Legally Disrupted: Four Key Takeaways on the State of Legal Industry Modernization
By Zach Abramowitz
Recently, I had an opportunity to host a conversation with Bill Henderson, Professor at Indiana University’s Maurer School of Law and Editor of Legal Evolution, as part of Legally Disrupted – Axiom’s series of interviews with the leaders who are moving the legal industry forward and disrupting entrenched ways of thinking and working. The conversation focused on an essay he published recently on Legal Evolution, entitled “The Best Metaphor for Today’s Legal Market Is the Auto Industry Circa 1905.” If you have the time, I recommend listening to the entire recorded webinar, but I want to highlight four of my own key takeaways from our conversation:
1. It seems inevitable that legal innovators will mechanize the legal industry
First, I was struck by Professor Henderson’s confidence in the new breed of legal innovation entrepreneurs.
“There is plenty of work that will be bespoke; but if all of it is bespoke, we can’t provision services efficiently to everyone. We can’t make it cost-effective. We need to identify the domains that need to remain bespoke, and the things that feed into it should be mechanized. This isn’t a philosophical question that we should argue about – let’s just see if the innovators can mechanize it.”
I share this same optimism. In a recent episode of the All-In Podcast, a panel of venture capitalists emphasized how much smarter and more efficient Silicon Valley’s sourcing of deals has gotten over the last 10 years. One factor is that investors can now bet on serial entrepreneurs who have already succeeded. But the other factor is that starting a company and raising capital is no longer as difficult as it used to be. As a result, domain experts who may not have startup expertise have a much clearer path to follow than did first-time entrepreneurs 10 years ago. The hosts of the All-In Podcast intended their comments for startups generally, but it applies just as much to the legal industry. In his essay, and again during our conversation, Professor Henderson noted that Ford was actually Henry Ford’s third company, and he highlighted Onit founder Eric Elfman as an example of a serial entrepreneur in legal. During our talk, Professor Henderson also highlighted individuals like Thomas Suh from LegalMation as examples of domain experts who were leaving lucrative legal careers to build the next generation of legal technology.
2. There are still limits to artificial intelligence
While both the Professor and I expect technology to play an increasing role in legal, we did recognize the limits of technology. “There are certain things that artificial intelligence cannot do,” said Henderson. “It cannot jump from domain to domain.” This is certainly true. As an example, AI is very good at learning how to play chess, but an AI that is good at chess is not necessarily good at checkers. In particular, the point Professor Henderson was making in comparing today’s legal industry to the auto industry in 1905 (as opposed to the ‘60s) was that many of the early automobiles didn’t work perfectly – they even crashed.
So, does the comparison imply that lawyers relying on technology are bound to crash? No. But it does mean that lawyers should set their expectations, understand that not all technologies are going to succeed, and plan accordingly.
3. Comeuppance for an entire profession?
The line in Professor Henderson’s essay that really stuck with me is, “In sum, we need to be careful not to conclude that a slow comeuppance for complacency is the same thing as no comeuppance at all. Indeed, it’s possible that our current policies are enabling one generation of lawyers to prosper at the expense of those who follow, effectively running the well dry. A truly learned profession, of course, would see this coming.”
During our conversation, Professor Henderson reiterated that the legal profession needs to develop a more sophisticated approach to human capital and adopt supply chain principles.
“Paul Cravath understood this; he had a rotation system. Yes, my rotation system is labor-intensive, but the result is I ‘get a better lawyer faster.’ Paul Cravath understood those things when he built the Cravath system. It was a very sophisticated human capital system. Big Law adopted it, but then fundamentally forgot the clockwork type pieces that compromised the original Cravath model.”
But, Professor Henderson also reiterated that comeuppance may be in store, not just for law firms, but for legal departments as well: “In-house counsel wants multiple things that are simply incompatible. They want to hire lawyers who have been trained at top firms, but they also don’t want to pay for junior associates; they want to hire diverse candidates, but they also want lawyers who attended T14 law schools. All this is happening as big law firms are moving to highly bespoke work that cannot be commoditized, while shrinking their entering class.”
The professor made a specific recommendation for in-house counsel: “In order to get the kind of things the in-house counsel wants, they have to adopt supply chain principles to run their business. The complacency of the Big Three car companies is very much in play for Big Law and their corporate clients.”
I couldn't agree more. Disruptive technology and increased competition does not distinguish between law firms’ attorneys and those in-house. Law departments who are not intentional about modernizing their supply chain could find themselves on the wrong side of comeuppance.
4. The role of Axiom in modernization
It would be almost impossible to have an academic conversation about the modernization of the legal industry without mentioning Axiom’s role, in particular, as one of the aforementioned “competitors” that have applied pressure on the conventional model. I was reminded of Axiom founder Mark Harris’s vision that he outlined to me in a 2016 interview on Above the Law, in which he explained that industrialization of the legal industry began with rethinking from scratch how attorney talent was procured. In the second phase of industrialization, disruptive technology would play a greater role.
“Disruption in the legal industry will be tech-enabled, but services-led. Why? You need a services-led change program to get people/companies operating in a new way. Then, and only then, can you successfully introduce technology solutions that can be adopted to support and underpin that change.”
For more insights from Professor Bill Henderson, listen to our entire conversation.
Zach Abramowitz, lawyer turned legaltech entrepreneur and angel investor, interviews Jason Barnwell, the Assistant General Counsel for Modern Corporate External and Legal Affairs at Microsoft.
A conversation with Jason Barnwell, Microsoft's AGC for Modern Corporate External and Legal Affairs, interviewed by Zach Abramowitz, lawyer turned legaltech entrepreneur and angel investor.