The 4th Industrial Revolution won't spare the legal profession. Thankfully
There is a lot of technological change happening at the moment, and that is driving lots of other change. This is going to continue for the foreseeable future. Even if you haven’t read the articles, you’ve seen the headlines. The fashionable tech development at the moment is artificial intelligence, or AI, but no doubt you’ve seen lots of breathless references to big data, advanced algorithms, cloud storage, robotics, and so on. How is all of this going to affect the legal profession and the practice of law?
“The Americans have need of the telephone, but we do not. We have plenty of messenger boys.”
- Sir William Preece, Chief Engineer, British Post Office, 1878
One view is that it won’t make much of a difference: technology evolves – typewriters, faxes, personal computers, emails, the internet, and so on – the law resists for a while, then it adapts, pauses momentarily to reflect on how modern it is, and then carries on pretty much as it always has, except now a little faster and shinier.
The leaders of many now extinguished retail, media, recruitment, music, delivery, publishing, transport, travel, accommodation, entertainment and financial businesses held the same view.
"We live in a society exquisitely dependent on science and technology, in which hardly anyone knows anything about science and technology." - Carl Sagan
So, that view may be right, but there's another one.
Big disruptive shifts in business sectors happen when two factors collide:
- users wanting something better - be it cheaper, faster or easier; and
- technology being able to deliver that.
Our taxi service was terrible for years -the desire for something better was always there. So when Uber put together the technology that sated the desire: bang.
The other views is that these two factors also apply squarely to the legal profession and the practice or law, and that it will make a hell or a difference.
Let's break the issues down.
Do our clients want something better?
Now, that's a sightly awkward question isn't it? It seems a little ... indecorous. How could our clients want more? We do our best. We work very hard. As we may have pointed out, we're quite clever. And our clients generally pay our bills.
Can't we talk about something else?
The fact is that our clients generally think we do a good Job. But increasingly many of them also think we could do things better and they are almost certain we could do things for less.
And why wouldn't they think this - they have been chopped and changed, and outsourced and insourced, consulted and reviewed, and taken apart and put back together again several times over the last decade or so - and beneath the rhetoric of agility and sustainability and visions and values lies the brutal fact that they are all simply having to do more with less.
General counsel may have some sympathy for our position, but his or her CEO simply doesn't care. Do more. With less.
One way to look at their perspective is to break down the sort of work lawyers do into categories. Let's say there are four:
- At the top of the pile is strategic legal work - as in very complex negotiation and disputes, and very sophisticated deal structuring and analysis. Services that require you to really exercise a high level of intellect, creativity and judgment.
- Then there is difficult legal work – as in the preparation of complicated documentation, or running messy litigation. Intellect and judgement have to be brought to bear, but success is as much about managing complexity.
- Next Is straightforward legal work- work that has its complexities, and which requires experience and skills, but which is reasonably standard. It's been done before many times.
- And finally we have basic work – you know what this is.
We all do some of each of these types of work.
Now, think about the hourly rate lawyers - perhaps you - charge, and think about how supportable that rate is, when applied to the different types of work you do.
You may come to the conclusion that in relation to strategic and difficult work that rate is supportable; indeed, in relation to strategic work particularly, a very good lawyer may well be materially short-changing their value.
But you may also come to the conclusion that in relation to straightforward work, and basic work, that weirdly identical rate is, if you really look at it, harder to justify.
In an environment where there are no alternatives, the rate - or a version of it reflected in fixed fees - is unavoidable. That is the world we have all lived in for years, for better or worse, and clients have accepted that. However, the people who pay our bills are thinking that if there was another way of doing even basic work more effectively; well, they’d be very interested in that.
And if you are wondering whether your clients do think about things like this, ask yourself this question: When was the last time that you heard a client say "lawyers' rates are too low"?
I speak to a lot of clients. A common refrain is: we need to do more with less.
So, in short, our clients are very keen for something better.
Is anything happening with technology?
This leads us to the second condition that has to be satisfied before our sector is ripe for a big disruptive shift: is anything special going on with technology?
Well, yes. We are living in what is being called the fourth industrial revolution - the technology age. It is tempting to think that we are in the middle of it, and that we can continue to successfully deal with technology in the future as we have in the past - reactively.
However, the advances we've seen in the past few years - email, social media, the digitisation of information - will not be the defining achievements of this age. They are the warm up act.
The exponentially powerful and connective powers of this age have set up the groundwork for two of the most important one-time events in our history: the emergence of real, useful artificial intelligence (AI) and the connection of most of the people on the planet through a common digital network.
Technology will be faster and more powerful, more intrusive, more indispensable, and with many more applications and uses - and all of these factors will continue to increase, sometimes quickly, sometimes exponentially, and in ways we cannot predict.
To put what is happening in perspective, there are now more interconnected devices on the planet than humans.
"Change before you have to." - Jack Welch
You know how interconnected we all are, because you see on Facebook that it's your Aunt in Melbourne's birthday.
Let's talk about AI
The popular understanding of AI is something like HAL in 2001: A Space Odyssey or, perhaps less worryingly, C3PO in Star Wars. These systems are able to do anything a human can - perceive the world fully, interact using natural and complex language and make complex decisions - and do all of it better than we can.
That's a long way off. In its present form, AI is more specialised and limited. However, it is here, and it is developing quickly.
One manifestation of AI that is pushing the current crop of technologies forward is machine learning. These systems don't just have deep knowledge in specific areas - they also have the capability to learn.
This is revolutionary. In the past, computers could do amazing things, but they were things we told - or programmed - them to do. Machine learning creates software that learns itself, and then interprets and prioritises data itself.
Without wanting to harsh your mellow, this is the development that led Elon Musk to declare AI the most serious threat to the survival of the human race.
He clearly hasn't seen the Kardashians.
"But they are useless. They can only give you answers." - Pablo Picasso, on computers
In any event, for the foreseeable future, AI is not full human intelligence, but it is a materiel step up from the processing that computers traditionally did. And that means that whilst traditional computers could replace a lot of processing work traditionally done by humans, now more interpretation and analysis work is up for grabs.
The 5 minute primer here is Watson, the IBM AI program - named after IBM's first president, Thomas Watson.
Tom has obviously been forgiven for saying - albeit in 1943 - ' I think there is a world market for maybe five computers.”
Famously, Watson - the AI version - won the game show Jeopardy, a game in which contestants have to answer questions framed in an unusual manner. The body of knowledge that Watson was given to learn the facts to allow it to play, and win, the game, was Wikipedia.
To put that in context, what we have here is a software program, that was loaded with a vast body of data, which it was able to assimilate and learn from, and which allowed it to answer quite complexly structured human enquiries.
You only have to tilt your head and squint sightly to start thinking that that sounds just a little bit like what we do.
AI is especially powerful when it uses big data. Big data is a term used to describe the consequences, or opportunities, flowing from the fact that technology has now reached the point where we can collect, store and process data on a vast scale. The human mind - well, this one anyway - cannot genuinely comprehend how much data there now is. To use a whimsical example, 30 billion pieces of content are shared on Facebook every month, though admittedly that's mainly my children.
This is the part of the story where the cloud, a term you may well be tired of, is critical. The cloud is the bucket all this data lives in.
Where Watson was given Wikipedia as its trove of knowledge to prepare for Jeopardy, big data also means that the enormous quantities of legal data being generated every day - laws, regulations, contracts, papers. emails and so on - can be fed into an AI system's pseudo-intelligent process and analysed.
In short, big data enables storage and processing of endless data, and AI allows synthesis and analysis of the data into answers to questions. Even legal ones.
What is happening out there
The AI revolution is just starting. To give you a feel, here are some diverse examples of the sorts of things that are happening.
There is a free smartphone app called DermaCompare - it uses Al to help with the early diagnosis of skin cancer. Users take photos of their skin with their smartphone camera, upload them, and the app uses comparative AI algorithms - and a database of over 50 million moles - to identify suspicious moles. It can even update the patient file and notify the assigned doctor.
Blue River Technology uses algorithms and robots to recognise plants, and decide which are weeds, and eliminate them.
The news industry is now using AI platforms to produce content. A system called Wordsmith uses natural language generation technology to fill in template articles. For example, it could write a match review of an AFL game using published stats.
lt isn't Yeats, but it’s obvious where it's going.
What's happening in the legal space
There is also a lot happening in the legal space, although, again, it is early days.
The applications of AI to law are broad. There are already AI applications - in varying degrees of development - for:
- online legal services
- due diligence
- document review
- document production
- predicting outcomes of claims
- practice management
- lawyer searching
- legal research
Most firms of any size have publicised an AI initiative of some sort - and some of them have actually done more than mere pubicily.
"lt is not necessary to change. Survival is not mandatory." - W. Edwards Deming
I will discuss what my own firm, Herbert Smith Freehills is doing simply because I know most about it.
We have actually been using AI for close to 10 years now - and, don't tell anyone, but most of us didn't realise it. Our e-Discovery team, which is part of our Alternative Legal Services group, uses very up to date e-discovery systems. These systems use a mix of rules based and predictive approaches to find relevant - or, more accurately, potentially relevant - information in discovery on large litigation. The systems we use, and our general approach, have been upgraded and improved several times, as the technology, as well as our knowhow, has evolved.
I referred earlier to the cost driver at the core of all this - the reality is that, without this technology, and the ability of law firms to use it in an increasingly sophisticated way, no one could undertake meaningful discovery in complex cases in anywhere near a sensible time frame at anything resembling a reasonable price.
We are also starting to use machine learning tools in other contexts, such as due diligence and general document review. We are also looking at how document automation and AI applications can improve what we do.
Critically, these innovations aren't just client facing – we’ve been using an AI backed initiative to crowdsource innovative ideas from our people, all around the world.
It’s not here yet, but we are beginning to get a glimpse of what the future looks like.
So, as you would expect, firms are driving this. As well as that, a lot of the interesting - and well-funded – work is being carried out outside of the law firms.
One of the better known here is ROSS. ROSS has been developed off the Watson platforn, and is an artificially intelligent legal software system. It can mine data from up to a billion text documents, analyse the information and provide answers to complicated legal questions in seconds.
It is early days, but even a quick look at ROSS shows you where things are going.
There is a lot of action - and investment - in this space.
The biggest change of all ...
The biggest mistake that lawyers can make about these developments is to think that this just means that at some stage in the next few years they are going to have to go to the shop and buy an AI machine.
That is certainly how past technology developments have been dealt with. But these technology developments are different, because they are going to change our business model.
It isn't enough to commit to buying an AI system. Firms will need to change their business model so that they can take advantage of Al. And the people working in these firms will have to have a different approach to how work is done.
Law firms will either have to invest in this in a way they have never invested in anything before, or they will have to outsource significant parts of what they do to third parties - and of course, in reality, to be really successful they will have to do both.
Different systems and processes will have to be incorporated into the law firm's operating model, which will involve employing many people with very different skill sets - that includes the lawyers.
To achieve the cost savings that clients are pressing for, these different systems, and the people behind them, will not necessarily live in the same geographical space. They may not even be part of the same company.
Lawyers will need to become adept at working in an environment where the solution to their client's problem is achieved by bringing together these different systems, in different places. Collaboration and flexibility will be crucial.
I cannot say what it will look like. However, look at how banks were set up in the 1980s, and look at them now. Do the same for the music industry. And the newspaper one.
That, at the very least, will give you a sense of scale.
When will this happen?
"We always overestimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Don't let yourself be lulled into inaction." - Bill Gates
Bill Gates is a smart man. It won’t be two years. But in 10 years we’ll be well on the way.
There won't be robots walking past our office. We'll still need lawyers. Just like we still need journalists and bankers.
It’ll be life Jim. But not as we know it.
The difference between an ordeal and an adventure is state of mind. It's an exciting time to be in practice, especially if you are young or curious.
Never in our profession has there been a better opportunity for adventurous, bold, innovative thinkers to make a difference.
Go for it.
The contents of this publication are for reference purposes only and may not be current as at the date of accessing this publication. They do not constitute legal advice and should not be relied upon as such. Specific legal advice about your specific circumstances should always be sought separately before taking any action based on this publication.
© Herbert Smith Freehills 2021