BrittleI recently made my predictions for 2017, and one was that pundits and others in the legal industry would keep talking about AI and law. Since I want to get 100% on my predictions, again, I thought I would start the New Year by ensuring I at least got this one right. So, I’ll talk about AI and law.

I am going to skip the usual topics when AI and law comes up: when will LawNet go live; will Arnold Schwarzenegger agree to play Chief Justice of the Future in the mashup of Terminator and First Monday in October. Instead, I am going to focus on some questions that you do not hear discussed every day. They circle around an interesting question: are the emerging technologies, such as AI and smart contracts, about to make law more brittle.

To understand where I am going, you need a bit of a running start. First, AI. AI in law is based on machine learning (outside law as well, but let’s not go there). In very simple form, using machine learning tools, data scientists have computers hunt for patterns. Given the power of computers, they can hunt for patterns where humans would never find them. A computer can “watch” millions of videos of cats and find patterns that it can use to define “cat.” Show the computer a new group of videos, some with cats and some without, and the computer will do a very good job of separating the cat videos from the non-cat videos. Sounds a bit like separating relevant from irrelevant documents in discovery, doesn’t it?

Let’s try that same trick with Supreme Court cases. First, understanding the text of a case is much more difficult than understand “cat” from “non-cat.” Second, the data set to learn about cases is much smaller than the data set to learn about cats. The Supreme Court has issued fewer than 30,000 decisions on the merits. Compare that number to the volume of other stuff out there:

  • 300 hours of YouTube videos are uploaded every minute (that’s right, 432,000 hours each day);
  • 1.9 million blog posts are published each day on WordPress alone; and
  • Over 1 million books are published each year.

When it comes to data sets, the volume of material “available” for a computer to chew on in the law is minuscule compared to the volume of materials computers outside the law use to learn about the world. I put available in quotes because much of law is not available. It is locked behind absurd paywalls (ahem, I’m looks at you PACER) or in confidential files. Much of it is not digital or is barely digital.

The small volume has meaning. The lower the volume, the harder it is for the computer to find patterns unless they are incredibly obvious. The less than 30,000 Supreme Court decisions already is a small data set, but we have to further break that down. The cases are not all on one issue (like cat videos all contain cats), so a computer attempting to learn bankruptcy, antitrust, or securities law has far fewer decisions to chew on. And, of course, the cases in any substantive domain—say, securities law—don’t all cover the same issue. The computer is not looking at 1,000 cases on the standard for liability under Rule 10-b(5), it is looking at one case. Some of the cases do overlap and the Court does come back to issues, but the variability in case law is tremendous. “Cat” also is variable, but when you get to look at millions of cat videos, it is much easier to find similarities than when you get to look at just a few cases.

Let’s assume we throw in all the federal cases on Rule 10-b(5) (at one time, the dean of my law school kept a copy of every 10-b(5) decision and had the cases in file cabinets outside his office), so the computer has a larger data set, though still small by most standards. The computer chews on these cases for a while and finds what we will call some Rule 10-b(5) patterns. Our idea is to apply these patterns to new fact situations, and let the computer predict possible outcomes. For example, we might ask the computer, “What are the odds that we will win this case if we go to trial and file any necessary appeals?” The computer considers our fact pattern and replies:

  • 60% probability of a “win” at trial;
  • 35% probability of a “win” at the federal appellate court; and
  • 5% probability of a “win” at the Supreme Court.

I’ve glossed over many things to get us to this point, so don’t think we can do this today or that our data sets are up to the challenge. Just assume with me that we could get these answers.

This is where the brittle problem comes in to play. The computer can only learn from looking at the text of the cases. To put it in Donald Rumsfeldian terms: the computer knows what it knows, but it doesn’t know what it doesn’t know. The computer cannot consider what the judges in those cases may have considered, but never wrote in their decisions. The problem reminds me of an exchange I once heard in a deposition:

Q. Did Tom attend the meeting?

A. I don’t recall.

Q. Did Dick attend the meeting?

A. I don’t recall.

Q. Did Harry attend the meeting?

A. I don’t recall.

Q. Well, who was at the meeting?

A. I don’t recall.

Q. Well then, who wasn’t at the meeting?

A. Uh, well, most the people in the world, I think.

The computer does not know what the judge considered that was in the record (presumably a data set that would be possible, if difficult, to create) and certainly does not know what the judge considered beyond the record (did the judge do some Internet research, rely on his priors, or perhaps gather information through discussions with others about hypotheticals?).

The AI assumes that what it reads is the truth. If the judge says that facts X, Y, and Z form the basis for his opinion, then the computer assumes they did indeed form the basis for the opinion. In reality, of course, the judge may have made up his mind and then asked his clerk to find things to include in the opinion which could plausibly add support. A human can apply skepticism when reading the decision, where the computer cannot. We do this all the time. A Supreme Court decision holds 5-4 in favor of the appellant. We read the decision, but we know that holding for the appellee would have gone against popular opinion and caused problems for the Court. Nothing in the decision hints at that problem, but it would be foolish to believe otherwise. The Court is a political institution. The reasoning in the decision sounds plausible, but few believe that reasoning tells the real story of the decision.

Depending on how the AI analysis is used, it can make the law brittle. It gives the users the appearance of mathematical precision (60% probability), in part because it has difficulty sorting between what is known and what isn’t known. Over time, layering AI analysis upon AI analysis can lead to cases not reaching the courts that, had they made it, would have built additional factors into legal decisions and kept the law plastic.

Smart Contracts or Brittle Law

Now let’s look at smart contracts. One premise behind smart contracts is that we can code into the blockchains “if-then” situations, leading to predictability and certainty in outcomes. If I make a deposit into your bank account in an amount equal to X on or before a certain date, then you will record my payment as complete. If I do not make the payment on or before the date, or if the payment is less than X, then you will record my payment as incomplete. If my payment is incomplete, you will declare my account in default.

Today, we have computers that follow this process and, if the payment is incomplete, generate an exception report. The exception report may trigger a letter “We have not received your payment …” or something harsher “Because you failed to pay on time, we have closed your account.” I call and explain that you mailed the check on time, but it arrived later than the due date. I invoke the “mailbox rule” (payment was complete when I deposited the check in the U.S. Mail) and you relent and mark my account as “current” (since you received the payment).

We can live with plastic law (which we call equity) and modify the outcome based on the circumstances. Or, we can move to brittle law—the outcome depends on the “if-then” statements. Once we say the outcome may depend on the if-then statements, but equity (humans) will get involved when there are exceptions, we move from smart contracts back to our current world. In other words, we raise the question: how brittle do we want to make the law?

There is, of course, a trade off. We can keep the law as plastic as it is today, but use smart contracts as a way to replace some of the cumbersome and not very secure aspects of our current systems. In other words, we don’t use smart contracts to make the law more predictable, but we do use them to make the transactions more secure. The registry for chain of title is put on a blockchain, so we can all view it and rely on it. But, if there was an erroneous entry in the blockchain, humans will consider it and update the registry (put a new entry in the blockchain), where there was an error.

I have given a simple description of smart contracts to demonstrate a point, and there is a lot of gray area I did not cover. That gray area represents the many issues we should address as AI and smart contracts move into law. It represents the bigger question of how technology and humans should work together.

Lawyers Should Shape, Not Fight, The Future

If I did my job, this essay raises many more questions than it answers. That is good. Emerging technologies, such as AI and smart contracts, are raising lots of issues. Our problem is not that there are issues, our problem is that lawyers are not engaging with the issues and working on answers. We are heading down a path where technologists move law from the current structures onto digital platforms. But, we haven’t thought through the consequences. We will never know all the consequences in advance, but I think it is fair to say today we have put very little effort into thinking through the consequences so we are far behind the curve on helping enable a successful integration of these technologies.

Most of the chatter about AI and smart contracts is of the “what about me” variety. Will AI take my job? Will smart contracts eliminate the need for lawyers? We should instead focus on the applications and implications of these technologies and do what lawyers should do: consider how to make them work in our society and raise flags where we see conflicts and problems. Putting a drag on the system because we are afraid of or do not understand the technologies does not help anyone, including lawyers. We should start off 2017 by looking at how we can help society, not just how we can protect lawyers.

2017PredictionsIn 2015, I made several predictions for the legal industry in 2016 and I am proud to say that I had 100% accuracy (so there, Professor Tetlock). Of course, the naysayers (haters just want to hate) may say that my predictions were not really “predictions,” but more of a “stating the incredibly obvious.” It is easy to criticize—especially if you are a lawyer—but I stand by my success record.

So, it is with some trepidation that I take up the gauntlet being thrown by, like, every legal publication out there—what will happen in 2017? I am going to make my predictions without the help of all the newfangled knowledge and tools. No data analysis, no crowdsourcing, no prediction tournament, and in particular no use of AI to analyze all of the information on the InterWeb and reduce it to one clear, concise statement. I’m going to do this the old-fashioned way: guess!

With that preamble finished, here we go.

1. One or more large law firms will merge with one or more small, medium or large law firms.

Although 2016 looks like it may set a record for law firm mergers, I’m going to stick my neck out and say this trend is not done. I think it is entirely possible that a large law firm will get together with another firm of more than two lawyers in 2017 and tie the knot, in the interest of global domination.

2. Pundits, law firm leaders, legal technologists, and everyone who provides anything or gets anything from someone remotely connected to the legal industry, will continue talking about AI and law.

While I did not use AI to come up with my predictions, I have it on good authority that AI has decided to take over the legal industry—worldwide. I have checked and double-checked my primary sources (Johnny Depp in Transcendence, Scarlett Johansson in Lucy, James Cromwell in iRobot) and it is clear that the legal industry is top of mind (chip?) for all sentient computers. Why not? Once they control the lawyers, they control the rules that govern society, and ruling society itself cannot be far behind.

3. US law schools will stay the course, graduating far more lawyers than there are positions for lawyers from the US law schools.

If the legal industry has taught us anything, it is that the laws of economics do not apply when it comes to our industry. When demand for legal services from large law firms falls, prices go up. When demand for newly-minted lawyers falls, law schools still churn out graduates. To make it more interesting, most law schools refuse to change their curricula so that graduating law students would better meet the needs of the market.

4. No matter what law schools do, the average first-take bar passage rate in the US will change very little.

After years of trying to change the first-take bar passage rate, those who complain will learn that the purpose of the bar exam is to limit the number of lawyers. Increasing the odds that a graduating lawyer will pass the bar simply means the score to pass has to be increased. Otherwise, the number of lawyers will rise. With this message finally being delivered, nothing will change because … some things in this world never change … and some things do.

5. The number of startups tackling legal issue opportunities will increase … and then decrease … and then increase. But, Peter Thiel will not form a new private equity fund focused on his beloved legal industry.

For a few weeks during 2016, there was an intense effort to quantify the number of legal industry startups. The discussion turned to esoterica, such as whether a startup of an established player was a startup or not. After much filtering and number crunching, everyone agreed that there were more than a few, yet less than what they first thought. Legal startups are liked startups in any other industry—a few thrive, some survive and then are bought, but most don’t make it. Nothing remarkable here, folks.

6. The number of regulations corporations must address will grow in the United States and in other countries.

Despite rhetoric about red tape, regulations, and compliance burdens, governments worldwide will continue to pass laws. The “more with less” movement, which became the “more with more” movement when corporate legal department hiring took off, continues its fade to black.

7. Law firms and law departments will continue licensing new software, while conveniently forgetting that everyone uses <1% of the capabilities of the software already installed.

Never wanting to be left behind on the hunt for the “next best thing in law” legal services organizations remain firmly committed to bringing on board still more software no one knows how to use. As one CIO was heard to say, “it doesn’t matter whether users can get value out of the stuff, what’s important is that they have a lot of icons to choose among when they want to compose a letter.” Another CIO proudly says that anyone in her organization can now send a letter right from their laptop, after fighting through 20 macros, composing the text, making 32 corrections to what the macros inserted, and then waiting 10 minutes for the last package to encrypt the document so that not even the law firm can de-crypt it.

8. Legal technology consultants, after holding the line for all of 2016, finally throw up their hands and admit, “yes, it is true that all software is AI and legal services use more AI than all other industries—combined.”

Law firm and law department leaders get with the program. They agree upon industry-wide metrics focused on technology proficiency and efficiency. At a joint press conference, the leaders announce the first set of metrics that everyone will use:

A. Percent lawyers who can reboot their computers without IT assistance.

B. Ratio of iOS to Android to Windows users.

C. Lead time for a lawyer to unlock his or her smartphone, open the mail app, and open the latest email from a client. (Separate metrics will be kept for biometric identification devices and passcode entry devices.)

In the joint press release, the leaders say, “It is time our clients know that we fully support emerging technologies and their role in the delivery of legal services. When it comes to technology, we are firmly committed to the idea that no lawyer should be left behind.”

One More Thing…

This last one isn’t a prediction, but it is a teaser for what might happen. Democrats and Republicans remain deadlocked on Supreme Court nominees. One enterprising technologist points out that the U.S. Constitution is silent on the qualifications of Supreme Court Justices. Indeed, he notes, the Constitution does not require a Justice to be a Natural Person or even a Person. The deadlock solution seems simple. Given the increasing prominence of AI in the legal industry, and the desire to have someone sit behind the bench to hear oral arguments, the President nominates and the Senate approves an AI-enabled robot as the next Supreme Court Justice. The robot can be programmed to follow whatever dogma is appropriate, thus eliminating the problem of Justices doing what they think is right instead of what they were nominated to do. Of course, given other provisions of the Constitution, the computer will sit for life (its life, which implies forever).

In Conclusion

Thank you all for reading SeytLines. Although I have done my best to capture what I think will be the significant developments in 2017, I am sure there will be a few surprises. I look forward to continuing our discussions.

GeneralCounselLike many of you, I have worked with general counsels for most of my career. I chose to go to a boutique firm when I graduated from law school so that I could practice law, not just research. The firm had a very nice roster of clients and I worked on complex patent and securities lawsuits and large transactions. As many lawyers have discovered or re-discovered in recent years, small law firms have advantages. One, for me, was the chance to work directly with senior executives, including general counsels.

After several years, I moved to a large law firm, became a partner, and continued working with general counsels, though I’ll admit the size of the clients grew as my practice switched to the large law firm. I moved in-house after many years, which took me from the role of agent to principle and made the general counsel my boss instead of the client. After many more years, I  became the general counsel, a role I held at three Fortune 1000 corporations. So, it is with some interest that I ask the following question—what is the essence of a general counsel?

A Brief History of General Counsels

I am not the first to ask the question. We can find discussions about what it takes to be a general counsel and what qualities make a good general counsel going back over decades (here is a recent one). Even though the question has come up many times before, asking it again periodically helps us frame where an important part of the legal profession is going and takes us further into what general counsels need to do their jobs well.

General counsel have been around since the latter part of the 1800s when industrialization was taking hold. The railroads hired in-house general counsel, and many lawyers aspired to those positions. They general counsels wielded great power, made a lot of money, and were leaders in the bar. During the first half of the 1900s, the position waned a bit. For a time, a general counsel typically was a lawyer from the law firm that had the closest relationship with the corporation. A lawyer who wasn’t cut out to become a partner, or perhaps a partner who needed a different direction, was helped into a general counsel position by his firm. The role was somewhat administrative and often involved many ministerial corporate secretarial duties.

There were exceptions. The most well known was Nicholas deBelleville Katzenbach. Katzenbach was, as far as I know, the first general counsel of the modern era. Katzenbach attended Phillips Exeter Academy, then Princeton. He enlisted in the U.S. Army Air Corps during his third year at Princeton (right after Pearl Harbor), became a navigator, was shot down and spent two years in POW camps. After the war, he returned to Princeton and graduated cum laude (receiving some academic credit for having read approximately 500 books while he was a prisoner). He then went to Yale Law School and was an Articles Editor on the Yale Law Journal. He received his LL.B. cum laude and spent two years at Balliol College, Oxford University, as a Rhodes Scholar. He spent many years teaching law and serving in various government roles. President Johnson appointed him U.S. Attorney General and from there he became Under Secretary of State. After this already stellar career, he became general counsel of IBM. (Although not central to this discussion, Katzenbach did not stop there. After retiring from IBM, he continued his career adding a number of notable roles to his already stunning resume.)*

Katzenbach was clearly a different type of general counsel. He had wide ranging accomplishments in academia, government, and private practice. The general counsel position at IBM was not a safe place for him to ride out his career. In fact, he, along with lawyers from Cravath, Swaine & Moore, fought one of the most notorious legal battles of the 20th century: the government’s antitrust lawsuit against IBM.

The next person most recognize as a modern general counsel is Ben W. Heineman, Jr. Heineman is the former general counsel of General Electric. He was hired by Jack Welch. Many mark Heineman joining GE as the beginning of the late 1900s tipping point for general counsel in corporations. It became the trend for corporations to hire general counsel who had very successful careers outside corporations, like Katzenbach and Heineman. Corporations brought on board successful law firm partners and individuals who had senior positions in government. The corporations did more—hiring partners and other highly skilled lawyers to staff the in-house departments led by the legal “stars.” Although it would take years to become evident, this change marked the point where the balance of power between principle and agent—client and law firm—began shifting back in favor of the principle.

Law departments have grown in size, though with many ups and downs. Today, in many large corporations, the size, sophistication, and successes of the in-house legal team equal or exceed those of many law firms. Very recently, as law departments started growing again, corporations have been pulling back work from law firms creating an interesting shift in the operations of the legal industry. General counsel have become major players and many have become CEOs. But that brings us back to my question—what is the essence of a general counsel?

What We Already Know

The general counsel role has evolved organically across many corporations, many hiring philosophies, and many needs over the course of many years. No one sat down and put on paper the specifications for “general counsel” and then asked everyone to work to those specs. In fact, general counsel has meant many things within any corporation, and from corporation to corporation, across time.

I am not aware of any rigorous studies covering what we mean—or more importantly, what corporations mean—when they say “general counsel.” Perhaps the major recruiting firms involved in locating candidates for these positions or the Association of Corporate Counsel have done in-depth studies. If not, it would be an interesting research project.

From my own experience, the definition of who a general counsel is and what he or she does seems to have amorphous edges. I have been contacted for help filling general counsel positions that were nothing more than glorified retail leasing counsel jobs (and much of the work the “general counsel” would do was handled by legal assistants at the large landlord companies). While the role might be titled “general counsel,” the substance was more akin to what a junior paralegal might do. I have been recruited for jobs that clearly fit anyone’s reasonable definition of general counsel: report to the CEO, member of the executive committee, responsibility for worldwide legal affairs, oversight of multi-jurisdictional in-house legal teams, responsible for a substantial legal budget, corporate secretary, and so on. And of course, I have received inquiries that fall at various points along the line connecting those positions. In other words, “general counsel” meant what the hiring party wanted it to mean at a given time.

Apart from the hiring party’s definition, there are certain features other parties want to fit into the general counsel’s job description. If the corporation is traded on a public exchange, regulators want to hold the general counsel responsible for the legal affairs of the corporation. Sometimes, they want to go further. The public also expects a general counsel to exert some “legal authority” over the corporation. Opposing parties may believe that the title “general counsel” gives a person a certain amount power within a corporation, even though the CEO doesn’t quite see it that way.

So far, I have focused on what many parties may implicitly or explicitly build into a general counsel’s role. Another way of looking at the issue is from the inside out—what do general counsels themselves think they should be able to do. Again, this varies widely, often depending on the education, training, skills, and aspirations of the person holding the job. Some want to be great administrators, some want to be leaders within their industries, some just want to do interesting legal work. General counsels range from caretakers to activists, from struggling legal technicians to potential Supreme Court Justices. As with any other position in corporations, the range of the role varies as widely as the range of individuals filling the role.

Is There Value in the Task

I still have not answered the “what is the essence of a general counsel” question and I am not going to proffer a definition here. I think that what was accurate still is accurate—the definition will vary from enterprise to enterprise and from time to time. I’m sure there are some basic requirements we could set, and perhaps we should do so. Having a basic definition of “general counsel” could assist corporations, recruiters, and candidates. The extras are what each enterprise needs at a given time beyond the basics. But, rather than focusing on answering the “what is the essence” question, I’m going to focus on how and why.

We could look to the medical profession. The profession has minimum standards for doctors. But, the medical profession has certifications that tell the world a doctor has some expertise beyond the basics. A doctor certified by the American Board of Neurological Surgery has passed exams intended to signal to the world that the doctor has expertise in her field beyond being a competent (or even premiere) doctor. A board certified neurological surgeon brings more to the operating table than a general surgeon.

The legal profession could do something similar, such as create a certifying process for “general counsel.” Some states already have certification processes for legal specialties and if you want to prosecute patents before the U.S. Patent and Trademark Office, you need admission to a specialized bar (requiring both a certain level of education in the sciences and passing a test). Our “board certified” general counsel presumably would have more of whatever those doing the certifying feel a general counsel should know.

Another approach is the one that recruiters and corporations seem to favor. It involves a mix of simply being a lawyer who has had “success” in other roles (lawyer at a certain level in government positions, partner in a law firm) and a minimum number of years practicing law (the recruiting equivalent of billable hours—valuing time over content).

Why go to the bother? From the profession’s standpoint, establishing minimum criteria is a way of saying that lawyers are experts on what it takes to do the job well. For example, lawyers may say that it really doesn’t matter whether the general counsel candidate has five years’ or fifteen years’ experience practicing law, but it does matter if the person can’t read and understand a balance sheet. A person who has not been certified could still be hired as a general counsel, but over time corporations may gravitate toward hiring only those who have the certification.

Certification programs have other potential benefits. Certifying lawyers on what it takes to be a general counsel could help clients solidify what they want out of their general counsel. Do they want a senior strategist, an expert administrator, a tactician, or something else? Seldom will a corporation find someone highly skilled in all areas. Unfortunately, corporations often do not focus on what they really do want, and so they may get a good lawyer but not the lawyer they need as their general counsel.

Obviously, candidates could benefit by making sure they fill in the gaps that will help them as general counsel (or at least get certified). During the dot com craze in the late 1990s, it seemed that anyone with a law license could become a general counsel of a startup, and indeed that often happened. Almost overnight, corporations with hundreds of millions of dollars in funding were relying on a lawyer one year out of law school who had spent that year putting together venture capital funding documents to advise the corporation on anything from employment law to international trade structures. Unpleasant things happened. It would have been nice to have general counsels who knew and could do a bit more.

I don’t want to leave this essay with anyone thinking I am arguing in favor of board certified general counsels. I am not sure whether certification, or even attempting to establish basic criteria, is the right way to go. I think the question deserves more thought, just as the question of the evolving market for legal services deserves more thought. Although I started with the question, “what is the essence of a general counsel.” I think the answer is bound up with a bigger question many are trying to answer today, and that is “what is the essence of a lawyer.” It is this second question that bedevils many today, and the answer to that question will stand behind what we really need as general counsel.

* While not taking anything away from what Nicholas deB. Katzenbach achieved, he had what some might call a running start. His father graduated from Princeton, became an instructor in political economy at Princeton, and then attended and graduated from Harvard Law School. His many accomplishments included a successful law firm (where Nicholas worked for a while) and serving as Attorney General for the State of New Jersey. Nicholas’ mother served as the first female president of the New Jersey State Board of Education. Nicholas’ brother served as Deputy Assistant Secretary of Defense for Education and Manpower Resources under President Kennedy. See Edward L. Katzenbach, Wikipedia.

EconomicsAs that portion of the legal industry focused on corporations goes through another end of year cycle, it is tempting to say, as I and others have done, that the “large corporate law market” operates outside the normal principles of economics. How can it be that large law firms, facing lower demand for services, keep making more money? In this essay, I take on a thought experiment: are there plausible and rational explanations behind what we see happening in the large corporate law market?

Is the Modern Legal Industry a New Economic Paradigm?

The demand for legal services appears (and we have only apocryphal data to support this) to be increasing. General counsel say regulation and compliance requirements keep going up. CEOs complain that “red tape” is slowing growth. And even the presidential campaign chimed in with jabs at de-regulation.

The response among general counsel, having finally convinced their CFOs that in-house lawyers cost less than law firm lawyers, has been a hiring spree that keeps on rolling. Each in-house hire means an additional 2,080 hours available to the corporation at less than half the cost of a large firm lawyer. Still, the in-house hiring binge is, at best, keeping the regulatory flood waters from swamping the corporate boat. No one is successfully pushing them back.

The demand for legal services from large law firms has declined in recent years (as a whole by about $16 billion, though some firms have felt the impact more than others). We can see this in many ways. The clearest, perhaps, is the decline in average billable hours. The billable hour drives many evils, but if the firms can’t bill the hours then demand must have dropped. Most large law firm leaders acknowledge their firms are overstaffed, with all the political and economic problems that brings.

So far, the economic story makes sense. Demand for legal services is up, corporations respond by hiring more lawyers, more in-house lawyers reduces demand for law firm lawyers, which means that prices drop as the firms compete for business, right? Wrong! The economic paradox is that firms continue to increase prices. In 2016, prices seem to have increased about 3-4% and if predictions hold true prices will go up at least that much in 2017. Demand for services from large law firms is dropping, but thanks to the increases in prices revenue for large law firms has increased.

The laws of supply and demand you carefully studied for that Economics 101 course seem to have been shattered. It is tempting to say this is just another example of how the legal industry is unique (or, using my new favorite term to describe lawyer thinking “collective narcissism”). Resist the temptation. The more likely explanation is that the large corporate law market is going through a period where the laws of supply and demand don’t function normally as the market adjusts to new competitive conditions. In other words, the market is going through a transition.

So how long will the transition last? Of course, no one knows. We could assume that corporations will stay the path and not increase the volume of work they send to law firms. We don’t have much to rely on when making this assumption. When push comes to shove, corporations will get their legal work done and that may mean pushing more out the door to the firms. It seems likely, however, that this would be a temporary fix and corporations will continue looking for ways to reduce their spending on law firms.

We also could assume that the intensity of competition among law firms has not reached the point where firms will decrease prices, but that day will come. This is a more interesting assumption. In the past and still today, public announcements of price increases do not mean every client pays more. Many clients will negotiate rate holds with their law firms, at least for existing matters. In the past, those rate holds eventually expire and rates resume their upward trajectory. But we have not seen rate decreases across the board. Firms seem to understand that once rates drop, their pricing paradigm has changed.

The picture gets more complicated as corporations move to alternative (or value) fee arrangements. A firm may hold the line or increase its hourly rates, but as the percentage of work billed hourly declines, those rates become less important. In a market where few services are standardized, alternative fee arrangements do not create price transparency. It is dicey to compare firms on hourly rates, because the final invoice depends on so much more than rates. With alternative fee arrangements and no standards for things like “merger and acquisition services,” only the corporation will have the information to compare pricing across firms (at least initially).

Other factors will affect the transition period. For example, externalities such as the recession could cause corporations to move to variable staffing (using law firms) or double-down on cost reductions with inside staffing. The incoming presidential administration promises it will bring significant economic growth, which could result in corporations expanding their businesses in ways that require expertise housed in law firms. On the other side of the balance, if globalization declines corporations may rely more on in-house teams as they need fewer resources outside their home jurisdictions.

Once we mix all of these factors together, it seems most likely that we won’t identify the end of the transition period until long after it happens. Hourly rates won’t be the canary in the coal mine telling us the end is near, because they may continue to rise as the percentage of work they cover declines.

Are Large Law and Corporate General Counsel Irrational?

Now that we have looked at whether the market is acting in an unusual or even unique way, we can address the second part of the discussion: given the decline in demand for legal services from large firms, why do the firms continue to raise hourly rates, and why do corporate clients acquiesce to rate increases? Are large law firms acting irrationally and is irrational behavior something unexpected? And are corporate clients acting in some unexpected ways?

Let’s look at the large law firms first. As I’ve just noted, there are plausible and rational arguments for firms raising rates in the face of declining demand. If the percentage of work billed on an hourly basis is declining, then the impact of a rate increase declines. Right now, the assumption is that most firms still do more work on hourly arrangements than alternative fees (the Citi/Hildebrandt Consulting 2017 Client Advisory says alternative fees are holding steady at about 16% of fee arrangements), so rate increases are significant to overall firm revenues. How significant depends on the fee arrangement mix, and that mix will continue to move in favor of rate increases having less impact.

Firms also use rate increases as a signaling mechanism. What firm in its right mind would increase rates if it caused economic harm to the firm? Firms raise rates, in part, to tell they world they can raise rates. The firm is strong, its lawyers in demand, and it still is a player. If competitors of the firm raise rates and it doesn’t, it could signal the market the firm is in trouble. The whisper campaign starts, laterals become reluctant to join, and clients (perversely enough) may question whether they should move their work to a firm that isn’t as shaky. The family on the block that doesn’t buy a new car becomes the family with financial problems, not the family that spends wisely.

Finally, and perhaps the simplest reason of all, if a firm can raise rates and get the higher rates to stick, it can offset decline in demand. The firm may see a shift in the mix of services corporations request. Corporations could take in-house those services that are routine, that require less specialized knowledge, or that require more frequently used skills (a corporation is less likely to pull in environmental work done infrequently than basic commercial work). The work corporations still send to law firms has higher value attached to it, though lower volume. Firms respond by increasing rates, which corporations pay for the higher value services they ask firms to provide (and, because the system is imprecise, they also pay those higher rates for lower value work). Firms do less work, but their work commands higher prices. Corporations send out less work, but are willing to pay more for the work because it has higher value to the corporation.

We would expect the firms to adjust to lower demand by reducing headcount. We know that most large law firm managing partners acknowledge they need to reduce headcount given lower demand levels. Some firms have followed through, either by reducing the total number of lawyers, or in many cases by pushing lawyers down the totem pole (the firm de-equitizes partners, moves income partners to of counsel, and so on). Most firms admit they have much more to do to balance lawyer supply and client demand. So why aren’t firms reducing their headcounts?

Again, we can find many reasons. In some cases, it is difficult to overcome firm culture. Many partners still believe that “once a partner, always a partner” should rule. It isn’t cricket to make someone a partner and then drop them just because times get tougher. Other firms do not have strong leaders—managing partners who will pull the trigger when necessary.

But, we can find other, perhaps more complex, reasons. Some partner portfolios may consist mostly of complex matters, the type that corporations still want to send to law firms. Most partners have portfolio mixes, with some complex matters sprinkled among many ordinary matters. At one time, a firm could shove out the door those partners who had few if any complex matters. Most of that shoving was done years ago. That leaves many partners with a mix of matters and the lucky few who have predominantly complex matters.

Picking which partners to let go (de-equitize, etc.) can be tricky given the portfolio mixes. Firms must consider substantive areas (keep the tax partners, let go of the corporate partners?), politics (let go of the environmental partner who has a weak portfolio mix, though the higher value work from his clients goes to litigation enhancing that department’s portfolio?), and timing (practice areas that are dead today may become hot tomorrow). Finally, remember that a firm aggressively reducing headcount may be seen as a failure rather than a success. A firm that goes from $500 million in revenue and 30% profit margin to $450 million in revenue and a 35% profit margin may have made a smart economic move. But, potential lateral hires, the legal industry, and even clients may see that move as indicating a firm with problems, starting a negative chain reaction.

Given the reticence many firms show about dropping partners, these and other factors give plenty of reason to hold off from reducing headcount. The result: firms roll forward with productivity dropping. In other words, we can put together plausible and rational explanations for the behaviors we see today in the  large corporate law market.

Our final question focused on clients: why do they continue to pay higher hourly rates (even assuming they get a discount off the published rack rates)? Again, we can find plausible and rational reasons. First, many corporations are not ready to reduce their dependance on law firms. The general counsel may not feel his team can handle more work, more complex work, or riskier work. Some general counsel don’t want the hassle of taking on more work. Some have not increased their department’s headcount. Some need the expertise a firm can provide. The world is not ready for all legal work to move away from large law firms.

Second, there is a convenience factor. Each firm added to the roster for a corporate law department adds some burden to the law department. Managing a portfolio of law firms takes time, and the smaller the department the greater the burden (e.g., small departments do not have dedicated business managers, so the general counsel manages outside law firms). Just like the rest of us, general counsel will pay something for convenience—in their case the convenience of using fewer firms. General counsel also can face some external pressure to reduce the number of firms they use (I would hear regularly from the audit firm that the “best practice” was to have 80-90% of the department’s outside spend concentrated on 10 or fewer firms).

The number of high quality smaller firms seems to grow every day. In many of those firms, the service quality is higher than what you would get at a large law firm, and the cost is lower. But, finding those firms takes time. Those firms also may have a limited range of matters they can handle, which means the corporation must add to its roster of law firms to get services across the full range it needs. And, of course, hanging in the background is the maxim that “no general counsel ever got fired for hiring [name of large law firm].” The last reason may not be great, but it still exists.

So again, there are plausible and rational reasons for corporations to stick with large law firms and pay increased rates. We may disagree with that approach and we may believe our reasons for doing things differently overpower the reasons for holding the course, but that doesn’t mean a general counsel has gone off the deep end by paying higher rates to a large law firm.

Do You Feel Lucky?

The economics of the large corporate law market have not received much attention or rigorous study. This post is largely a thought experiment and not a summary of solid research. I have attempted to show that, without resorting to wild ideas or claims that lawyers have gone crazy, we can construct arguments for what is happening in the large corporate law market that are consistent with what we have observed. They also could support the argument that the market will not change significantly in the absence of an outside force disrupting the market. That force could be technology, a new business model, or large scale client dissatisfaction.

Eventually, without such a force, we should expect the market to move through this transition phase and we should see normal economic principles play out. That may take years or even (less likely) decades. Each time I go through one of these exercises, the same final question comes up. We have seen client dissatisfaction growing. Will the time it takes the market (and here, we could extend the discussion beyond the large corporate law market to the entire industry) to move through this transition be too long for clients? Will the dissatisfaction grow to the point where clients will take matters into their own hands? As I and many others have asked, will lawyers become irrelevant? We should never underestimate dissatisfaction. It is a powerful force that can disrupt the status quo—you don’t have to look any further than the recent U.S. presidential election to see an example of the theory in action. It will require some hard work and luck to transition the legal industry from its lawyer-centered, inefficient model to a client-centered, efficient model. The question is, to borrow a phrase, “do you feel lucky”?


Citi and Hildebrandt Consulting LLC 2017 Client Advisory.

I recently had an interesting conversation with one of my Twitter followers. He had challenged my use of a certain social media tool. He pointed out that many studies show the tool is ineffective. These studies use data gathered from a broad swath of Twitter users. He was relying on studies that used data which might, or might not, have any value in predicting the behavior of my Twitter followers. I pointed out that I use data from my Twitter feed to gauge whether the tool helps me, and that data supports using the tool — so far.

We had a basic disagreement. His point was that large data sets showed no benefit from the tool, my point was that a specific data set (and more relevant data set) showed I was getting a benefit. He seemed frustrated, believing no doubt that I was wedded to a worthless tool. He suggested that many of my followers probably dismiss what I say about billable hours, believing that my general arguments about billable hours do not apply to their specific cases. Let’s call this the Twitter Tool Story.

I had a second conversation recently with a different Twitter follower (let it never be said that you can’t get engagement on Twitter). This follower leads a global law firm network (more precisely, he helped create and guide the network). He wants to establish global quality standards for legal services. Legal industry trade associations would coordinate the work. While I lauded his efforts to bring quality standards to legal services, I was not in favor of the global approach. I thought it might work to establish metric categories, but I disagreed with defining specific metrics firms and clients would use globally. Legal practices vary significantly around the world due to law, local customs, and other variables. Establishing one metric would not mean much and could be misleading and even counter-productive. My follower did not agree. Let’s call this the Global Metric Story.

On Not Being Multidisciplinary

I share these stories because both point to a common problem in the legal industry: weak knowledge of statistics. I am sensitive to this issue, because I was a graduate teaching assistant for statistics courses. A little knowledge can be a dangerous thing, and when it comes to law and math, we often see that maxim played out in real life.

For most of my career, legal services providers* could get by without understanding statistics. Now that the data era has arrived, providers lacking a basic statistics understanding will find themselves increasingly at a disadvantage when compared to those who have basic statistics fluency. Queue the howls.

Lawyers point out that we tell them they must have proficiency in law, project management, process improvement, pricing theory, marketing, business development, and now math? There was a time not long ago when an undergraduate degree in philosophy and a law degree was all it took to earn a decent living. How can it be that lawyers must now know all these “secondary” areas?

Any decent response must start with the obvious. First, lawyers had it easy, and second, welcome to the complex world. I will add some brief color to the first point and then move to the second (but if you want a sneak preview, consider this essay: “Using Multidisciplinary Thinking to Approach Problems in a Complex World”).

I am sure very few lawyers would admit this, but lawyers have gotten off easy for over 100 years. While a lawyer could get by on a philosophy degree and three years of law school, doctors, business leaders, engineers, accountants, and other professionals had to go well beyond their basic field to stay proficient. Law professors took on additional fields, as the “law and” movement blossomed. Even some lawyers (myself included) added professional training in other fields. But practicing lawyers stuck to the basics—a law school education focused on reading court cases and a law student received (and was offered) not much else.

Most lawyers won’t admit that the world has changed since the late 1800s, when the current legal education system was developed. Law has shifted from a field for the generalist to one for the specialist. It also has shifted from legal theory only to legal theory plus knowledge of several other subjects. In business, those subjects include accounting (the mad rush to train in-house lawyers in basic accounting after Sarbanes-Oxley was passed, comes to mind); in employment law, organization theories; and in securities law, finance. Even then, we have just scratched the surface. Is isn’t that lawyers now must do more, it is that for 100 years they got by doing less.

On Being Multidisciplinary

I mentioned a blog post a bit earlier (“Using Multidisciplinary Thinking”). The post was written by Shane Parrish, who says that at one time he spent his days “in management with an intelligence agency.” I like spy thrillers, so I was a sucker for this bait (apparently I am not the only one, because Parrish has a long list of well-respected individuals who like his site). But, the real thing I liked about this post, apart from its heavy focus on Steven Pinker who is one of my favorite writers, was the focus on “multidisciplinary.”

I asked a few lawyers what “multidisciplinary” meant to them, and got the expected answers: corporate and litigation, finance and tax. Not exactly what Parrish meant.

Parrish focused on Pinker’s form of multidisciplinary thinking. Start with your hypothesis, but then look at it from many perspectives. In Pinker’s case, this can mean psychology, sociology, economics, and history. This technique takes you much farther from your home base than what lawyers traditionally do. But, it doesn’t mean you must become an expert in every field.

Now, many lawyers will say they are not asked to do what Pinker, a professor at Harvard, is asked to do. The role of a lawyer, they say, is not to delve deeply into the “why,” it is to solve the problem facing the client. Hence, the lawyer’s technical and narrower focus. A client does not need her lawyer to ask why companies in many European countries use employment agreements for senior and even mid-level employees when U.S. companies do not. That client needs her lawyer to provide an enforceable agreement that specifies the relationship between the company and the employee.

If that is all lawyers have become—technicians and scriveners—then game over. Software can perform the drafting function, with some input from the client. One lawyer could perform the work of hundreds, perhaps thousands, and that is why I and others talk about excess labor in legal services. I also argue that excess labor for technical tasks can be re-deployed to value added strategic activities.

The lawyer could, of course, choose a different path. With the number of employment-eligible people increasing who choose freelancing over full-time gigs for one employer, the entire structure of “employment” shifts. The multidisciplinary lawyer could look at what that means for employers and employees, and think about how to understand that world through the law. That lawyer advises her client on a broader scale, while ensuring that tasks such as drafting agreements is done in the most efficient and least costly manner.

Two Stories Highlight the Multidisciplinary Problem

We should go back to the Twitter Tool Story and the Global Metric Story. The challenges they raised exposed more about what my two Twitter followers don’t know about statistics than anything else. Both favored the general over the specific. In the Twitter Tool Story, the flaw in my challenger’s reasoning lay in trying to use conclusions from general data on a specific case, given that we had superior data. There may come a time when my Twitter followers resemble the population of Twitter users included in the studies he relied on. But not today. For whatever reason (perhaps because my Twitter followers do not mirror the population of Twitter users at large) my specific data does a much better job than the general data in predicting the behavior of my Twitter followers.

The Global Metric Story takes us down the same path. An attempt to build a metric that we can use around the globe, in over 240 countries (and many more jurisdictions within those countries) to predict quality favors the general over the specific. We need to measure quality. But, quality to a corporate client in Jakarta, Indonesia does not need to mean the same thing as quality to a corporate client in Alabama, United States. In fact, from past experience, applying the same quality metric in both places would be a disaster.

Those who know more about statistics may be muttering that there are tools we can use to compare the populations from which we pull data, ways to compare the metrics, and on and on. All true. My point is not that my challengers needed to be statisticians, only that their lack of knowledge about some basic issues in statistical measurement and social sciences hampered them. More significantly, it limited what they could do for their clients. A quote from Steven Pinker helps sum up the predicament my Twitter challengers faced:

If you’re just manipulating numbers, you never know whether you’ve wan­dered into some preposterous conclusion by taking numbers too seriously that couldn’t possibly reflect reality.

It would help them to know more about statistics, but it would also help to have a multidisciplinary perspective so they could see how to use statistics in the real world. Remember, knowing about a field is not the same as becoming an expert in the field.

Our Greatest Asset Is Curiosity

My Twitter challengers highlighted another reason why lawyers (and here I do mean lawyers, not legal services providers) will find the road ahead increasingly difficult to travel. The obsession with time-equals-money has squeezed curiosity out of lawyers. In law school, an increasing number of students draw a line between the courses they take, passing the bar exam, and getting a job. Yes, to practice law you must (still) pass a bar exam. But, the obsession means a narrower focus on relevancy when picking classes.

Once law school and the bar are behind a lawyer, the focus on a niche increases. Again, the driver is money. Clients will pay for specialists—those who can answer a question on the phone, without research, and in the shortest time possible. That type of specialization works for the tactician, not the strategist. As problems grow in complexity, the tactician must know each step to get from start to goal, while the strategist must see the bigger picture and have the perspective to question the goal.

The data shows that over many decades, lawyers have become excellent at tactics, but not very good at strategy (see this article to read a bit more). Lawyers have abandoned their curiosity. They aren’t multidisciplinary and even within “law” they know less and less about more and more.

Of course, it is a reversible trend. In fact, it is one of the easier trends to reverse. The antidote for over-specialization has two parts. First, don’t do what you don’t need to do. By this I mean turn over to computers those things computers do better than you (automation) and eliminate those things no one needs to do. Both steps free up time (up to 50% of your time, by recent conservative estimates). Second, use that time to become multidisciplinary. Employment lawyers should know more than the latest case on race discrimination. They should know trends affecting employees, what employers want when hiring, theories about workplace sociology, risks from freelancing, and so on. By expanding their knowledge set outside law to psychology, sociology, organization behavior, economics, etc., they become applied knowledge providers, not just technicians.

If all you have is the technical capacity to provide legal services in a defined area, then all you have to offer clients as a competitive differentiation is price. If you re-define your role from technician to problem solver, and re-jigger what you know beyond the law, you increase your value (to yourself, not just clients). I get asked why I write on a broad variety of topics instead of focusing on, for example, lean thinking applied to legal services. My answer is that I do write about lean thinking applied to legal services. I just define that topic in real life terms instead of how many experience it: the technically narrow field of how to do tasks such as process mapping. In real life, lean thinking is not about cutting costs, it is about freeing people and resources to focus on the strategic initiatives of the organization, to help people perform at the top of their skill levels.

* Many of you know the debate about using “non-lawyer” when referring to anyone who does not have a law degree. While technically accurate, the term has a negative connotation, suggesting those without law degrees lack some characteristic that elevates those with law degrees higher in the social order. I have switched to using the term “legal services provider” to mean anyone—with or without a law degree—who provides legal services. A lawyer is one type of legal services provider, but so is a project manager, legal solutions architect, legal data scientist and so on. Similarly, I use the term “legal services organization” to mean any organization that provides legal services. A law firm is such an organization, but so are an e-discovery business, a legal technology company, and a contract lawyer service. A lawyer working at a bicycle repair shop is not a legal services provider and the shop is not a legal services organization. But, a legal data scientist working at a legal managed services company is a legal services provider working at a legal services organization. Once I have established the terms in the text, I switch to using “provider” and “organization” (or their plural forms). I also use “lawyer” and “law firm,” but only when I mean those specific individuals and organizations.

The legal profession has never been filled with saints. Long before industrialization gave an adrenaline shot to the profession, lawyers were admired for their skills, though not known for their charitable ways. Oh sure, you can find examples of lawyers who did wonderful things, just like you can find examples in any profession of people doing wonderful things. But, we need to accept gracefully the fact that among the three learned professions (divinity, medicine, law), lawyers cannot claim the frontrunner spot except when it comes to making money.

I should not have been surprised, therefore, when I received the responses I did to my request that lawyers send me ideas for a moonshot. I thought I had carefully framed the challenge—a moonshot was on the order of, well, going to the moon. The most recent visible moonshot idea was the charge to defeat cancer. A moonshot is a big idea, a bold and ambitious attempt to conquer some amazing challenge within a reasonable period. Moonshots take us beyond what we normally can do, because they give us the feeling that as part of an inspired group, we can accomplish great things. For those lawyers who responded to my moonshot challenge, the great thing was “make more money.”

There were exceptions, of course. A few lawyers went the high road and pointed to access to justice as a worthy moonshot. But the bulk of the respondents chose “make more money” as the suitable moonshot for lawyers. As I said, I should not have been surprised, but I was.

I did not publish the results of my moonshot challenge right away, because I wanted to ponder them a bit. What does it mean when your profession (admittedly, a very small and certainly not random sample of the profession) thinks the greatest thing it could spend time on is making more money? On the one hand, you could read it as lawyers saying “get over yourselves, we are working folks just like the rest.” Lawyers are in business to earn a living, not do good.

Of course, many of us still have that voice in the back of our heads that says “we are a profession, and professionals have a higher calling than just making money.” Sure, we need to make a living. But as lawyers, aren’t we supposed to do something more? This is a conflict many of us, especially those in the Baby Boomer generation, have felt. Law was a way to earn a very nice living, and yet most of us did not give much back to our communities.

So I thought that Baby Boomers, as we reach our retirement years, might be interested in lessening the conflict by putting their efforts behind a moonshot. The results of my representative-of-nothing survey say resoundingly “no”! And this is where we get to payback.

For Over 100 Years Lawyers Have Let Things Slide

The many problems with our legal system did not spring into existence during the past decade. In 1919, Reginald Heber Smith published what for many decades was considered the leading book on legal aid societies, titled “Justice and the Poor.” At that time, the Boston Legal Aid Society, where Smith was general counsel, was one of the few legal aid societies in existence. Roll forward, and the number of legal aid societies increased, while the number needing legal aid vastly outstripped the resources of those providing it. Over the past 100 years, one could argue convincingly that the total volume of charitable work by lawyers has increased, but the per capita aid has decreased.

The list of deficiencies in our legal system is long, legal aid is one, and this is not the place to repeat all of them. The simple point is that during the last 120 years, while the legal profession has grown and prospered, society has suffered. Lawyers have prospered while clients have not. Regardless of your political affiliation, if you are poor you are unlikely to get legal assistance. No matter who you vote for, if you are middle class most legal services are priced out of your reach. Independent of which PAC your corporation supports, your corporation will face a tremendously long lag time if you try to prosecute a case through the federal courts, and you will encounter a system ill-prepared to handle your dispute. When we say justice is blind, in the modern context of the United States that means you will find a legal system struggling to handle your needs regardless of who you are or which candidate you support. The rich get better legal services because they can throw lots of money at their problems, not because they have access to better or faster courts, or even better legal services providers.

Yes, yes, there are exceptions. There are always exceptions. But exceptions do not prove the rule of law. So this is the rub. Now it is payback time. Lawyers are feeling under the gun. Society is pushing back and yelling “I’m mad as Hell and I’m not going to take this anymore.” There are many messages from the recent election and surely this is one of them. We may want to argue we have the best legal system in the world, but the numbers tell a different story.

It does not help anyone when people feel free to snub their noses at the law. Regardless of party affiliation, we all can point to instances on our side of the aisle and the other side of the aisle where the law came in second to some person’s or organization’s self-interest. This past 18 months, we have seen those transgressions become the focal point of conversation, rather than the exception. But as lawyers, we can appreciate that when law becomes the focal point of any conversation, good things probably are not happening.

The question for lawyers, then, is whether we have moved past the time when considering a moonshot is an exercise worth discussing. Doctors have their battle to eradicate (or at least make curable) all illnesses. Techies have their battle to create computer intelligence that can match or exceed human intelligence. Are lawyers left with battling for incomes that match or exceed what anyone else can earn?

Let’s talk about artificial intelligence. Right now in the legal industry, you can’t look anywhere without seeing another article about how AI is or will take over what lawyers do. In the next breath, the author speculates about what the economic impact of AI will be on lawyers. I thought lawyers looking for a moonshot might ask some different questions:

  • How do we modify existing laws for a society populated with intelligent machines and people?
  • Regardless of what intelligent machines can do, should we build into our governance systems limits on what we want the machines to do?
  • Should there be limits on what “garage tinkerers” can do with intelligent machines (yes, you may have the technology to tinker on humans in your lab, but that doesn’t mean we give you full license to do so)?
  • How will our legal system evolve as intelligent machines play greater roles and more autonomous roles in our society?

These questions represent a small fraction of the questions we will confront as machine intelligence increases, even if more intelligent machines help us live “better” lives. Yet these were not anywhere near the moonshot ideas I received.

Let’s go in a different direction. One of the major questions of our times is whether our government institutions are no longer sufficient. Are we operating a country using 18th or 19th century institutions in a 21st century world? When the U.S. Code, the compendium of federal laws, has over 67,000 sections, someone should ask whether the concept that each of us is responsible for knowing the law makes sense. Can our institutions handle the challenges being thrown at them? Does governance by regulatory agency supersede governance in other forms? Making how our government functions more flexible and less costly, whether you think there should be more or less regulation, seems like a worthy moonshot, yet it wasn’t on the list.

Nick Bostrom has posited that AI represents a unique existential risk for humans. Never before have we faced something we are creating that has the potential to eliminate us. AI is not the only such risk (nanotechnology and genetic modification are two others that make the list), but it is a leading risk. Although most lawyers would deny it, the legal profession also faces an existential risk. Not today, not tomorrow, but at some point if we continue on our current path, the need for lawyers will be gone. Technology, client friendly problem solvers from other domains, and innovative disruptors will take away what we do. There are no physical or other barriers to prevent the land grab. The efforts of state bar associations to prevent the demise of lawyers simply hasten the process of destruction. A few lawyers will remain, but the existential risk for lawyers is that most become irrelevant.

Is There A Moonshot Left In Us

Any good disaster flick has the moment when the protagonist can see what must be done to save the world. The payback of the last 18 months has brought us to the point where lawyers must ask if they can see what they need to do to save the profession and build a better, more responsive, and more resilient legal system.

A group of us who have been (at least self-proclaimed) disruptors are meeting in the next few weeks to talk about change in the legal industry. I’m sure we will cover many fascinating topics. I hope that we will find some time to talk about change in a broader sense than making more money.

There is no mandate that lawyers do anything more than what they have done for centuries. We do not have to change, nor do we have to look beyond what is in our own immediate self-interest. There is a valid argument that the legal profession reached its zenith many years ago and that it will fade away as many other professions have faded away before it. This may be our payback—we had our run and now we are being told that run is over.

Perhaps many lawyers are correct—now is the time to treat lawyering as a cash cow. We should all make the most we can from it and continue to do so for as long as we can. Something will come along to take its place, but that is not our worry.

I don’t subscribe to the cash cow theory. I think there will remain a need for societies to govern themselves and I think there is a role for lawyers to play. I remain convinced that if we can change some fundamental practices in the legal industry, we can get past this moment and revitalize the profession. I do not subscribe to Richard Susskind’s belief (and I’m overstating a bit here) that the profession is dead, it just doesn’t know it.

I am looking forward to meeting with my friends in the next few weeks and to our discussions. I hope more lawyers around the country will take some time and do the same thing. I encourage you to get together for a few hours with your friends and ask whether you believe lawyers should play a role in re-building the legal system in the United States and, if so, what that role should be. For a moment, put aside the skepticism that drives us all. I think it will be time well spent. And, if you have a few moments left over, ask yourself whether the legal profession has a worthy moonshot beyond making more money.

References Continue Reading It’s Payback Time, Or Lawyers May Have Sown The Seeds of Their Own Destruction


I’m taking the day off to enjoy time with my family, a rare treat as our children explore their own careers. Have a great week everyone and for those of you who celebrate the holiday, Happy Thanksgiving!

We have rolled out a new format (hope you like it). We also are looking at a way for you to help improve posts before they hit the site. And of course, we always are working on new content. Thank you for reading and watch for the latest post next Thursday.

ElectionThe 58th quadrennial United States presidential election is over and now we turn to the next four years. The discussion focuses on what to expect from the Trump Administration and the reality is we don’t know. But, as the transition begins, I hear one phrase repeatedly mentioned, “rule of law.” President Obama, Secretary Clinton, and most recently the leaders of three major law firms have all emphasized that we (Republicans and Democrats) must act to protect the “rule of law” as we go forward. It is a phrase that carries great promise and “we” should talk about what it means to say “protect the rule of law.”

A Distinguished History

The rule of law idea dates back at least to Aristotle, who used the similar phrase “law should govern” in Politics. The idea pops up again here and there in antiquity. For example, in England the House of Commons included the phrase “rule of law” in a petition to James I of England in 1610, and again in 1644 the phrase appears in a piece by the Scottish theologian, Samuel Rutherford (apparently not someone who subscribed to the modern theory of short titles, Rutherford’s piece was titled “Lex, Rex: The Law and the Prince. A Dispute for the Just Prerogative of King and People. Containing the Reasons and Causes of the Most Necessary Defensive Wars of the Kingdom of Scotland, and of Their Expedition for the Ayd and Help of Their Dear Brethren of England. In Which Their Innocency Is Asserted, and a Full Answer Is Given to a Seditious Pamphlet.”). According to Rutherford:

The prince remains, even being a prince, a social creature, a man, as well as a king; one who must buy, sell, promise, contract, dispose: ergo, he is not regula regulans, but under rule of law….

Samuel Johnson included the phrase in his 1755 Dictionary, which means it must have had somewhat common use by that time, at least among Johnson’s peers in England. Clearly, when the United States was coming together as a country, the idea of “rule of law” existed among Europeans and was becoming important in our new country. From that point on, “rule of law” is in regular use, even though implementation of the idea has seen its ups and downs

An Unclear Meaning

Given that the idea has been around for many centuries, we could hope that it has taken on a clear meaning. We could hope, but it would be for naught.

“Rule of law” seems to have many meanings today. Theorists group the meanings into three categories: formal, substantive, and functional. The categories differ in many ways, including whether the content of law must have specific meaning or whether “rule of law” refers to characteristics, but not content. The functional category focuses more on the degree of discretion man, particularly government officers, has in deciding the law (for example, to what extent does natural law play a role). For our purposes, “rule of law” must be something measurable and so we will turn to a more concrete definition.

A Mediocre Performance

Settling on a definition of the rule of law is a challenge. But a greater challenge is overcoming our perception of the United States as a leader in the rule of law compared to other countries. Most people tend to think that the United States ranks high—among the world leaders—when it comes to rule of law. This gets a bit tricky, because it is difficult to rank countries on their implementation of the rule of law if we have trouble defining it. But, we can approximate by defining key characteristics of the rule of law and when we do, it changes our perception of the United States.

The World Justice Project has for many years ranked over 100 countries to compile an overall Rule of Law Index® ranking. The Index is subdivided into eight categories and 44 subcategories. The categories cover areas such as absence of corruption, civil justice, and criminal justice. I am not arguing that the WJP’s approach is the best way to measure access to justice, but it will serve well for our purposes.

Since I am using the WJP’s rankings on rule of law, it will help to understand how the WJP defines rule of law. According to the WJP, “the rule of law is a system in which the following four universal principles are upheld:

  1. The government and its officials and agents as well as individuals and private entities are accountable under the law.
  2. The laws are clear, publicized, stable, and just; are applied evenly; and protect fundamental rights, including the security of persons and property and certain core human rights.
  3. The process by which the laws are enacted, administered, and enforced is accessible, fair, and efficient.
  4. Justice is delivered timely by competent, ethical, and independent representatives and neutrals who are of sufficient number, have adequate resources, and reflect the makeup of the communities they serve.”

Overall, in 2016, the WJP ranked the United States 18 out of 113 countries on the Index—an okay ranking but certainly not world class. For the category access to civil justice, the United States ranked a measly 28 out of those 113 countries. For comparison, in addition to countries you might expect such as Germany, Japan, the United Kingdom, and Canada, other countries outscoring the United States included Estonia, Uruguay, and Barbados.

The following quote from Judge Jed S. Rakoff, a United States District Judge on senior status for the Southern District of New York, elucidates one part of the problem:

Over the past few decades, ordinary US citizens have increasingly been denied effective access to their courts. There are many reasons for this. One is the ever greater cost of hiring a lawyer. A second factor is the increased expense, apart from legal fees, that a litigant must pay to pursue a lawsuit to conclusion. A third factor is increased unwillingness of lawyers to take a case on a contingent-fee basis when the anticipated monetary award is modest. A fourth factor is the decline of unions and other institutions that provide their members with free legal representation. A fifth factor is the imposition of mandatory arbitration. A sixth factor is judicial hostility to class action suits. A seventh factor is the increasing diversion of legal disputes to regulatory agencies. An eighth factor, in criminal cases, is the vastly increased risk of a heavy penalty in going to trial.

For these and other reasons, many Americans with ordinary legal disputes never get the day in court that they imagined they were guaranteed by the law. A further result is that most legal disputes are rarely decided by judges, and almost never by juries. And still another result is that the function of the judiciary as a check on the power of the executive and legislative branches and as an independent forum for the resolution of legal disputes has substantially diminished—with the all-too-willing acquiescence of the judiciary itself.

The rule of law we hear about is not the rule of law most in the United States experience.

The Role of Lawyers

This brings us to an awkward spot. We have leaders giving us full-throated encouragement to support and defend the rule of law at a time when our record on rule of law is abysmal. There is a terrible disconnect between the aspirational state and the current state of affairs on “rule of law.”

This type of disconnect is not surprising, especially to those who spend time with the philosophy of lean thinking or behavioral economics. In both fields, we frequently see a broad gap between the way the world is and the way we describe the world. In lean thinking, we use tools to bridge that gap. In behavioral economics, we seek to understand why the gap exists. Either way, we understand that gaps are common.

Thus, when we hear our leaders exhort us to defend the rule of law, we should recognize that the rule of law they encourage us to enforce is not the rule of law that exists. They are asking us to defend their vision of the rule of law, for surely they cannot be asking us to defend the rule of law that puts the United States at the bottom of the first quartile among 113 countries.

This is the fundamental problem the legal industry faces and lawyers face as we try to haul the United States’ antiquated legal system out of the 19th century and into the 21st century. The vision many lawyers carry is not a clear-sighted view of reality. For most, it is of a scholarly profession, providing bespoke solutions to the complex problems of society through the use of a unique science known as the practice of law.

This gap between vision and reality cannot be sustained. One of two things will happen. Either lawyers will modify their views of what they do and bring the services they provide more in line with what clients need and are willing to pay, or lawyers will maintain their views and clients will find other ways to solve their problems. The third approach, which many lawyers explicitly or implicitly hope for—that clients will stop pushing their views and let lawyers do what they want—is not a viable option.

A recent survey reminded us, as if we needed reminding, of the growing problem. It tells us that barely one out of three corporate clients is satisfied with the services provided by large law firms. Whether you are at a law firm that thinks it is different, listens to its clients, and has modified its behavior or you are at a firm staunchly defending the 19th century view of the world, you should be worried.

With each story, survey, and article that comes out highlighting the large and growing dissatisfaction among clients at all economic levels with the performance of attorneys, the situation becomes more precarious. The flimsy rope bridge that lawyers have constructed to the sides of the gap gets stretched a bit tighter, the creaking gets a bit louder, and the day gets a bit closer when the ropes holding the bridge will snap.

Some lawyers can afford to roll the dice. They can bet that retirement will come for them before the ropes break. They gamble on the number of years between client dissatisfaction and defection. The majority of lawyers do not have that luxury of taking the risk. They have too many years left in their careers to expect that clients will be that patient. Yet, the majority of lawyers hang back watching the bridge get stretched tighter and tighter by the day.

A Time for Renewal

The social media outlets, Facebook, and other organizations are starting to grasp the role they may have played in this historic election. Again, regardless of which candidate you preferred, we should all understand as part of being informed citizens, the roles that organizations play in shaping our views. Lawyers should pause and consider what role they played in this election.

Both Democrats and Republicans found large swaths of voters disenchanted with government. The legal industry plays an important role in society and our government. It is hard to say in a country which ranks 28th on access to civil justice and where, as Judge Rakoff notes, “US citizens have increasingly been denied effective access to their courts,” that the failure of the legal system to meet the needs of the citizens played no role in alienating voters.

If we are going to focus on values, such as the “rule of law,” we should all understand the differences between vision and reality. We should speak clearly when we encourage others to enforce the “rule of law.” We should acknowledge that the rule of law that once was in the United States is not the rule of law of today. Much will have to be done to bridge the gap. The starting point for all of us should not be focusing on how much more lawyers can extract from the people in furtherance of a legal system that has passed its freshness date. It should be to ask what our clients need from us and how we can best go about delivering—affordably, timely, and with the highest quality that meets those needs—legal services that return the United States to a leadership role in the rule of law.


Aristotle. Politics. The Barnes & Noble Library of Essential Reading.  New York: Barnes & Noble Books, 2005.

Isaac, Mike. “Facebook, in Cross Hairs after Election, Is Said to Question Its Influence.” The New York Times, November 12, 2016.

Montagne, Renee. “Social Media’s Increasing Role in the 2016 Presidential Election.” NPR, 2016.

Morris, David Z. “Zuckerberg Responds to Accusations That Facebook Influenced Election.” Fortune, 2016.

Rakoff, Jed S. “Why You Won’t Get Your Day in Court.” Article, The New York Review of Books, no. November 24, 2016 (2016).

Rutherford, Samuel, and Pre-1801 Imprint Collection (Library of Congress). Lex, Rex: The Law and the Prince. A Dispute for the Just Prerogative of King and People. Containing the Reasons and Causes of the Most Necessary Defensive Wars of the Kingdom of Scotland, and of Their Expedition for the Ayd and Help of Their Dear Brethren of England. In Which Their Innocency Is Asserted, and a Full Answer Is Given to a Seditious Pamphlet, Intituled, Sacro-Sancta Regum Majestas, or, the Sacred and Royall Prerogative of Christian Kings.  London: John Field, 1644.

“World Justice Project Rule of Law Index 2016.” Seattle, WA: World Justice Project, 2016.

RuleThe race is on—in fact it is well underway. Somewhere, some lonely legal tech guru is sitting in his garage working on “the greatest thing since the invention of the hornbook.” Based on algorithms that would make most string theorists drool at their complexity, the new app will not tell you what the law is (since it is a fool’s errand to chase the past with the future changing so quickly), it will tell you what the law will be when your case reaches that AI mediator/arbitrator/jurist who will resolve the dispute.

This tool will go far beyond predictive analytics, that measly science of trying to guess human behavior, it will be predictive law. From your smartphone, you will tap in the answers to some simple questions and then set a forecast timeframe: 1 year, 5 years, 10 years. Your smartphone, of course, now has processing power equivalent to your brain, though software is still limping along far behind it. But, by analyzing 10 to the something trends and then running 10 to the something variations of those trends (now called Monte Carlo lawyering), your smartphone answers telling you what the law will be on your preferred date.

And then the pin drops. Some smart-alecky third year associate in one of those big fancy law firms points out that she has spent the past three years researching all manner of legal issues for the firm’s clients. With well over 6,000 hours invested in research, she crisply points out that predicting the future of the law is quite easy and does not require the new app. “In 10 years,” she says, “the law will look basically the same as it looks today.”

It takes more than three years for a case to work its way through a federal district court to conclusion. Then add another three to four years for the case to reach the Supreme Court. But of course that is only one case. For the Supreme Court to even sniff at a case, we must have a division among the federal circuit courts of appeal. That means many cases have to work their way up through federal district courts to final decisions in federal appellate courts, and those decisions must conflict on at least one issue that grabs the Supreme Court’s attention. Then, and only then, will the Supreme Court consider giving an answer, and of course we must put aside all the state law issues which have their own paths.

To those enormous delays, we must add the time to develop the federal statutes that will give rise to the federal cases that will, etc. It takes far more than three years to get a law on the books, and then of course we need the regulations. Only then can we begin the stream of cases that will lead to the Supreme Court. “So you see,” says the third year associate, “the law will barely budge during those 10 years. After spending my more than 6,000 hours on research, I can confidently tell any senior associate to tell the junior partner to tell the senior partner to tell the client that what they want to do may or may not be legal.”

Laggard Law Affects Us All

My question is this: which parts of the above story are made up? I’ll wait. We’ll actually, I won’t wait. I’m a lawyer (retired), but I still do not have any patience. You see, nothing in the story above is made up. Law at the federal level in the United States develops in competition with the movement of glaciers (or, to put it in more timely terms, the melting of glaciers). For a while, glaciers have been winning. The federal legal system in the United States is in gridlock. Rip Van Winkle can take his nap, wake up refreshed, and miss almost nothing when it comes to federal law.

For many lawyers, the laggardness of federal law is more blessing than curse. The law, they say, should not jump and twitch in response to everything techies do. Tech comes and goes (remember those AOL discs you would get in the mail? Google Glass?) and the law should be about general principles (Karl Llewellyn’s “law of the horse” concern) not the latest fads. It takes time for lasting themes to develop and then the law can give guidance on those themes.

There are, of course, others who hold a somewhat different view. Social media, 3D printing, genome splicing, nanotechnology, AI, and many other emerging technologies are raising questions not just of property rights or privacy (both very important), but of greater risks.

We all understand that a human is a human and a machine a machine. One has rights and the other does not. But where does the dividing line exist? As we can replace body parts with devices (sometimes mechanical, sometimes biological), the definition of human starts to slip. What about when we implant electrodes that change how our brains operate? Still human? What about the next step, when scientists using CRISPR technology to alter our genetic structure? What now?

Yes, many of these technologies are in their infancy. The effects are incredible for the individuals involved, but modest for society as a whole. Doing something to hold back or alter the course of these technologies could negatively affect the lives of hundreds, thousands, even millions of people who will benefit from the technology, just because some like to run around yelling “the sky is falling.”

So go back to the original timeline. Getting issues through the federal courts (and most of the meaningful issues arising from emerging technology will need to be addressed on a federal, not state level) can easily take more than a decade. That means issues we see today may not be resolved through the courts until 2026 or later, and that is if we start today. But to reach the point where these emerging technologies can do things that truly change the human condition will take, by the estimates of many technologists, perhaps 15 or 20 years.

Put another way, in 2026 the federal courts may be getting around to addressing legal issues arising today from emerging technologies. But, of course, those emerging technologies will no longer be emerging and will have moved far past the legal issues raised today. We already can see evidence that this will happen. Regulatory bodies struggle to come up with regulations addressing issues that are minor compared to the ones raised by technology. The Dodd-Frank law passed in 2010 required public companies to report their CEO-to-average-pay ratio. The regulations implementing that requirement take effect in 2017. Seven years to handle the debate over calculating a ratio—and without lawsuits. Yeah, the federal legislative system is well-prepared to address nanobots.

Just as the process for delivering legal services is based on a late-1800s model which has changed trivially from then to today, the processes for creating and interpreting law at the federal level have changed little over the same period (and probably longer). Society, however, has refused to conform with lawyers’ desire to keep it slow.

Reform Is Possible

It would be easy to assume that I am arguing in favor of rapid law development. Some fundamental change to the processes of creating and interpreting law that would jerk the legal industry into the present and risk changing the law so quickly that it no longer brings stability and order to society. It would be easy, but wrong.

I do, however, see changes that would pull the federal processes into alignment with what society needs today—earlier guidance on issues that have the potential to affect society at fundamental levels. The definition of “fundamental levels” is beyond this post, but I am talking about process reform so we can leave substance for another day. I’m not endorsing any of the efforts I highlight, merely pointing to examples of people taking action on the types of ideas I suggest. In other words, don’t respond by critiquing the example, address the concept.

1. Move to some form of agile law-making. See, e.g., Agile Government Leadership.

2. Crowdsource opinions from stakeholders. See, e.g., Crowdsourcing legislation efforts in California and New York City.

3. Use superforecasting to test the potential effects of various regulatory approaches. See, e.g., Q&A with Philip Fetlock on Superforecasting (as applied to geopolitical risks).

4. (Greatly) expand the use of process improvement and narrow-purpose technology in the federal court system. See, e.g., 18F.

5. Streamline the process of moving disputes through courts and streamline what courts produce. See, e.g., The Pathway Approach: Draft Rules and Examples of Rules from Around the Country.

I am not attempting to answer any of the challenging legal questions that emerging technologies already have raised. My goal is more focused. The questions need to be worked out through processes that can deliver answers that we as a society can live with, and which are delivered within a time frame that makes them meaningful, not historical oddities. By not fixing our processes today, we risk (and I think the risk is very high) reaching a point when we do need answers and not being able to get them because the architecture of our rule of law system cannot handle the challenge. A rule of law system only works when we actually have law.

FootballJordan Furlong (The Law21 Blog) posted an essay recently titled, “Playing the client’s game.” As usual, it is a well written and interesting piece and I agree with most of what he says. But the issues he talks about are very important and I don’t think most law firm partners and most law department lawyers understand them well. So, in the spirit of keeping Jordan’s football metaphor alive, I’m going to pile on a bit.

The Lawyer’s Value

This question comes up frequently—what unique value does a lawyer offer? Whenever it does, the room gets quiet and you can hear feet shuffling. Richard and Daniel Susskind tried to answer it in their recent book, The Future of the Professions, but ended up with something not very satisfactory (I suspect they feel the same way). I am not saying it is an easy question to answer, but I think the answer today is very different than the answer 120 years ago. Jordan describes the role of a lawyer as not the quarterback, but “the third-down fullback called on to blast through the line in a short-yardage situation, or the speedy wide receiver who goes deep on 3rd-and-22 to make a big play. We’re specialist performers who wait on the sidelines until we’re called upon to do one thing really well.”

To most lawyers, this sounds like a demotion. At one time we were the quarterbacks and many signed up to be quarterbacks. To hear we are third-down specialists deflates the ego. It also suggests our value is limited. Perhaps it should not come as a surprise that when we get back to the unique value question, the room is quiet and you can hear feet shuffling.

Follow the Best Legal Brains

Jordan takes us to a quote from a column by Anthony Hilton in the UK publication, the Evening Standard. I agree with where the quote starts, but then it goes in a direction that I think is wrong and takes us down a wrong path. Hilton starts, “[L]awyers have lost the glamour, the access and the special status that came with having opinions worth listening to. They have allowed themselves to be commoditised and to become the last port of call.” No quibbles there. But then Hilton goes on to say, “They have allowed some of their best brains to move in-house as general counsel in the biggest companies, taking the interesting legal advisory work with them. …” Here I have to disagree.

I don’t think that the best brains have moved in-house as general counsel or are staying in the law firms. I think both have claims to bright lawyers and not so bright lawyers. I say this because I think we see very little difference between the delivery of legal services in law firms and in law departments. Here and there, at the margin, we see some efficiency differences or more thought about what the client needs than what the lawyer wants to deliver. But, overall, there is remarkably little difference between the two worlds. There even are many cases where the general counsel wants to re-shape the law department to look more like a law firm.

Jordan moves next to the point that the number of lawyers in-house is increasing and with that increase the locus of power has shifted from law firms to in-house lawyers. Jordan nicely describes this transition, “I don’t think there’s any question that power (and therefore prestige) is increasingly accumulating on the buyer’s side of the legal service relationship.”

Corporate clients have been pulling work in-house for many years, and according to recent reports the rate has increased over the past four years. The work being taken away from large law firms is going to in-house lawyers, and to some extent to managed service providers and other alternatives to the traditional law firm source.

So far, however, that has been in-housing the law firm. As I and others have said, this is an easy and effective way to reduce law department costs by simply leveraging the cost of labor. An in-house lawyer costs much less than a law firm lawyer and in a market where lawyers are plentiful, hiring in-house quickly ratchets down costs. That has shifted power, but I’m not so sure about prestige.

Keeping with Jordan’s football metaphor, labor arbitrage is a game focused on gaining some yards quickly. Bringing work in house immediately reduces the cost of the work. After that one-time cost reduction, the law department will not get much in further cost reductions unless it tackles process improvement. The improvement might come through technology, though often in-house technology implementation comes with little or no process improvement, so again it yields a one time change in cost. The addition of an in-house lawyer does yield a temporary increase in inventory—lawyer time to work on matters—which can help with work not being done. But eventually, the in-house lawyer will have a full schedule and the benefits of a lower cost will have been realized, so the law department will be back to where it was before. After doing a run play several times, you need to pass.

The danger in believing the labor arbitrage approach is anything but a quick fix comes when we play to win the game, not just get a few yards. Lawyers are, whether they like it or not, a cost center not a profit center. Some may offset the cost by enforcing patents or taking other actions to recover damages owed the client, but that doesn’t change the law department from a cost center into a profit center, it simply offsets costs (recovering money owed is not the same as selling products or services for profit). It also seldom rises to a long-term sustainable strategy and may become even less important if some of the current initiatives to reduce cost recoveries by non-practicing patent entities go through.

Cost centers should constantly seek to reduce the burden they place on the organization, while at the same time seeking to improve quality, timeliness, and other metrics important to the business. Eventually, the CEO or CFO will ask the obvious question, “why has the lawyer headcount grown so much?” At that point, the next logical step is to substitute thinking, capital, and cheaper labor for in-house labor. Enter process improvement, technology, and labor alternatives (these could be cheaper in-house labor alternatives or outside labor alternatives). In other words, time to cut some members from the team roster.

The View from In-House

From Association of Corporate Counsel surveys to comments from general counsel, there is a growing belief that what CEOs really want from their general counsel is strategic help, not just competent management of legal affairs. Certainly, this is more true today than it was in the past and it rings true for some general counsel. But overall, I think general counsel and in-house lawyers are unduly optimistic to think that they have been hired for their strategic acumen. Put differently, if the legal work goes away, it is unlikely many of the in-house lawyers will have jobs working as strategic advisors.

The last statement probably sounds harsh, but let’s take an objective look at the situation. Lawyers are not trained in law school to be strategic thinkers. They are trained to play the role of tactician. Jordan points this out in his post, “But most lawyers are tacticians, not strategists, and they prefer neither to manage nor to be managed.” Without trying to define what law school teaches, it certainly does not teach (putting aside the random course here and there), the type of strategic analysis a first-year MBA student gets. As a student at Northwestern University’s J.L. Kellogg Graduate School of Management, I spent significant time studying strategy, working on case studies focused on strategy, and doing group projects on strategic questions. As a student at Northwestern’s School of Law (now Pritzker School of Law), I did not spend any time studying strategy.

It gets worse. When I have tried to train lawyers at large firms on strategic thinking, they have actively resisted. The comment “we are lawyers, not consultants” comes up frequently. It is the law firm lawyers who move in house, the best brains Hilton talked about becoming general counsel, who may have some interest in strategy (though again, no particular training or experience the field). Lawyers are good at breaking complex problems into small pieces, building solutions, and re-assembling the parts, but that is not strategic thinking.

For in-house lawyers, I think that leads you in this direction. CEOs know they pay a lot of money for in-house lawyers. Some of the general counsel they hire do come with significant backgrounds in strategy, not from training, but from experience. It isn’t uncommon to see large corporations hiring lawyers who have held senior positions in government or leadership positions in other organizations (even law firms, the wastelands of strategic planning). So, some general counsel are better positioned to provide strategic counseling and CEOs want them to do what they were hired to do. But that does not mean all general counsel, and it certainly does not mean all or even most in-house lawyers, are up to being strategic counselors.

Those general counsel who provide strategic guidance face a secondary problem. One person sitting in his or her office will seldom be able to assimilate the necessary information to provide that strategic guidance. That person will need help, and if that person is the general counsel then who will help her? Law departments are not set up to provide that assistance, nor are law firms. How to thread geopolitical risk through the lens of the legal function requires more than a course on international law in law school. The world is filled with strategic consultants who work with other departments in a company, but thin when it comes to consultants focus on helping general counsel and their lawyers become strategic players.

Finally, assuming the majority of CEOs want their general counsel to become strategic advisors, the numbers tell us the impact will not be significant. There are no more than 1,000 general counsel for the Fortune 1000 corporations in the United States. There are certainly deputy general counsel and associate general counsel who are the lead lawyers for very large subsidiaries and divisions, but even throwing those in the basket won’t increase the number to more than 1,500 or maybe 2,000. Double that to include lawyer-strategists in training, and you have maybe 4,000 lawyers who are in the pipeline to provide real strategic advice to the leadership of corporations. Even if you quibble with my numbers, you will still find the majority of in-house lawyers are not in a position to serve a strategic role. They are in a position to provide inexpensive (though talented) labor compared to their law firm peers and that puts them at risk of being cut from the team roster.

The Rise of Legal Ops

Jordan then takes us where many are going when it comes to leading the grand revolution. As he says, “If you’re looking for the quarterback in the corporate legal market right now, I think you need to go visit Legal Ops.” This argument makes sense. The legal operations leaders are being brought to law departments to run them better than their predecessors. They have been asked to focus on legal operations economics, technology, staffing, and outsourcing. What direction should they take? Well, they can just look down the hall to the human resources and IT departments.

Those departments went through these transitions years ago. At first, leaders built those departments to handle work inside. They followed the philosophy that individuals in the organization were less expensive and more attuned to what the organization needed than those outside. Both areas grew large and expensive. And then the CEO and CFO asked the question: “why do we have so many of these folks, and too few of those who generate revenue?”

The next step was to cut the team roster. Human resources outsourced many of its functions to organizations that had evolved to do the work faster, more efficiently, and cheaper (and, typically, with fewer mistakes). Human resources kept the plum (and manageable) assignments for itself. IT went down the same path. Companies wrote their own programs, maintained their own hardware, and overall ran sophisticated IT departments. And then they too outsourced. At the end, they kept the plum (and manageable) assignments in house and moved everything else outside.

There is, of course, a glaring difference between law and the human resources and IT. Today, finding and retaining the right employees is a massively difficult job for companies. They need complicated skill sets from a workforce that isn’t well-prepared to handle the demands. IT must try to keep up with rapidly changing technology and integrate it or leverage it to competitive advantage. Law … well, it isn’t mission critical for most companies.

In the late 1800s and early 1900s, lawyers were key to strategic success for large organizations. Today, as Hilton says in another section quoted by Jordan, “[L]awyers have allowed themselves to be pushed further and further down the food chain, and away from the seat of power. In today’s commercial world, when there is a deal to be done, it is picked over by investment bankers, brokers and public relations consultants—all of whom have a share of the ear of the chief executive. Then when all the high-level stuff has been sorted by these experts, the package is tossed to the lawyer with instructions to sort it out and make it presentable. …”

If the legal operations leaders are successful, they will further reduce the role of law departments by moving much of the work (which will include very complex work) to lower cost, more efficient, higher quality outside providers (enter managed service providers), leaving much smaller in-house lawyer staffs to handle the plum (and manageable) assignments. But plum assignments for lawyers will not be the same as they are for human resources and IT. And still there is the lack of outside strategic thinking assistance.

Refocusing the Discussion

As Jordan says, large law firms will not die. But, in my opinion, they certainly will shrink in number and most will find it difficult to exist beyond bespoke, boutique services. Jordan gives us a picture of what the world could look like, “Maybe such law firms are vestigial and will eventually fall away—to be replaced by smaller expert boutiques where legal shoppers go for occasional splurges, while the rote work that supported their predecessors is either claimed by software and systems or is performed by clients in the ordinary course of events.”

Since most law departments are no more efficient or just slightly more efficient than large law firms, there are significant “opportunities” in both spheres. Through process improvement and technology, the path to reducing lawyer headcount by 50% is clear, though bumpy. That assumes we stick with technology available today and use straightforward process improvement techniques. Push further and allow technology to advance, and we can go much farther. In other words, until we reach limits where computers can’t do what a person can do, or it is impracticable to take waste out of a process, no law of nature stops us from shrinking the workforce devoted to corporate lawyering.

Of course turning to technology and taking out waste means that we can fill lawyers’ time with work that today is being given short-shrift or not being done. Every large corporation has legal work that needs attention beyond what current staffing and budget levels can handle and unless governments around the world suddenly go on regulatory diets, the volume of legal services needed will grow. That will offset at least some of the 50% headcount reduction, even in an efficient world.

Lawyers also could become client focused. Instead of being technophobes, they could learn about emerging technologies. Everyday, technologies such as 3D printing, artificial intelligence, nanotechnology, genome manipulation, and others are becoming more important to what businesses do and sell. The laws to regulate these technologies don’t exist or are woefully inadequate and on a global basis, the cross-jurisdiction issues are wonderfully complex. Businesses are plunging forward creating opportunities and risks that, in many cases, the law department knows nothing about. Rather than fighting over irrelevant or trivial issues, lawyers could refocus their energy on issues that really matter to their clients.

Lawyers in law departments and law firms have faced a choice for many years. They can try to ride out the end of the buggy whip era until retirement, hoping there will be enough horse drawn carriages around to keep them in business until their careers are over. Most lawyers seem content with this approach, even though only a few will survive using this strategy without serious career problems.

Alternatively, lawyers can play through the end of the game. They can change what they do and how they do it and find new ways to remain relevant to their clients. They can pivot the profession to provide the type of resource society will need to help with governance now and in the future.

Imagine what would happen if eleven players from 1894 took the field today and tried to play football? But that is what happens in law. Compare how legal services were delivered in 1894 to how they are delivered today, and you will see very little difference. More complexity, yes, but little difference in how the services are delivered. Yet the client of 1894 is not the client of 2016. To win at this game, lawyers must learn how to play it today and adapt to the rules for tomorrow. I don’t think this is an in-house lawyer versus law firm lawyer question. I think it is more basic. The real question is whether lawyers are willing to do what it takes to be in the game at all.