Grainger” and “Duncan” are named entities or that “payment” is something different from “handing.”

We can easily give the computer more information, and we often do this through something called “tagging.” You already know about tagging. You tag photos with the names of the people in them, you tag blog posts with the subjects covered, and if you are an SEC lawyer you have seen XBRL tagging of financial data in 10-Qs. The tagging you see and do (with the exception of financial data) requires that you manually assign the tags. But, much of the tagging for text, as with financial statements, can be done automatically. Instead of a digitized, but unstructured, document lawyers could have data—a document broken into pieces that can be manipulated with the proper tools.

Legal Data and The Future

Of course, the key question is not whether lawyers can convert text to data, but what is the value of doing so? It the conversion simply means computer geeks have another thing to play with, then it makes no sense for the world at large to shift.

The value of doing so, I believe, is deep and will accelerate the change from law being a religion of the past practiced by a cloistered tribe, to a flexible tool of the future that can help individuals and organizations at all levels of the economic ladder. That is big value, so the next question will be “what do you have to back up that belief?”

We all know by now that data—as an augmentation to what we can do as humans and not as a replacement—will play a big role in our future. The same is true for lawyers. Let’s go through some examples.

As a transactional lawyer, one question I was often asked was whether what we were proposing to do or what the other side was proposing to do was “market.” This simple question usually leads to a spirited, but worthless, debate between opposing counsel. The proponent of the clause argues it is market, the opponent argues it isn’t market. Clients sit there perplexed: surely this is a question that can be answered objectively? The answer is “of course,” but not as law is currently practiced.

Three years ago, as I was working on a large (over $1 billion) financing agreement, the question came up all the time during negotiations. The firms on either side of the negotiations were (and are) top tier firms recognized as “the” firms to use for financing. Yet, neither firm could answer the market question. The usual response was “we could have our library staff look at recent financing documents to see if there is a pattern.”

The documents they would search were “materials agreements” to the companies involved, and so they had been attached to filings with the SEC. That is, they were publicly available. Anyone could download the document, convert it to data, and do searches on the documents. In fact, collecting these documents, tagging them, and using them as a corpus would have put any firm in a great position. But, to my knowledge, no firm has gone that far.

As a second example, consider the many briefs filed in lawsuits each day. Judges consistently complain about the quality of brief writing. Their complaints, by the way, are not directed solely at small firms or lawyers who occasionally appear in court. The epidemic of poorly written briefs extends up through the ranks to the largest firms.

If those briefs were turned into data, we could use the data for many purposes. For example, we could perform quality studies on the briefs. We also could compare the briefs to the court decisions (did the brief overlap with the decision, were the cases cited used by the court, did the arguments make their way into the decision, and so on). We could compare briefs across firms and even develop quality measures to tell us which firms and which lawyers have the best written most persuasive briefs. Instead of measuring the quality of law firms based on where the lawyers went to school, we could measure quality based on the legal product.

The list of ways we can use legal data is long and growing every minute. Legal data can be combined with data from other sources to construct predictive modeling. Data streams from sensors and mobile devices can be combined with legal data to create early warning systems—predictive analytic models that tell us when certain actions may lead to a lawsuit. Turning documents into data also is the first step in converting contracts into smart contracts, connecting law to the world of blockchain technology.

I’m a Lawyer, Not a Computer Scientist

Most lawyers are dizzy at this point. They don’t understand technology in its basic form (Can you describe to me how the internet works? What happens when you hit “send” for an email?) and now I’m asking them to go from those .docx files to computational linguistics and natural language processing. Time to run!

The key is understanding the difference between the lawyer trying to do it all, and the lawyer managing a collaborative team that does it all. None of us can do everything (despite what we think), but we all need to learn to manage teams. Law departments should move from hiring lawyer after lawyer to hiring one or two legal data scientists (who may be lawyers with technology training). By using the legal data scientists to automate certain steps (document assembly) and combine that with data tagging, a law department would take itself instantly into the 21st century. The future of law belongs to teams.

One final note about legal data. What law firms and law departments seem not to realize is that stored on their servers is 21st century gold. Today, Google, Facebook, and Amazon have put themselves in enviable positions. They each control massive data sets that enable them to analyze the world in ways we didn’t believe possible a decade or so ago. It will be difficult for other companies to build comparable data sets. IBM CEO Virginia Rometty puts it nicely:

What steam was to the 18th century, electricity to the 19th and hydrocarbons to the 20th, data will be to the 21st century. That’s why I call data a new natural resource.

In the law, the large legal publishers have data sets that also give them an advantage. Other publishers are looking for data sets that will help them build positions in the publishing industry similar to what Google, Facebook, and Amazon have done in their respective domains. For example, Elsevier recently announced it is purchasing the Social Science Research Network (SSRN). SSRN is a significant publishing platform for social sciences and humanities, and one of its main libraries is devoted to law. Overall, it has about 673,000 papers. Elsevier will be combining SSRN with its technology platform, Mendeley:

SSRN is devoted to providing “tomorrow’s research today” through specialized research networks in the social sciences and humanities. We facilitate the free posting and sharing of research material (e.g., conference papers, preprints, non-peer-reviewed papers) in our subject areas. Social science papers tend to have fewer co-authors, so networking and sharing ideas, hypotheses and drafts during the research process are critical; SSRN helps authors evolve their research and communicate their results worldwide.

Mendeley is a researcher workflow tool that helps researchers organize, discover and share their research. Mendeley is also becoming a collaborative environment for sharing early results of research but is more focused in science, technology and medical fields. Its technology platform, enhanced by Elsevier’s investment, uses metadata from articles and usage on its site to develop a suite of analytic tools that directs researchers towards the best people to collaborate with and what to read.

What does the combination really mean? It gives Elsevier unprecedented access to an enormous database. It isn’t the papers, it is the data. In this case, data represents influence or impact within the scholarly community which is something very valuable to scholars and institutions. As one blogger put it: “The reason is obvious to anyone who works in the university: impact = higher rankings, higher rankings = more and better students, more donors, more reputation for the institution… all of which translates into the ability to hire more high impact researchers.” The motivation to access data may be different for lawyers, but the need is no less than in academia.

Lawyers also object by saying that the knowledge of how to convert text to data and manipulate it is a computer science, not something for humanities majors who became lawyers. Ironically, text tagging grew out of the humanities where language, history, philosophy, and other professors have been tagging text for decades.

Lawyers love to find excuses for resisting change. In fact, a recent Altman Weil survey shows that over 90% of large firm managing partners know their firms need to change (become more efficient), and yet over 64% of partners resist change (up 20 points from a year ago). So be it. There will be a few firms that can get by ignoring change, while technologists and clients (the real clients) work behind the scenes on software that reduces or even eliminates the need for lawyers (don’t chuckle, the software already exists).

Lawyer are their own worse enemy. The profession is changing slowly and will not disappear overnight or perhaps ever. In the meantime, the demand for lawyers (versus legal work) shrinks, alternatives pop up daily, and the world moves past the era of scriveners with their vellum. If you don’t believe me, just check—it’s in the data.

Make Some Beautiful Music

Posted in Change

MusicI remember going into the basement of our house in the 1950s and 60s and listening to music on the large record-payer we kept there. The LPs, as they were called (LP for long playing) spun lazily at 33 1/3 revolutions per minute. The discs were thick, heavy vinyl and you had to handle them carefully or you would scratch the surface (and incur a fair amount of displeasure from your dad). If you liked music, you had to master the skill of gently letting the needle down onto the LP and then lifting it up when the album was done playing. None of that “automated” needle moving!

Music was special, I think, because it wasn’t so easy to come by. You could turn on a radio (AM) and fiddle with it to get a clear channel. But the station played what it wanted to play and if your musical tastes were not the same as your parents then the radio sitting in the living room was probably off limits. For many of us, a record player in our room didn’t happen until we got to middle school. Even with a record player, your record collection was limited.

Because music wasn’t everywhere, it became a group activity. Your friends had some records, you had some records, and someone would “borrow” their older brother’s or sister’s record player. By pooling records, you could spend an afternoon listening to a broader variety of music than you could get at any person’s home. If you look at pictures from the time, you often see groups of kids gathered around the record-player. Today, you see the individual with earplugs listening to iTunes. Music was a team-event.

Growing the Orchestra

Most large law firms, though certainly not most lawyers, accept that clients have moved from tolerating inefficient lawyers to expecting more efficient partners. Say the words “project manager” 10 years ago and you got a blank stare from everyone in the room. Today, ask a firm about project management and it will immediately jump to tell you about the firm’s program.

Project management and process improvement are just getting their start in legal service delivery. Lawyers have grown tired of hearing about them, so the number of conferences and webinars on the topics have dropped off. My friends outside the industry are astonished when I tell them that most law firms think they have control over the project management thing and aren’t that interested in learning more about process improvement. These are disciplines that take decades to understand and apply to complex work, yet lawyers think they have them mastered after 60 minutes.

It is difficult to explain to lawyers and firms the gap between where they are in these fields and and masters of the methodologies. More recently, I have used this metaphor. Imagine your five year old tells you she would like to learn to play the violin. Pleased, you take her to her first lesson which lasts about one hour. You sit in on the lesson, so you know what the teacher has told your child and can reinforce it during practice.

The teacher explains the basics of the violin. It is a stringed instrument, she explains. You can bow the strings or pluck them to make sounds. The teacher explains the parts of the violin, shows the basics of moving the bow across the strings, and how to hold a violin properly. The teacher then takes your child through the steps to play a few notes and asks the student to practice the tune during the week.

You leave the lesson with a happy child who goes home and promptly ignores the new violin sitting in its case. That night, your tell your husband about the lesson. Then, you say that you are ready to play a concert at Carnegie Hall. After all, you say, you heard the violin lesson, you are a lawyer, you got this because how hard can it be? Lawyers are smart and quick and can learn new skills in a flash. You must be a violin player, because you sat through that one hour lesson.

You have a few children and you repeat this exercise with each of them. The next week it is a clarinet lesson and the week after it is a flute lesson. Each time, you return home claiming you are ready for the big concert because you sat through that one lesson.

The story sounds ridiculous, yet I meet the lawyer in this story every week. After a one hour lesson in project management or process improvement, they feel ready to play the big house. “Of course I know project management,” they want to tell clients. “Yes, we are all over process improvement,” they proclaim to general counsel. The metaphor works for me, because the one-hour violinist is just as silly as the one-hour project manager or lean thinker.

Make Your Own Kind of Music

To keep the metaphor alive, I tell lawyers that if they really are looking for their place in the story about musicians, they are the composer. This shocks many lawyers, because they expect me to put them in the place of the conductor. Lawyers are not good conductors, as a general rule, but they fit naturally into the composer’s role.

A good composer understands the capabilities of each instrument and how to blend them to make the music. Each composition calls upon different combinations of instruments and explores their capabilities in unique ways. A good composer excels at blending these capabilities. The composer typically plays one or two instruments herself, so she understands the role of the instrumentalist, but her forte is not as the soloist it is as the creative person who can craft the beautiful music.

The conductor serves a different role. He helps the orchestra interpret the composer’s work. The orchestra is guided when to go faster or slower (adagio does not mean the same thing to everyone). He blends the voices, increasing some and decreasing others, so that the combination achieves what the conductor thinks the composer wanted.

If we translate roles, the conductor is the project manager. The members of the orchestra are the lawyers, process improvers, analysts, paralegals, and other legal professionals who form the team executing the composition. The composer is the lawyer whose creative vision (the structure of the deal) is being played out.

Many lawyers (especially litigators) believe they must be the conductor and some are very good at the role. But, that usually assumes that the client has no concerns about cost and is willing to pay whatever it takes to “win” the lawsuit. In some cases, the composer conducts and the outcome is fantastic. But “some cases” does not a rule make, and most clients are cost sensitive on most cases. Too many lawyers think they are Leonard Bernstein conducting the New York Philharmonic in the first rendition of West Side Story.

The Future of the Legal Orchestra

It is easy to overuse a metaphor, and I’ve probably already gone past the point of no return. But, perhaps the visual image will stick with you. It takes a long time, over many years and performances, to learn do something well. A good project manager or process improvement guru will have spent years polishing his or her trade. They did not just jump into the role. An astute lawyer should know that he must use talented people in each role on the team that is executing his vision, and that it would be bad for the lawyer to try to jump in and play a role for which he is unprepared.

Lawyers have great difficulty, having been trained in law school and law firms to rely upon their own skills, in ceding their autonomy to the group. In the early 1900s when legal “teams” meant two lawyers working together, the skill of the individual lawyer was paramount. Louis D. Brandeis did much of the work himself on many of his famous cases. Today, Brandeis would have large teams with dozens or more lawyers working on the same cases. The skill lies in leading the team. The leader must provide direction, but it is the rare leader who can provide that direction and give day-to-day guidance at the same level.

The 21st century buzzword for the orchestra in business and law is “collaboration.” Collaboration is the way today of explaining that team-event we used to do when I grew up listening to music. By pooling our resources, just as we pooled our records, we can improve over what any one of us could do on our own. It seems we are returning to the need to get along with one another.

By 2020, about 50% of the workforce will be freelancers. Law departments will realize they can’t afford dedicated staffs encompassing all of the skills needed to do the legal work for their clients. They will build ad hoc teams using combinations of dedicated staff, law firms, and freelancers who will work together for a project or tow and then disband (this already happens – think company, law firm, and Axiom).

While companies will use more freelancers with a wider variety of skills, the real change will be this: technology will be the glue that binds them. Instead of a world with dozens of software packages that don’t play nice music together, we will use platforms that interconnect with dozens of programs (SAP for lawyers). Corporations will plug in law firms, freelancers, and other parties as needed and then close out the team when the matter is done. As this happens, the team will get more creative, the tools more useful, and the results more powerful. Then we will really hear some beautiful music.

Industry Versus Specialty Focus: Tie Goes to the Lawyer

Posted in Leadership

IndustryFocusIn the 1970s when I first worked at a large law firm, new associates had only a few choices for substantive law practice areas when they joined a firm. They could choose the litigation department, the corporate department, or one of a handful of other practice areas. For example, large law firms still handled trust and estate work at that time.

Depending on the firm’s roots, those other choices might include tax, labor and employment, antitrust, or finance. Most firms did not break out smaller practice groups they just bundled them into the large blocks. The key, of course, was that lawyers were grouped according to their specialty and that grouping had nothing to do with clients.

For 100 years, clients seemed to accept that structure without complaint. But, I remember attending legal industry conferences 10 years ago and listening to in-house lawyers talk about what they really wanted from law firms. Five years ago I attended the same types of conferences and heard in-house lawyers say the same things. This year, I am again attending industry conferences and the message hasn’t changed. Clients want lawyers focused on the their businesses and industries. Clients want lawyers focused on what is best for clients, not for lawyers.

Whenever you see a sign that says “everyone should go right” but all the drivers keep going left, it is worth stopping to ask why? Why do we hear the same request over and over again from clients yet all the large firms go a different direction? Surely the law firms have heard what the clients say. If the firms aren’t changing and they are still doing well (and despite all the hand wringing, the vast majority of large law firms are still doing quite well), there must be a reason they aren’t changing.

The Clients Changed and the Law Firms Didn’t

In the early 1900s, organizing a law firm by practice specialty made sense. Firms were very small and covered many industries. The number of substantive legal specialties compared to now was much smaller. As the regulatory world expanded and firms subdivided practice areas, the balance of power still rested in favor of specialty over industry. There were exceptions, but the majority of firms served a wide range of industries. Organizing by industry was not practical.

Today, we have massive industries which have evolved into complex regulatory, compliance, and political environments. Lawyers may know the nuances of their specialty (often a sub-specialty), but trying to have comprehensive knowledge about the sub-specialty and a broad range of industries is asking too much.

As corporations evolved, client sophistication with legal matters evolved. The movement of lawyers from law firms to in-house, the increased reliance on in-house lawyers, and increase in size of corporations (which has increased the volume of matters in-house), have combined to create an in-house base of lawyers whose skills equal or exceed their outside peers.

Industries have their own languages, customs, networks, and problems. It takes a long-time to develop knowledge about those idiosyncrasies and integrate them into your advice. I started as a lawyer in a manufacturing company, but I spent most of my time practicing in the retail industry. As I learned, giving legal advice about an employment matter was very different in the two industries.

The Risks of Change

Talking about the situation raises the obvious question: why hasn’t a large law firm moved from legal specialization first to industry specialization first? As a gentle nod to clients, firms have developed a structure where lawyers from different legal specialties band together as industry focused. These ad hoc affiliations fall far short of what the consulting and accounting firms do to build industry expertise. As with most of the questions we post about the legal industry, we don’t know the answer and probably never will. But, we can guess.

First, even if one firm moved to an industry-first focus it isn’t clear other firms would move. In an industry obsessed with lawyers jumping from one firm to another or from firm to corporation, this creates a problem. The lawyer at the industry-focused firm becomes an expert on retail industry. Now, her firm stumbles or she wants to move on. Other firms will be concerned that she can only handle retail issues and they (being “the best change is no change” stalwarts) want lawyers who can work in many industries. The lawyer may find her movement limited. If she wants to go in-house, she may have limited the field to retail companies.

Second, lawyers are the ultimate “keep my options open” players. If a firm organized around a few key industries and those industries fell on tough times, the firm might fall on tough times (of course, tough times might mean more legal work, so this one can be hard to call). To large firms, specialization means taking more risk—a retail focused law firm could not become a manufacturing law firm overnight.

Third, building industry expertise takes time. Even if a firm has a large cadre of lawyers who have worked with retail clients, turning that work into a sophisticated understanding of the retail industry does not happen quickly.

Compare the depth of knowledge a law firm has about an industry (and of course there are exceptions) to the depth of knowledge a consulting firm has, and you will see the gap. It is hard to market your firm as the leader in retail legal services when your claim is based simply on lawyers representing clients in the retail industry on isolated legal matters.

Fourth, law firms face the same problem they face when confronted with any request to change. The current system has worked for a long time. The industry may be changing, but that doesn’t mean changing the firm will make things better and it may make things worse—pity the first mover when no one follows. The platform isn’t burning, so why jump?

Put simply, change means risk, lawyers do not like risk, so they prefer to stick it out. What clients want may be good for the clients, but it doesn’t sound better for the lawyers and in the event of a tie, the tie-breaker goes to the lawyer.

Clients Do An End-Around

What do the in-house lawyers do when the firms stay the path? They find the lawyers who do know them and their industry and then stick with them not the firm. In effect, they create a virtual firm of lawyers who meet their requirements. This virtual firm has many drawbacks, but it is better than the alternative of the lawyers who do not know the client and industry well. This is one of the reasons lawyers hear clients say: “I hire the lawyer, not the firm.”

The drawbacks include inefficiency and lack of innovation. The in-house lawyer is burdened with coordinating a network of lawyers who can meet her needs. Sometimes, the in-house lawyer must sacrifice using a lawyer knowledgeable with the industry to use someone less knowledgeable but in the same firm as a primary lawyer. For example, the corporate lawyer may know the client and the industry but not have a tax lawyer in the same position. The in-house lawyer will default to using the tax lawyer because of the firm connection even though there is a tax lawyer at another firm who does know the client and industry.

Innovation, something which large firms usually do not provide and (though there is a lot of debate on this point) at least some clients seem to want, comes hard when the firm does not have client or industry expertise. How do you suggest innovative ideas for emerging legal issues and ways to efficiently deliver those legal services when you just don’t know what is emerging?

This view is somewhat at odds with the law firm convergence movement, where clients have reduced the number of law firms they use from hundreds to a dozen or so. Many in-house lawyers have had to give up using the outside lawyer who did know the client and industry in favor of the law department’s perceived greater good. Many clients have gambled that, with no large firm having industry expertise, picking a firm and hoping it will develop that expertise through concentrated work is better than what existed. And, of course, some clients have converged on the firms that do have some industry expertise and plan to build on it.

Time to Move Along

What clients seem to want is not what lawyers want to deliver and a stalemate has emerged. Will the tie-breaker go to the disruptor? Will we see new providers emerge who are focused on an industry? Yes, we have some smaller firms that do so, we have boutiques, we have large firms with some niche practices, but we really don’t have any larger players who offer a soup-to-nuts set of legal services focused on an industry.

I recently used the word “kaleidoscope” to describe what the legal industry will look like as it evolves from the current one-type-fits-all model. Within that wide set of options, we could see, for example, a retail-focused consulting firm forming a partnership with a retail-focused law firm to offer clients a retail solution set, much like we saw audit firms connect to (but not merge with) consulting firms. That type of combination would provide some interesting solutions and ideas for clients (and I pick on retail since I know the industry it represents almost 30 percent of the nominal U.S. GDP).

Whether we see the law firm-consultant combination, a large law firm organized along industry lines, or some other variation, it would be nice to go to these conferences in another five years and not hear the same in-house lawyer problems from the last 10 years. It is time to move on.

A Note to Entrepreneurs About Calls

Posted in Strategy

CallMeOne of the great privileges of doing what I do is having entrepreneurs call me to talk about their ideas. Many of the conversations I have are very interesting and enjoyable. The entrepreneurs are excited, they have thought long and hard about the problems they are trying to solve, and they are doing creative things with technology. After those calls, I have the feeling the legal industry really might change.

I do get some calls, however, that do not go as well. The callers want to tell me all about their tech, and then clearly want me to praise what they have done and tell them they are the next Zuckerberg. When I try to have a conversation with them, I hear “we have thought of that”, “we have solved those issues” or “we are quite familiar with the industry.” Even if all those statements are true, the point is they aren’t listening. In fact, in those calls the entrepreneur typically spends 80% of the time talking. Yuk.

This post is my guidance to all of those who want to talk with me about their ideas. Again, I feel very fortunate that you want to talk with me, so thank you. But, to make sure we both get a lot out of the conversation, I’d like to share with you why I am making some suggestions, my suggestions for what not to do, and my suggestions for how to make these calls worthwhile. Most of what I say applies not just to talking with me. It applies when you talk with anyone about your idea.

Where These Suggestions Come From

These suggestions come from several sources:

1. My experiences from when I was an entrepreneur.

2. My experiences teaching entrepreneurs (in many settings).

3. Reading what others recommend entrepreneurs should do during these calls (i.e., angel investors, venture capitalists, private equity investors).

4. Talking with others like me who get these calls.

I want to see every entrepreneur I talk to succeed. It is incredibly difficult to work as an entrepreneur and we need many more successful ones in our industry. So I am making these suggestions, because I think they will help me assist you.

What Not to Do

Before I get to my suggestions, let me suggest some things that you should avoid doing in a call with me or anyone else:

1. Talk down to me.

I may be the least intelligent person you will talk to this year. Don’t talk down to me, treat this call as an opportunity to learn how someone less knowledgeable than you views your product or service. Lawyer-entrepreneurs especially fall into this trap (the arrogant lawyer turned arrogant entrepreneur). If you have done your homework before the call, you should know enough about me to carry on a conversation at the right level.

2. Lecture me about the industry.

I want to know about the problem you are trying to solve and that should be a target customer problem. Telling me what you think the problems are in the legal industry doesn’t help either of us.

3. Try to impress me that you know it all (or have solved all the problems).

I know you don’t know it all and I know you haven’t solved all the problems. Trying to convince me otherwise is not a good use of your time. Besides, no matter what you think, you don’t know it all and you haven’t solved all the problems.

4. Name drop.

Some entrepreneurs try to impress me by telling me the names of the law firms, companies, or other advisors with whom they are talking. Don’t. First, your object should not be to impress me, but to find out what I think. Second, this isn’t a sales pitch. If you want to explain that your product has been tested in large law firms or corporations, you can do so without name dropping (“we have done beta tests in three AmLaw 100 firms to find out how our product works in that environment”).

My Suggestions to Entrepreneurs

Making these calls work well and serve a very useful purpose is not hard, but it requires a bit of planning and some discipline. Most of the work is necessary for all the calls you will do when you want to talk with people about your product or service.

1. Have a plan when you talk to me.

Most entrepreneurs do not have a plan when they call. Instead, they talk about their product followed by a “whadda ya think”? That isn’t a plan. Start by assuming that if you scheduled a 30 minute call, you only have 30 minutes. We may go longer because I have a lot of questions or thoughts, but assume that won’t be the case. Now, you need to plot out how to use those 30 minutes.[1]

2. Don’t just jump into the pitch.

This can be a very cultural thing. For example, if you go to China and just jump into your business conversation with a stranger, you may find whoever you are talking to isn’t that impressed with you. It is better to start with a minute or two of appropriate socializing. The same is true for these calls. Spend a minute or two talking with me about us, our industry, common friends, etc. This isn’t wasted time, it is time spent building a relationship and finding some common ground.

3. Make sure you know something about me.

I get many calls because people read my blog posts or articles or hear my presentations. But, surprising to me at least, often these people have not looked up my background (I’m on LinkedIn). Without knowing who I am, they waste time on the call talking about things they would not talk about if they new my background (“I know you work at a big firm, but you would think differently if you worked in-house”). Spend one or two minutes on the call making sure you are up-to-date with my background. An easy way to do this is to ask what type of things the person you are talking to is working on. Knowing who you are talking to gives you some perspective when you think about what they say.

2. Tell me a story.

Many entrepreneurs just launch into a presentation of all the features they have built into their product. In other words, they start off by trying to impress me with their solution. I want to hear the story that connects your idea with the problem. It doesn’t need to be a long story, but it should start with the problem. I am expecting a crisp, well-defined description of the problem from the perspective of your target customer. Again, this probably takes two minutes.

3. Give me the solution in a well-run demo.

This is where many entrepreneurs go off the rails. First, they have designed a lot of features into their product (which hasn’t been released or is just being released). Often, that is a danger sign because it means they are throwing on features without getting proper feedback about what their target customers want. Second, it means they are focused on the features, not the problem. They also have problems because the demo wasn’t polished and tested before they get me on the phone. Spending time trying to get the demo to work, find the files you need, or explain half-baked features isn’t a great use of time. The demo should take about 15 minutes.

4. Run some tests.

This is another place where entrepreneurs go off the rails. Try some tests on me. One thing to test is pricing—and tell don’t ask! It is much better to say “we plan to use a per seat pricing model starting at $250 per seat and then dropping the price at 50 seats and again at 100 seats” and asking me what I think, than to ask “what would you pay”? You can test other marketing ideas, but tell me what you plan to do and ask for a reaction. Spend about three minutes on your test.

5. Have a closing.

As I said, most entrepreneurs jump right into the demo, run out of steam at some point, and then ask for a reaction. They never get to important points and they don’t know how to close. After you run your tests, have a wrap up. Yes, you should thank me for my time, but you can do more. Ask for permission to follow up with me (ask, don’t tell). Also, ask for referrals. You want to keep building your network and not asking for a referral is a lost opportunity.

6. Document.

When you get off the call with me, make sure you finish documenting our conversation. Whether you agree with everything or nothing that I said, make a record of it. You will forget it soon after (you are an entrepreneur and have moved on to 50 other tasks). Your interview is part of your database that helps you shape what your are doing.

Calls with target customers and people familiar with the industry should add a tremendous amount of information to help guide you in developing your product or service. If you use them properly, you will find your product becomes more useful to those who buy it, you will spend less time developing features or following useless paths, and you will have a much higher “that was time well spent” feeling. Don’t just make the calls because that is what you are supposed to do, make them with a purpose and a plan. Thank you for listening, I hope to talk with you, and good luck!

[1] Ash Maurya gives some nice suggestions about how to conduct solution interviews in his book, Running Lean (p.103).

A Root Cause of the Innovation Problem

Posted in Innovation

DataAccessAccording to AngelList, there are over 1,000 startups focusing on legal industry solutions. But, as Keith Lee points out in a nice post here (and you should read the comments) that number is inflated. After pulling out the long-departed, large firm “startups,” and other misfits, the total number of legal industry startups drops. And, of course, startups do not have to register on AngelList so there are many out there not included, which would increase the list. Still, if you are a traditional lawyer, pause to let the AngelList number sink in. Even adjusting it, there are at least several hundred entrepreneurs gunning for ways to switch legal work from your clients to their businesses. Yeah, most of them will not succeed. But when it comes to your clients, it may only take one success.

I often write that large law firms are not the place to look for real innovation, spelled with a capital “I.” This isn’t some failing of large law firms. They were not built to be Innovation engines and until very recently, no one expected them to Innovate. In fact today, most clients still do not look to them for Innovation.

Could they change? Maybe. But about 80% of culture change efforts fail, a number that has held for decades. Even if a large firm did want to change, the odds are against it and even if it did succeed, the amount of change needed to go from today’s model to one that would succeed with Innovation is huge. And then there are the clients.

I have read many stories featuring an apologia for clients. The authors all give reasons why clients do not push for change. In some cases, they argue that clients should not have to push for change. I have found, through teaching at a law college, that Latin has worked its way out of law so I’ll put this in English: poppycock!

For twenty years I was a client—if you want change you will get it and especially today. First, much of the change can be had with a simple phone call. The many existing alternatives to law firms are ready to show up in response to a simple call. Drop a note to your law firm that you will be meeting with firm X and you will see how fast your old firm becomes interested in making changes. So let’s be serious. Law departments’ interest in change is not much more than law firms’ interest in change. I have yet to see a law department re-invent itself using Innovation. Incrementalism abounds!

I may be pilloried now for my heresy, but I believe I am on pretty firm ground here. Some departments use more technology than others, some have tried more alternative service providers than others, and many profess to be more forward-thinking than their peers. But none, as far as I am aware, have re-invented how they deliver legal services. We talk about disruption, but when the best we can muster is about $8 billion out of $275 billion of services shifting from firms to lower cost labor, disruption is at an early and unsophisticated stage.

Why?

When I was in Japan being re-trained into a lean thinker, I was taught to incessantly ask one question: Why? Ask the question, don’t accept the answer, ask it again, and so on. By following this approach, I and my colleagues would eventually get to the root cause of a problem, attack it, and see improvement.

I have asked many times why we are not seeing Innovation in law, and see instead innovation or no change at all. In lean thinking we talk about using the “5 whys” but here I think I have well-exceeded the target of five. I have found a lot of explanations, some excuses, and many theories. I am sure somewhere in there lies “The Truth,” but so far it has not been apparent. That probably means that there are many reasons and the mix of reasons varies by law firm and even lawyer.

Can we at least say things are starting to change? There are signs that among those startups, we have some innovators and possible some Innovators so Innovation may come to the legal industry. In the meantime, those startups are giving us clues to what may be a root cause worth revisiting—the lack of data that could be used to drive Innovation.

You may have heard about the data challenge, so my root cause announcement won’t come as a surprise to you. The legal industry in the United States, and more so in many other countries, still locks up most of its data and provides no access, limited access, or expensive access. In a world where access to data is starting to define those who will have the most power, the lack of data access should be troubling. Data does not stop anyone from Innovating, but data sure makes it a lot easier to do a lot of Innovation.

There are, of course, many who have tried to attack the legal industry’s lack of access to data problem. I will not try to list them all, because I will miss many of the key players. Perhaps the best known is the Legal Information Institute at Cornell. There are many others. The most recent entry is the joint Harvard/Ravel Law effort. They are scanning United States case law and will make it available over time to everyone.

All of the parties who are pushing for “open access” to data in the legal industry are helping reduce the problem, and even the U.S. government is in on the action. The data.gov site is a treasure trove of information that as recently as a couple of years ago was not available.

Could Massachusetts Trial Courts Spur Innovation?

An interesting situation to watch will be the invitation of the Massachusetts Trial Courts for public to comment on the “Proposed Trial Court Rule XIV Uniform Rules On Access To Court Records.” As you might expect, access today is a bit haphazard. One group (and I am a signatory) has proposed an “API” approach. An API is an application programming interface. Simply put, it gives programmers a way to connect to a data set and extract information. A public API means anyone can connect and get the information. For example, the Securities and Exchange Commission has a public API for its EDGAR database, allowing anyone to access and download documents filed in the EDGAR system by public companies.

If Massachusetts introduced API access to its system and then other states used the same approach (or the states reconciled to a common approach), we all would have access to information already “public” but basically inaccessible. That data access would spur innovation. Researchers, law firms, entrepreneurs, and yes, even the public, could go online and access the materials that already are part of the public domain, but are sitting in closed file cabinets and boxes. (And by the way, documents filed under seal would stay under seal, so an API does not mean making public that which is private by order of the court.)

You Know You Aren’t an Innovative Industry When …

The House of Commons heard from an MP recently. It seems the House of Lords, without consulting the House of Commons, decided to stop the practice of recording laws on vellum and switch to paper. The MP was calling this to the attention of the House, because many MPs disagreed with the decision. There is much to be said for a 1,000 year-old tradition. But, pause for a moment and consider how your tech clients would think about a similar discussion in the United States.

Most of the data the legal industry could use still remains buried in files and computers, inaccessible to the world or at least inaccessible unless you are well-funded. For example, only a few states make appellate briefs available online. If you want to get materials from federal lawsuits, you must pay PACER—an irony since other government agencies are posting data on data.gov, but the judiciary is relying on a statute to charge us for access to its data. You can get some of this material from other databases (such as LexisNexis or Westlaw), but again, you must pay.

I am not ranting against capitalism. I understand that there are costs to making the data available and that agencies outside the judiciary charge for some information, such as in response to Freedom of Information requests. I also do not harbor a grudge against companies taking the data, adding extras, and charging for access to the enhanced package.

But if we (the public, scholars, researchers, etc.) do not have access to the basic data (and cost means lack of access) then we will see innovation stifled. This argument comes up frequently today, as large players in search and social media create enormous data sets. They have the data for innovating that others will not be able to replicate (or at least, not without great cost and difficulty).

The tipping point for Innovation in the legal industry may come when someone creates or gets access to the data. Many thought the major legal publishers would do this, because they already have access to great treasure troves, much like the large search and social media companies. So far, we have not seen it happen, but competition from disruptors may force that to change.

Another possible source is the large accounting firms. They have the resources to drive significant change and to acquire or build data sets, but again we have not seen much happeN. Right now, they seem to be benefitting from the same client lack of interest in re-invention that I mentioned above.

A final thought on the data issue. Many still believe that value in the legal industry comes from having the data and controlling access to it. This was the model large law firms used back when I started practicing. To get to the data, you needed to call your outside lawyer. Then, legal publishers and eventually the all-powerful internet broke through that wall. Large law firms could not control access to, for example, documents. Any lawyer could get a document to use as a template. Value came through knowledge and large law firms moved away from believing access was the choke point. This wasn’t access to data, but it was a start.

Just as moving away from a labor-centric model will be necessary for lawyers in firms and departments if they want to avoid obsolescence, moving away from hiding data will be necessary for the legal industry to spur Innovation. Imagine what would happen if the world had access tomorrow to the data locked in all of the file cabinets in all the courthouses around the U.S. Could we radically change the litigation model to reduce the cost? To even eliminate much of the burden litigation puts on society? Access to data raises many important issues. In the legal industry, perhaps the most important one is: why aren’t we making access to data happen?

Do We Have Too Many Elite Law School Graduates?

Posted in Change, Leadership

EliteMany years ago, I stepped away from practicing law for a while and ran a large manufacturing and distribution facility. I had started at the company as a lawyer, but almost overnight I became a vice president and general manager leading over 500 people (soon to grow to 700). I had an MBA, which meant I had some classroom leadership training, and before law school I had worked for a few years so I had some exposure to working outside the law firm environment. But, I also had 15 years in law firms and departments and law school training, so by the time I got the job my leadership skills had been ground almost to dust.

As a manufacturing and distribution facility, this operation needed line shift supervisors. These individuals were really the first level leaders in the organization, at least by title. For eight hours, a line shift supervisor had around 50 to 70 individuals reporting to him or her. The line shift supervisor was much more the boss than I was as general manager.

The line shift supervisor was part of the management pipeline. The company had shifted from a traditional manufacturing setup about three years earlier and was now at the beginning of its transformation into a lean manufacturing organization. We had re-organized production lines into factories. A line shift supervisor worked in a factory and reported to the factory manager. The factory managers reported to me. When we thought about succession planning, the line shift supervisors were part of the chain leading to the general manager role (except for oddities like me).

Our facility operated five days a week with three shifts and during busy periods that expanded to six days a week with three shifts. We had six factories, which meant a minimum of 18 line supervisors. But, we also had distribution (three more supervisors) and speciality shops so we had around 25 supervisors when fully staffed.

Being a line shift supervisor on a production line was a demanding job, especially in a facility going through a lean thinking transformation. In other words, we often were not “fully staffed.” We regularly looked at prospects in the facility and interviewed candidates from other companies. When I started, the HR director would bring in the candidate, have him or her interview with some supervisors and factory managers, and then ask me to interview those who made it through the gauntlet. I would interview the candidate and promptly reject him or her. We did this dance several times before the HR director had a meeting with me to discuss life in the facility.

The HR director had worked for one of the best manufacturing companies in the world. He was on the last stop in his career and he and his wife were going to retire in the somewhat remote corner of Georgia where the facility was located. He had a lot of experience and wisdom. He explained that, while my goal of finding the best of the best was nice, it wasn’t realistic. In a facility that needed 25 line shift supervisors, not every one had to be a potential factory manager or general manager. We needed many who were really good and comfortable with line supervision, and a few who fit into the pipeline. Put into another language, I needed to stop looking for equity partners and find competent associates.

The Wrong Mix

Roll forward many years, a few jobs, and a lifetime of talking to lawyers, and I have a new theory I would like to test: we have too many graduates of top law schools. I do not mean this in the way that many talk about law schools overall graduating too many students. I mean this as a proportion of the total graduates. Whether we graduate 50,000 or 20,000 each year, do we have too high a percentage coming from the elite schools? This is a blog post, not a law review article so I will not explore every argument and permutation. For example, one assumption I make is that the mix of legal work has shifted towards more routine work and less creative work. That may be a very bad assumption (another thing we would need to test). Think of this as the famous 30,000 foot view.

Let’s start by taking some arguments off the table. We can assume that as the demand for graduates increases or decreases, the mix of graduates needed varies. That is, at times we may need more graduates who can become judges and at other times we may need more who can provide routine legal services. This isn’t an evaluative statement (one is better than the other), just a recognition that the needed skill mix varies among jobs.

Another argument is that students at elite schools have better skills, on average, than students at other schools. As you will see, my argument isn’t that some skills are better or worse, but they are different. In other words, elite school students have a different mix of skills than students in other schools.

With those two arguments addressed, let me move on to the theory. As we know, graduating from an elite school means passing through a series of filters. A student must get from high school into college (grades, test scores, extracurricular activities). The student must then get through college and get into an elite school (test scores, grades, extracurricular activities, jobs, other). Once into an elite school, a student has an extremely high probability of graduating. He or she must pass a bar exam, but that is not much of a barrier (passage rates are above 90% for many, maybe all, of these schools).

Students who go to other schools must pass through the same filters, but the filters are more porous. They let in more students. That means the variation and mix of skills is greater. Again, I am not saying some skills are better.

The Hiring Filter

For many decades, the filters used by large law firms to screen law school graduates have focused (not exclusively, but mostly) on three areas: 1) school, 2) grades, and 3) journal membership. In fact, this system (excluding journal membership) dates back to the early 1900s when Paul D. Cravath came up with what is known as the “Cravath System.” There are many aspects to the Cravath System and it often is mis-described. But, one component was hiring associates from the top of the class at the best law schools (Harvard and Columbia, at the time).

Cravath’s approach made sense in the early 1900s for a firm doing high-end corporate work. The variability among lawyers was significant, in part because of training variability. Many lawyers were trained as apprentices, some had a mix of apprentice and classroom training, the few law schools that existed varied widely in quality, and many lawyers had no undergraduate training. New lawyers varied widely in quality and skill. By setting certain filters, Cravath was narrowing the variability of lawyers his firm would hire.

The legal system also was at a different stage in development. In the early 1900s, we had not gone through the tremendous explosion in statutes that we face today. Lawyers had more creative freedom (fewer constraints) and so skill included a heavy dollop of creativity. It is not hard to imagine that lawyers with more and better training may have faired better in that situation. Today, we face a world with a tremendous number of legal restrictions and those restrictions grow every day.

Once Cravath established his system, it grew from firm to firm and even jumped species. Accounting firms, consulting firms, and other professional firms have used the Cravath System. Over the years, however, the conditions that gave rise to the system have changed and, of course, how it was implemented has changed. But, one thing has remained constant: there still is a strongly-held belief, at least in many law firms and law departments: hiring a graduate of an elite school is better than hiring a graduate of another school for one’s law practice.

We Need More Line Shift Supervisors

So this is my theory. It is only a theory and we would need to test it. As the demand for law school graduates drops and enrollment drops, many have argued that the pool of applicants has dropped. That is, we see students with lower grades and admission test scores applying for school. At the elite schools, this change has not made a difference. The elite schools have been over-subscribed for a long time, so the mix in skill performance of elite school applicants has changed little (or if it has, it has changed among the many not accepted, not among those accepted). The change has been felt in the other schools.

The elite schools also crank out graduates at basically the same rate as before the drop in enrollment, while other schools graduate fewer students. That means the total mix of graduates changes and, presumably, the percentage of elite school graduates increases.

As the number of jobs for law school graduates decreases, and given the bias toward hiring graduates of elite schools, the mix of graduates hired shifts. Again, the percentage of elite school graduates among those getting jobs becomes higher and graduates from other schools disproportionately do not get jobs.

As law is becoming, in many cases, not a creative endeavor but one focused on large amounts of routine work, navigating statutes, turning out repetitive documents, and doing other tasks that require depth of knowledge in an area and strong technical (drafting) skills, the mix of what we need from graduates varies from the mix of skills we get. We have jobs that need people equipped to do more routine work and we are filling them with lawyers trained to be creative.

Going back to my manufacturing days, we are hiring supervisors as if every one should become a general manager when what we really need are good line shift supervisors. We know that even elite school graduates are having more difficulty finding jobs, because, among many reasons, traditional employers (large law firms) need fewer associates. Part of this is because the world is (very slowly) moving away from a labor-centric model, but my theory is part of this hiring reduction is due to a shift in the mix of skills needed (for example, firms use contract counsel rather than associates).

If this theory is correct, one logical solution would be to reduce the number of graduates from the elite schools, and increase the training in certain skills at the other schools (I’m not holding my breath). What skills? The lawyers at these other schools would need significantly increased training in how to work with computers, project management, process improvement, and similar operation skills. Their jobs will require more operational expertise. Knowing the law will help them, but they will spend less time creating novel legal solutions.

The reduction in graduates from the elite schools would help us match demand for elite school skills with supply. I am presuming (another theory to test) that elite school students find operational level lawyer jobs less satisfying. They also may not have certain skills at the levels employers need to do much of the legal work that needs to be done.

Altering the Ecosystem

At one time, it made some sense to have lawyers trained as generalists and have them ready to do whatever came across the threshold. Today, that approach does not make sense. We need lawyers with various skill mixes because lawyering has become a profession with a broad range of demands. This isn’t an elitist theory. It is a theory that recognizes ecosystems work best when the participants have various skill mixes and those mixes are tailored to what the system needs, instead of skill mixes set as if everyone does the same thing. Law schools still act, from admissions through curriculum, as if all participants in the ecosystem should have the same skill mix. A legal ecosystem where all participants are the same is like giant grove of elm trees. It looks nice at the outset, but pests and disease realize there is a feast to be had. The ecosystem suffers and, without change, dies. It would have been better to have a mix of types in the grove.

The Modular Legal World

Posted in Efficiency, Technology

ModularityLawyers think about things in somewhat discrete units called matters. No one has a formal definition of matter we all must use, but we all know them when we see them. A lawsuit is a matter, a contract is a matter, a policy is a matter.

We have, of course, managed to confuse this neat world by using “matter” indiscriminately at times. If you do a lot of over-the-phone counseling for a client, your system may show “Grady Counseling” as a matter. We also collect things, like all the work necessary for company A to buy company B, into a matter we call “A Acquisition of B.” This matter includes many contracts and other documents, counseling activities, and other tasks.

When we talk about matters which include multiple tasks—that is, when we refer to matters as collections of tasks rather than discrete tasks—we create the possibility and usually the reality of a networked system. “A Acquisition of B” includes contracts and other documents, some of which are based on templates taken from “X Acquisition of Y.” These matters are now linked through a common document template, the asset purchase agreement template.

Active law practices have lots of networking, or linking, because templates get used often. I may have a standard form or motion I use in litigation, a basic form of will, or a standard ERISA 401k plan document. The more often I use it, the more networking affects my system even if I modify it for each particular use.

We can think of each template as a module that gets used and re-used in our network. That module addresses one thing. But, we can plug the module into many situations which need the one thing. Using the module stops us from re-inventing the wheel each time we need whatever the module covers. Using the example above, you would not want to draft an asset purchase agreement from scratch each time you had a client making an asset purchase. You use a template (the module) which allows you to customize the basic template.

The Modular Office

Although programmers have used modules for a long time, certain of the key programs most lawyers use are not modularized when viewed from the user’s perspective. The most famous programs comprise the Microsoft Office Suite—Word, Excel, PowerPoint, Outlook, Access, and OneNote. Office (in one of its many forms) has about 1.2 billion users so anything involving Office could have a massive impact.

Microsoft has explained many times that the organization’s focus is moving toward the cloud and mobile computing. Neither is a surprise as these are overwhelming trends in the tech industry. The interesting note here is that Microsoft also plans to modularize Office. What does this mean?

Start with how you work today. If you want to write a document, you open Word. If you want to crunch numbers, you open Excel. And if you want to tell a story, you open PowerPoint. Behind the scenes, these and the other Office applications share data and processing modules, but to the user they are three separate programs. With the evolution of mobile computing, things get a bit more complicated because some of these applications are easier to use in the desktop world and some work just fine on a smartphone.

Microsoft’s vision involves looking at the “problem” from the user’s perspective and re-defining how the applications work based on what the user wants to do. One example given by the executive vice president of Microsoft’s Applications and Services Group is the post-meeting distribution task. After a meeting, you need to circulate the notes and PowerPoint deck from the meeting to the attendees. Doing this task today would involve using parts of different applications. Tomorrow, in Microsoft’s view, you could simply ask (orally) your computer to do the task. It would know the meeting, the PowerPoint, and the notes and send an email (via Outlook) of the relevant documents to the meeting participants.

Modularity and the Augmented Lawyer

Microsoft’s focus on the modular Office product takes us in the direction of what I call the “augmented lawyer.” This lawyer combines human skills and computer capabilities to deliver solutions to client problems. Augmented lawyers look for ways to combine the best of what computers can do and the best of what humans can do to find higher quality, lower cost, and more timely solutions to client problems.

The augmented lawyer could use the new form of Office to accomplish many tasks faster and with better quality. Assembling a motion for summary judgment might happen when the lawyer asks the computer to assemble the various parts into an e-filing document. Quality increases, because each time we take the human side down and bring the computer side up we have an opportunity to reduce mistakes (when we don’t get better quality, we typically had a process design issue not a computer problem).

Modularity is another way of talking about disaggregation. At the macro level, we can disaggregate projects into tasks and operations. At the next level, we can disaggregate tasks and operations into components done by humans and ones done by computers. As we disaggregate and automate (again, putting aside our mistakes in re-designing the process), we make improvements. Each improvement may seem small, but over the course of days, weeks, and months these small improvements can mean the difference between a viable practice and one that is too inefficient to survive.

Modularity is Coming to Legal Services

Lawyers who have not already done so need to think about modularity in their practices. Having lawyers in a firm or law department continuously repeating what others have done does not add value. When several lawyers, each sitting in his or her own office, review and revise contract terms that that have been beaten to death by generations of lawyers, clients get poorer and lawyers get richer but value is not created. Lawyers’ desire for autonomy needs to become subservient to clients’ desire for for improvement.

One of the early hallmarks of becoming an effective augmented lawyer will be adopting the modularity concept. Lawyers, firms, and departments that do so will see significant efficiencies and quality improvements, and most likely many other benefits. For those who move first, it will give them many opportunities and a significant lead over their competitors. The danger of being the first-mover and choosing Betamax over VHS exists, but only for those who act by tying themselves to an inflexible structure. Another hallmark of the successful augmented lawyer will be avoiding the urge to become inflexible.

Microsoft’s vision is one example out of many about where software is headed. Law firms and departments have tended for many years to prefer enterprise systems or network systems that, once installed, are difficult to adapt to rapidly changing worlds (and expensive). While the future always is murky, focusing on modularity in both computer systems and legal practice design will enable lawyers, firms, and departments to move quickly and focus on client needs rather than face the titanic task of changing course every year (or less) in the new, competitive, legal world.

Checkers, Chess, Jeopardy, Go … Law (Part II)

Posted in Technology

LawGameIn part I of this two-part series, I covered the history of computers versus humans playing perfect information board games. In part 2, I talk about what lawyers should take from Lee Sedol’s recent loss to AlphaGo in a five-game Go match. Given the length of the series, I have cross-posted the entire piece on “The Algorithmic Society.”

When Thinking About Automation, Think Tasks Not Jobs

While no one is suggesting that board games are one step away from practicing law, AlphaGo’s significant step forward from Deep Blue and Watson suggests why lawyers must embrace a different future. I call this future the “augmented lawyer.” Lawyers leverage the growing power of computers by using them to handle “power and volume” tasks while lawyers contribute skills computers have not mastered.

Artificial intelligence is not an “either or” situation, often phrased as either the computer can do the lawyer’s job or it can’t. Lawyers’ jobs are composed of thousands of tasks. Some tasks are extremely complex, but many are very simple. Most are mixed. Legal service processes can be disaggregated, for example, during the lean thinking exercise of process mapping. Once a process is disaggregated, the question is whether computers can automate a task or even part of a task. AlphaGo’s win shows there are many tasks lawyer do that computers can learn.

We already have seen computers tackle legal tasks that require significant power or involve lots of data. Consider Shepardizing a case. Shepardizing is a term that dates back to before the modern computer era and comes from a series of books published as Shepard’s Citations (named after the original author, Frank Shepard). Shepard’s books listed all of the published case decisions by federal and state courts. They were arranged by citation. Underneath each case citation heading, Shepard’s listed subsequent cases, that is, cases referencing the case cited in the heading. Shepard’s used symbols to indicate why each subsequent case cited the heading case (overturned, reaffirmed, questioned, cited, etc.).

Lawyers want to know whether the cases they present to judges in briefs are still good law. To Shepardize using books, the lawyer would look up the main citation in the most recent bound Shepard’s volume. Then, she would move to unbound volumes covering each month since the last bound volume. Then, she would move to small booklets covering the weeks since the last monthly volume. She had to repeat this process for each case cited in her brief.

Once she knew all the cases citing a case in her brief, she had to decide which ones to review. If Shepard’s listed five cases citing her case, she might not need to read all five. But if Shepard’s indicated any of the subsequent cases had questioned, limited, or overturned her main case she had to read the subsequent cases. That meant going to the library, tracking down the book with the published case and either reading it right there or photocopying it for later reading.  If there was a significant lag between finishing the Shepardizing process and filing the brief, she had to check each case against the latest small booklets. Junior associates had the pleasure of Shepardizing and it took quite a lot of time and client money.

The Shepardizing process is quite different today. Software automatically checks each citation in a brief against databases of published decisions. Within seconds, the lawyer has a list of all cases citing any of the cases in her brief. By clicking on a link, she can go directly to a citing case and the place in the case where the citation occurs. The tasks of finding the citing cases and tracking down the published decisions have been automated, significantly reducing the time spent on those tasks. If there is a lag between Shepardizing and filing, updating means clicking the button again and checking any new cases. Lawyers still must read the citing decisions and draw conclusions about whether those cases have any impact on the case they cited. Large Parts of Legal Service Processes Already Can Be Automated

Most legal service processes involve this combination of tasks amenable to automation and tasks that lawyers still must do. The question is not whether the computer can replace the lawyer, but which tasks the computer can do more quickly, less costly, and with higher quality than the lawyer. The number of tasks where the computer excels is growing, but lawyers resist change and are holding on to those tasks. That resistance increases costs to clients while also reducing quality.

The false “either or” dichotomy masks a continuum. By using process mapping, continuous improvement, and workflow automation reviews, lawyers can construct a pipeline where processes have waste removed and tasks move to automation when the timing and cost make sense. Instead of fancy, complicated software systems lawyers can use simple, low cost and easy to modify automation tools.

A recent article by Michael Chui, James Manyika and Mehdi Miremadi in the Harvard Business Review made estimates about the percentages of daily tasks knowledge workers perform that could be automated. Thirty percent of the tasks performed by knowledge workers can be replace with current automation. Add to that another 20% reduction in tasks from taking waste out of processes (waste reduction estimates range from 20% to 95%, so using 20% is conservative). That means lawyers should be able to get a 50% reduction in the tasks done by attorneys be eliminating or automating them without significant spending or overwhelming time investment.

AlphaGo’s Victory May Be A Tipping Point

AlphaGo’s victory does not mean a defeat for lawyers. But in three ways it is a warning.

First, given that only a year ago experts were predicting it would take a computer another decade to beat a human at Go, it shows the pace of machine learning development is faster than anticipated. The more lawyers resist automation, the farther behind they fall. The faster computers move up the machine learning curve, the greater the gap between what computers can do and how lawyers use them. This will accentuate the difficulty of becoming an augmented lawyer.

Second, lawyers base many of their arguments against using computers in legal services delivery on the distinction between rote tasks (find all documents with the word “discriminate”) and legal thinking. AlphaGo’s use of something akin to intuition shows that, at a minimum, computers are capable of more in law than their critics had claimed. In truth, this already was the case but the AlphaGo win makes it more apparent.

Third, lawyers argue that the cost of training a computer system outweighs the benefits received from the trained system when it comes to the legal tasks that system could do. Hassabis’ statement that AlphaGo will be able to train itself how to play Go and defeat a human player in less than a year shows that the upfront burden of bringing computers into legal services will soon be, or already is, dropping.

Today, anyone with a Macbook, a basic knowledge of Python programming, and access to a data set also can turn loose machine learning on a problem. Many machine learning programs are readily available. Google is even making some of its work available (see TensorFlow, an open source Machine Learning system, now expanded by Cloud Machine Learning “a framework for building and training custom models to be used in intelligent applications”). While good data sets are hard to come by in the law, they are becoming more accessible every day. Soon, we will have all reported U.S. caselaw available to scholars and not long afterward, to everyone. With greater dissemination of the tools and more access to data sets, the power of computers to automate legal tasks will grow and at a faster rate than it has grown before.

No one should minimize the difficulty of jumping from what AlphaGo did to understanding and manipulating language and higher level legal thinking. But assuming some barrier exists is foolhardy. The question is not if, but when. Lawyers must take heed and fully engage in understanding how to work with computers more effectively as part of an augmented lawyer practice. It’s time to go.

Checkers, Chess, Jeopardy, Go … Law (Part I)

Posted in Technology

LawGameThis is part I of a two-part series talking about what lawyers should take from Lee Sedol’s recent loss to AlphaGo in a five-game Go match. Given the length of the series, I have cross-posted the entire piece on “The Algorithmic Society.”

A shudder of excitement went through the tech world recently and its epicenter was Seoul, South Korea. There, a computer named AlphaGo played five games of Go against Lee Sedol, a South Korean master of the game ranked fourth in the world. AlphaGo won four out of the five games. Long considered a difficult and perhaps impossible task, a computer winning at Go suggests that computers are moving closer to taking over some human tasks much sooner than we imagined. It also was a strong volley by Google to be the company whose algorithms drive the “thinking” behind the takeover.

Yet, of the approximately 1.25 million lawyers in the United States, it is safe to say that few read about and understood the significance of the victory, some saw the headlines but skipped the stories, and many did not even know the match took place. AlphaGo’s win over Sedol will be one of those moments lawyers will look back on and see as another tipping point they missed. The event that shook the technology world caused barely a tremor in the legal world.

What is Go

To understand the significance of AlphaGo’s win, you must understand something about Go. The game originated in China and dates back at least 2500 years. It was considered one of the four “essential arts” of a cultured gentlemen (the other three were calligraphy, painting, and qin, a stringed instrument). Two players do battle on a board which has a grid of 19 x 19 lines. Each player strategically places his pieces, following several rules, to block territory (space on the board). The winner protects the most territory.

There are several measures of game complexity, including game tree size, decision complexity, game tree complexity, computational complexity, and state-space complexity. Journalists often use state-space complexity to describe the relative complexity of games, because it is fairly easy to grasp: “the number of legal game positions readable from the initial position of the game.” The state-space complexity for Go has been estimated at 10 to the 174, which is more than the total number of atoms in the universe. By contrast, the state-space complexity for chess is 10 to the 120. The difference is not trivial. A computer can play chess using brute force. It can calculate the possible move combinations after each play and select the next move out of the universe of possibilities, taking into consideration various strategies. Because the number of possibilities in Go is so high, a computer cannot use brute force. Instead, it must do something to approximate human intuition. It has been described as the “pinnacle of perfect information games.”

Round 1: Checkers

Computers have been beating humans at games for more than 20 years. In perfect information games, players move alternately and each knows all of the other player’s prior moves. In 1994, a computer program named “Chinook” developed by Jonathan Schaeffer at the University of Alberta, was declared the winner in a match against the world’s top checkers player in the Man-Machine World Championship. While the victory was impressive, there was a hanging question about the computer’s abilities. It was declared the victor after drawing six times. Marion Tinsley, its human opponent, then withdrew from the match due to problems with his pancreatic cancer. Chinook never actually won a game against Tinsley.

In 1995, Chinook played Don Lafferty in a 20-game match. It won one game, lost one game, and drew 18 times. Schaefer retired Chinook from competition after that match, but he and his team continued working on the checkers problem (a program that a human could not beat). In 2007, they announced that the best any human player could achieve in a game against the updated Chinook was a draw.

Round 2: Chess

The next human loss to computers in a perfect information game happened just a few years after the Chinook defeat. Chess had long been viewed as a game that challenged the smartest humans. A computer beating a human would make quite a statement about the state of computer “intelligence.”

In 1996, IBM’s Deep Blue played Garry Kasparov in a six game match. Kasparov won 4–2. But in 1997 they played a rematch which Deep Blue won 3 1/2–2 1/2. That was the first time a computer had beaten a Grand Champion chess player in a match following tournament regulations. Deep Blue’s victory was significant, though the victory represented brute force more than elegant play. At the time, some believed that Kasparov did not bring his best to all the games in the second match and could have won had he done so. Some believed if Kasparov had played with more human intuition he would have beaten Deep Blue.

After Deep Blue defeated Kasparov, IBM wanted another challenge to show off its software. Jeopardy presented that challenge. Jeopardy is more complex for a computer than chess. First, there is the format. The host gives the answer and the contestant must respond with the correct question. Second, Jeopardy involves language interpretation. As The New York Times described it, Jeopardy is “a game that requires not only encyclopedic recall, but also the ability to untangle convoluted and often opaque statements, a modicum of luck, and quick, strategic button pressing.

In February 2011, IBM’s latest masterpiece, Watson, played Jeopardy against Ken Jennings and Brad Rutter, the two leading human contestants. After three matches, the results were a clear win for Watson: $77,147 to Jennings’ $24,000 and Rutter’s $21,600.

As with Deep Blue’s win against Kasparov, Watson’s Jeopardy win against the human contestants was impressive, but it also showed that Watson was not perfect. Computers still had a long way to go when it came to matching wits with humans.

The Final Round: Go

With the chess and Jeopardy matches under its belt, the computer world wanted another win. Go was seen as the ultimate perfect information game challenge. A win against a human would show that  computers had moved beyond brute force and were taking on human “intuition.” The computer could not simply crunch numbers, it would have to do something else to beat a Go grandmaster. Two competitors took on the challenge, Google and Facebook, and Google got there first with AlphaGo.

In October 2015, AlphaGo played a match against Fan Hui, the European Go champion. AlphaGo won 5–0. While a significant victory for AlphaGo, its next match against Lee Sedol was an even bigger challenge. Sedol watched the games between AlphaGo and Hui and was able to evaluate AlphaGo’s strategies and weaknesses. Sedol predicted that, while the computer was good, he was still better.

As it turned out, Sedol was (mostly) wrong. In fact, most experts were wrong. In 2015 before the match between AlphaGo and Hui, most experts were predicting it would be another decade before a computer could beat a Go grandmaster. But in the few months between the match against Hui and the match against Sedol, AlphaGo continued improving. Unlike a person, AlphaGo could play games continuously and at a furious pace, learning all the time. What it learned gave it the edge.

How did AlphaGo learn to play Go so well? According to researchers at Google’s DeepMind:

AlphaGo was programmed to sift through a database of expert Go moves, and then play against itself millions of times to improve its performance. Researchers called that part of the program the “policy network.” Another part of the program runs through Monte Carlo simulations to evaluate board positions.

Today, Demis Hassabis, who founded DeepMind and still leads it after the Google acquisition, says his team believes AlphaGo could learn to play entirely through self-learning. As Hassabis says:

Actually, the AlphaGo algorithm, this is something we’re going to try in the next few months — we think we could get rid of the supervised learning starting point and just do it completely from self-play, literally starting from nothing. It’d take longer, because the trial and error when you’re playing randomly would take longer to train, maybe a few months. But we think it’s possible to ground it all the way to pure learning.

Because Go is so complex, during training AlphaGo had to learn how to use some measure of computer “intuition.” What do we mean when we say AlphaGo has “intuition”? Geoffrey Hinton, called the “godfather of neural networks” and a member of the AlphaGo team describes it this way:

The really skilled players just sort of see where a good place to put a stone would be. They do a lot of reasoning as well, which they call reading, but they also have very good intuition about where a good place to go would be, and that’s the kind of thing that people just thought compute[r]s couldn’t do. But with these neural networks, computers can do that too. They can think about all the possible moves and think that one particular move seems a bit better than the others, just intuitively. That’s what the feed point neural network is doing: it’s giving the system intuitions about what might be a good move. It then goes off and tries all sorts of alternatives. The neural networks provides you with good intuitions, and that’s what the other programs were lacking, and that’s what people didn’t really understand computers could do.

Does AlphaGo’s victory and use of “intuition” at some level mean computers are getting close to human abilities? According to Hinton, not for more than five years (he refuses to predict anything that he thinks is farther out than five years):

My belief is that we’re not going to get human-level abilities until we have systems that have the same number of parameters in them as the brain. So in the brain, you have connections between the neurons called synapses, and they can change. All your knowledge is stored in those synapses. You have about 1,000-trillion synapses—10 to the 15, it’s a very big number. So that’s quite unlike the neural networks we have right now. They’re far, far smaller, the biggest ones we have right now have about a billion synapses. That’s about a million times smaller than the brain.

There will not be another perfect information game challenge that surpasses Go. While there are other strategy games, they involve human language and interactions and other dimensions which still are well beyond computer capabilities.

Oren Etzioni, CEO of the Allen Institute for Artificial Intelligence, described AlphaGo’s wins as representing “an outstanding technical achievement, … demonstrat[ing] that when the goal is crystal clear, and the rules of the game are simple … computers will dominate.” Etzioni contrasted that situation with the ones that lawyers confront: “when the problem is ‘ill-defined,’ as in understanding a sentence, writing an article, or even comforting a friend – this is still way beyond our [AI’s] abilities.” Lawyers should not assume Etzioni’s comments mean machine learning computers are not ready for legal services. It turns out there are many ways computers can augment what lawyers do.

Part II of this two-part series will be posted on April 7, 2016. 

Why Lawyers Do Not Fear Computers: The Lump of Lawyers Fallacy

Posted in Technology

LumpOfLawyersImagine the world of law in the United States as a fixed amount of legal work that needs doing. That fixed amount includes all the legal services lawyers do for large corporations, individuals, criminals, and others. One recent estimate put the market for legal services by lawyers in the United States at about $275 billion.

In the United States there are about 1.2 – 1.3 million individuals who call themselves “lawyers.” Using some basic math, we can say that each lawyer has a claim to $275 billion divided by 1.25 million or roughly $220,000 of legal work. Some lawyers are very good and they get more than their share, other lawyers do not practice law so they forfeit their share, and many are employees so they don’t get a share they get a salary. In other words, do not go looking for your $220,000, that is just the average per lawyer.

In 2014, roughly 44,000 students graduated from law school. Of those, 71% or about 32,000 got jobs practicing law (more precisely, they found jobs either requiring a law degree or in a position where a law degree was preferred). Add those 32,000 to our 1,250,000 and we are at 1,282,000 lawyers. Of course, some lawyers retired, so we will drop the number of lawyers to 1,275,000. Redo the math and each lawyer now has a claim to about $216,000 of legal work. Makes sense, right? The more lawyers given a fixed amount of legal work, the less legal work per lawyer.

Now assume that we can start replacing lawyers with computers. The Harvard Business Review recently ran an article suggesting that 30% of tasks done by knowledge workers can be done by existing computer programs. Assume that number holds true for legal work (there is nothing suggesting that it wouldn’t, since the tasks are basic ones that apply across all types of knowledge worker jobs) and we could say that of the $275 billion of legal work, $83 billion could be done by computers leaving $192 billion for those 1.275 million lawyers. That would reduce the legal work claim by each lawyer from $216,000 to $151,000. Ouch!

Economists do not believe a world exists where the amount of work available to laborers is fixed and so they call the imaginary world I describe above the “lump of labor” fallacy. They argue that in the real world, the amount of work increases as technology enters the market. This is the broader argument by many technologists: artificial intelligence and increasing computer power may displace workers from some jobs they hold today, but those jobs will be replaced by other jobs many of which we cannot imagine right now. People may shift jobs, but we will not have mass unemployment in the foreseeable future. Relax.

The Lump of Lawyers Argument

A good lawyer always has another argument and when it comes to technology replacing lawyers, lawyers are ready. Many lawyers argue that law is different than other knowledge work. It is not a profession that is amenable to computerization like, say, medicine or finance. It takes a certain amount of lawyers to process a given amount of legal work. The amount of lawyers may vary a bit depending on a lawyer’s experience, expertise and (not to be forgotten) pedigree, but within a narrow band the amount of lawyers to do the work is fixed. Therefore, lawyers argue, computers will not greatly affect the legal profession in the foreseeable future because computers cannot replace lawyers doing legal work. It takes a certain lump of lawyers to do the work. This is the lump of lawyers fallacy.

Unlike the lump of labor argument, which is in disrepute, the lump of lawyers argument has tremendous support in the legal profession. Lawyers trot out the argument almost any time they are in a room talking about technology. Some of what they say comes from ignorance, some from the challenge of believing that a computer could replace any part of what took them three years of post-graduate education and 20 years of practicing to learn, and some from economic self-interest. Mix all of that together and lawyers dismiss the “computers replace lawyers” idea and head back to their offices to review the latest draft for typos. No fallacy to see here, keep moving.

The Amount of Legal Work is Growing

While a few lawyers may challenge the lump of labor argument, it seems most believe that the amount of legal work is growing. We have seen increases in compliance work, regulatory work, and laws going on the books in countries that are modeling their legal systems after the United States. Any lawyer at a global corporation knows that his or her workload is not shrinking. Add to that the legal complexity coming from new technologies (e.g., 3D printing, artificial intelligence, nanotechnology) and you have plenty to do if you are in the corporate legal world.

If we go further and include that universe of middle income and low income people who need legal services, the amount of legal work certainly is increasing. Each new layer of regulations and laws means individuals have more areas where they are at risk for not consulting a lawyer. Despite some feeble efforts to stop the tsunami, the laws on the books of the states and federal governments seem to increase each year.

Looking at the labor to do certain legal tasks, we can point to some obvious areas where computers have made progress. EDiscovery is one, but we can add in Shepardizing, due diligence, and contract automation as a few others. Even ancillary tasks, such as recording billable hours, have seen advances. Some advancements are just starting to penetrate the thick membrane lawyers use to keep out anything new. These include ways to research caselaw using something other than boolean searches and programs that can construct basic texts from facts. Keep in mind that automation replaces tasks, not people. When it comes to automation, the legal industry is only beginning to see the tip of the point at the end of the spear.

Legal Education Needs to Drop the Lump of Lawyers Fallacy

A recent report from the Christensen Institute (yes that Christensen, the one who wrote The Innovator’s Dilemma) suggests that law schools need to dramatically restructure the legal education process if they want to survive much longer. The authors recommend moving from the time-based approach used today to a competency approach using modules, online learning, and other techniques that will make legal education more relevant and less costly. As you might imagine, many legal educators will not warmly embrace these suggestions since they would mean change in a system that has been used for 150 years and would undermine the lump of lawyers argument. The recommendations focus on students learning through modules. This approach fits with automation — as tasks are automated educators can re-focus modules on new tasks students need to learn.

Watch Out for the Black Swan

As any experienced driver knows, the greatest danger often comes not from where you are looking but from where you are not looking. In more modern terms, we call this the Black Swan. Black Swans are unexpected and for most lawyers, computers taking over much of what they do will be unexpected. But there is an even greater surprise in store for lawyers who adhere to the lump of lawyers argument, and that is the end-around.

Many programs I see in development today are not aimed at lawyers. These programs are aimed at clients who will use the programs to reduce their need for lawyers. We have seen LegalZoom and Rocket Lawyer do this in the retail market for legal services. Now, software developers are targeting small and medium-sized businesses for the next round of programs. These programs are aimed at clients and can draft documents, review documents, and provide suggested alternative language.

To put it a bit more bluntly, outside lawyers have said they will not change unless clients force them to. In-house lawyers have started looking at ways to improve and have reduced their need for outside lawyers. But clients are impatient and, seeing what can be done with computers in other areas, naturally ask the question “why can’t computers reduce or eliminate the need for lawyers”? That question is music to a software developer’s ears. The market is starting to respond and in-house lawyers will feel the impact as well as outside lawyers.

The Black Swan for lawyers may be the software packages that start eliminating lawyers as the “man-in-the-middle.” Whether lawyers like it or think it appropriate, clients will move like water finding the path of least resistance to get their work done. Lawyers who build dams will find their clients going around, over, or under those dams and that may mean using software that does some or all of the work lawyers have done. No more lump of lawyers.

By definition, it is hard to imagine the Black Swan. For lawyers, it is hard to imagine clients going around them. That is the lawyer’s problem, not the client’s. The circumvention approach is not widespread yet and the impact on law firms and law departments is very small. It will grow. But lawyers can control its growth by recognizing that client needs outweigh lawyer protectionism. Law schools need to embrace new ways to educate lawyers, and lawyers need to embrace using computers to handle client matters.

Contrary to what many lawyers believe, now is a time for optimism about the legal profession. The need for legal services is strong. For the first time in history, we have the ability to shed the boring, tedious, repetitive tasks that bog down the day and add stress to every legal practice. We have the ability to leverage a tool that can free us to focus on what we love to do instead of spending our time on exchanging labor for dollars. The legal issues societies face have never been more interesting and challenging and the promise is that there are more of those issues to come, if only lawyers structure their practices in ways that clients will pay them to tackle those issues. Time to enter the real world, lawyers, embrace computers, drop the fallacies, and focus on the issues that matter to clients.