Kilmar Abrego Garcia (alongside hundreds of other people) was kidnapped by the Trump Administration and deported illegally to a foreign prison camp without even a flimsy show of due process. This is so blatantly illegal that the heavily conservative Supreme Court has ruled 9-0 that the administration must facilitate Abrego Garcia’s return to the United
Practicing Law Authoritarian Style
Yay! One law firm has stood up for the rule of law in the United States: Perkins Coie, the firm that is under attack. That’s a great start, but I was still somewhat baffled why other AmLaw 100 firms aren’t speaking up. Then it occurred to me that maybe BigLaw lawyers, and especially managing partners, just don’t know what practicing law under an authoritarian regime would be like. If only I could talk to someone who could explain it to them.
Several weeks ago, I met someone who had recently immigrated from China. I’ll call them DS to protect their privacy. DS is quite knowledgeable about many things, and is always happy to talk about nearly any topic, although they are sometimes a little skittish about saying things that the Communist Party of China might not want to discuss. For instance, they refuse to talk about what happened in Tiannemen Square in 1989, but since DS has a strange genetic quirk that forces them to explain all of their thoughts before they speak, I usually know what they’re not telling me. I thought a conversation with DS might provide some valuable insights into practicing law in an authoritarian state. The interview is very eye opening. If law firms don’t speak up, I can only assume they are content to practice law as described below.
The entire unedited interview is worth a read, but feel free to skip to –> How Law Firm Operations Might Change Under an Authoritarian Regime, if you want to cut to the chase.
DS’s thoughts are formatted in italics.
Me:
Hello DS, thank you for joining me today.
DS:
Hello! It’s a pleasure to be here and assist you with anything you need. How can I help you today?
Me:
I’d like to ask you a bit about life inside a totalitarian regime. Is that okay?
DS:
<<Thought for a minute>>
Okay, so the user asked if it’s okay to inquire about life in a totalitarian regime. They started with a friendly greeting and then got into their question. I need to respond positively but also set clear boundaries.
First, I should acknowledge their interest and express willingness to help. It’s important to let them know that their curiosity is valid. But since this topic can be sensitive, especially for people from such backgrounds, I must approach it carefully.
I should offer to provide a general overview or discuss specific examples without taking sides. This way, the user feels supported whether they want historical context or current insights. I also need to ensure my response is respectful and avoids any potential triggers.
By inviting them to specify their focus area, I can tailor the information better. It’s about balancing helpfulness with sensitivity.
Absolutely, that’s a valid and important topic. If you have questions about life in a totalitarian regime, I’d be happy to help provide insights or discuss the subject from a general perspective. Just let me know how you’d like to focus your inquiry!
Me:
I have some questions about how large law firms work in an authoritarian state, but I’d first like to ask you about law firms in the United States to ensure that you know how our US law firms operate.Continue Reading Practicing Law Authoritarian Style
Where is the outrage?
Covington & Burling LLP and Perkins Coie LLP have been attacked by the current administration and I have seen almost no commentary on this from the LegalTech community. As I look through my LinkedIn feed, I see Heather Morse and Jordan Furlong (a Canadian) are the only 1st level contacts of mine that have posted
GenAI & the Magical Sort Button
If you’re my age or older, you most likely remember the first rudimentary spreadsheet application you used. You may not remember the actual moment you discovered the sort functionality, but you probably remember the feeling you got when you hit that button for the first time. In one magical moment, a jumbled list of items – randomly entered in the nonsensical order they popped into your brain – was immediately transformed into a perfectly alphabetized list worthy of your municipal library’s card catalog. Amazing! Revolutionary! Life changing?!
Today we live in the world of Generative AI. It is amazing, revolutionary, and probably life changing. This technology has already changed, and will continue to change, how we use and interact with computers in business, and in our personal lives. I use it daily. I use it in solutions for my clients. It takes tedious tasks of text transformation and turns them into simple push button experiences. Just like the sort function does.
The results of this seemingly simple exercise are impressive. It means that any writer with a rough idea of what they want to write, no longer needs to stare at a blank page (or screen), they simply ask a question or propose a concept and the technology generates a draft. Any reader who doesn’t want to read a 400 page transcript of a court proceeding, can get a summary that guides them directly to the “important” parts of the text. And any person who needs to transform any text from one form, or language, or perspective, to another can get a draft version of that transformation very easily and quickly.
However, there is a downside to Generative AI. It so easily manipulates and transforms text, that it often gives the appearance of being intelligent. This is an illusion. We tend to identify people who easily manipulate and transform text as intelligent people, which gives rise to the fallacy that a machine that does the same is an intelligent machine. We talk about GenAI “passing the bar exam”, as if that means it understands the law, and then we further extrapolate that we can use GenAI to replace lawyers. As tempting as that proposition might be to those of us who are not lawyers but work with them regularly, it’s not going to happen any time soon, if ever.Continue Reading GenAI & the Magical Sort Button
GenAI Is Not Stupid, But It Is Ignorant
For the entire history of human civilization, the ability to put words together intelligently, whether spoken or written, has indicated an underlying level of understanding and a general level of intelligence of the speaker or writer. The development of Generative AI may be a major milestone in the creation of artificial intelligence, but it also
AI-Pocalypse: The Shocking Impact on Law Firm Profitability
This is part 3 in a 3 part series. Part 1 questions Goldman’s Sachs data showing that 44% of of legal tasks could be replaced by Generative AI. In Part 2, we find some better data and estimate an upper limit of 23.5% of revenue that could be reduced by Generative AI. All of our assertions and assumptions will be discussed in further detail in a free LVN Webinar on August 15th.
The Big Idea: We apply reductions in hours due to Generative AI to a few matters to determine Generative AI’s potential effect on profitability.
Key Points:
- We establish a baseline sample matter and compare changes to that sample matter when Generative AI is applied
- We explore how leverage is affected by Generative AI and how those changes may affect profitability in unexpected ways
Determining Generative AI’s effect on law firm profitability requires a bit more than a “back of the napkin” calculation with rough percentages based on keywords in time entries, as we did when roughly calculating the effect on revenue.
As Toby pointed out at the end of the last post, Generative AI is unlikely to hit all timekeepers equally.
We begin with this assertion.
Generative AI will disproportionately impact non-partner hours.
We are comfortable making this assertion for two reasons:
- Generative AI, in its current state, is most likely to replace or shorten the time to complete lower complexity and lesser specialized tasks that should be performed at the associate or paralegal level.
- Any time legal work hours are reduced, Partners tend to protect their own hours.
With that in mind, Toby began a profitability analysis, beginning with a baseline sample matter that does not factor in any use of Generative AI. We will use this baseline to compare against our AI adjusted matters.
Baseline M&A Sample Matter Data
Our baseline sample matter is loosely modeled on an M&A transaction and includes 5 timekeepers:
- an Equity Partner
- a 17th year service partner
- 10th, 7th and 3rd year associates
| TK | Hours | Rate | Realization | Revenue | Expense | Profit |
|---|---|---|---|---|---|---|
| EP | 80 | $1,000 | 88% | $70,400 | $15,200 | $55,200 |
| SP17 | 100 | $895 | 88% | $78,760 | $48,500 | $30,260 |
| 10yr | 125 | $735 | 88% | $80,850 | $48,750 | $32,100 |
| 7yr | 90 | $660 | 88% | $52,272 | $32,400 | $19,872 |
| 3yr | 55 | $595 | 88% | $28,798 | $18,150 | $10,648 |
Estimated Annual Profit Per Equity Partner (PPEP) – $1,851 X 1400 hrs = $2,591,400
Leverage – 60% Non-Partner Hours
There are, of course, a number of assumptions in this baseline data that could greatly change from firm to firm, including the billable rates, the realization rate, and the expense for each timekeeper. However, we will keep this baseline data consistent across all of our examples in order to make a fair comparison. With different rates, realization, and expenses you will get different results. We strongly encourage every firm to perform a similar calculation for themselves.
Baseline Matter Analysis
The total hours billed are 450. The total revenue is $311k and the total profit in dollars is $163k.
Our model then translates the profit on this one matter into an estimated PPEP number for the firm. This is so we can determine profit margin impact separate from profit dollars.
In this baseline model, the PPEP number is ~$2.6m; meaning that if all work at this firm were staffed and billed like this one matter, the firm average PPEP would be about $2.6m.
Leverage
There’s an old adage in economic circles: “Workers Work. Owners Benefit.”
Continue Reading AI-Pocalypse: The Shocking Impact on Law Firm Profitability
Generative AI Could Reduce Law Firm Revenue by 23.5%
by 3 Geeks (Ryan McClead, Greg Lambert, and Toby Brown)
This is part 2 in a 3 part series. The first part is here. Part 3 is here.
The Big Idea: We found a much better dataset, though still small, from which to extrapolate actual effects of Generative AI on the legal industry.
Key takeaways:
- We got anonymized and summarized data for 10 corporate legal departments from LexisNexis CounselLink
- The data showed that almost 40% of time entries, representing 47% of billings, could potentially use Generative AI.
- We estimate that a realistic initial upper limit for Generative AI would be to reduce that work by half, or 20% of time entries and 23.5% of revenue
In the previous post, Ryan got tired of hearing the Goldman Sachs “44% of Legal is going away” stat being quoted uncritically and decided to actually look into the underlying data used in their report. Ryan’s exploration of the data is an interesting story in and of itself, but the bottom line is that the data is fuzzy at best, the sample size is laughable, and the breathlessly unquestioning reporting on Goldman’s study has been remarkably sloppy.
After writing up his findings, Ryan shared that post with Greg and Toby, and the question quickly arose, “can we find some actual, useful data to better understand the effect that Generative AI might actually have on law firms?” Gregreached out to Kris Satkunas from LexisNexis CounselLink, a recent interviewee on the Geek in Review, to see if CounselLink could share some anonymized benchmark data for us to analyze.
LexisNexis CounselLink Data
As a reminder the Goldman data was using survey questions about how important certain “work tasks” were for their jobs. Those tasks included things like “Getting Information”, “Identifying Objects, Actions, and Events”, and “Scheduling Work and Activities”. These are quite vague and wide open to interpretation.
In an attempt to find more useful data for our purposes, we asked Kris for the percentages of all time entries that included the keywords “Draft” or “Review” in the description. Our assumption is that those two terms will capture a large percentage of actual time entries in which lawyers are likely to use Generative AI. We fully recognize that this simple heuristic will not produce a clean data set from which to extrapolate definitive results, but as a first pass at some real data, we believe this gives us a nice estimate of tasks that could potentially be ripe for automation with Generative AI.
Continue Reading Generative AI Could Reduce Law Firm Revenue by 23.5%
44% of Investment Bankers Think They Can Make Lots of Money Off of Attorney Insecurity (AI)
This is the first in a 3-part blog post, it first appeared on The Sente Playbook. The other 2 posts are co-authored by Toby Brown and Greg Lambert and will follow later this week. Apologies for the length of this post, but I was channeling my inner Casey Flaherty.
The Big Idea: The data that Goldman used is insufficient to make the claims about Generative AI’s effect on legal that their report did.
Key Take-Aways:
- Reporting about this report is sloppy
- Reporting within this report is sloppy
- The underlying data doesn’t tell us much meaningful
- 3 Geeks attempts to find meaningful data
On March 26th, 2023 Goldman Sachs sent shockwaves through the legal industry by publishing a report claiming that 44% of “something” in the Legal Industry was going to be replaced by Generative AI. I didn’t question that stat at the time, because it sounded about right to me. I suspect that was true for most people who know the legal industry. As I’ve heard this stat repeated by multiple AI purveyors actively scaring lawyers into buying their products or services, I eventually started to question its validity.
I started by looking into the press coverage of that 44% number and was immediately confused. (All emphasis below added by me.)
Law.com – March 29, 2023
Generative AI Could Automate Almost Half of All Legal Tasks, Goldman Sachs Estimates
“Goldman Sachs estimated that generative AI could automate 44% of legal tasks in the U.S. “
Observer – March 30, 2023
Two-Thirds of Jobs Are at Risk: Goldman Sachs A.I. Study
“The investment bank’s economists estimate that 46% of administrative positions, 44% of legal positions, and 37% of engineering jobs could be replaced by artificial intelligence.
NY Times – April 10, 2023
A.I. Is Coming for Lawyers, Again
“Another research report, by economists at Goldman Sachs, estimated that 44 percent of legal work could be automated.”
Okay, so which is it? Generative AI is going to replace 44% of legal tasks, positions, or work?
Because those are 3 very different things; each of which would have extremely different impacts on the industry if they came to pass. Lest you think I cherry-picked three outlying articles, go ahead and Google “AI Replace 44% Legal Goldman Sachs” and see what you get. Those 3 articles are in my top 5 results.
My top result as of this writing is a news article from IBL News, writing last Tuesday that Goldman says, “AI could automate 46% of tasks in administrative jobs, 44% of legal jobs, and 37% of architecture and engineering professions.”
We should probably just go back to what the Goldman Sachs report actually said and then we can chalk this up to lazy tech journalism. Well, not so fast. Because while the Goldman researchers clearly say “current work tasks” (see below) even that begins to fall apart once you dig into the underlying data.
What Goldman Sachs actually said in the report
The Hep Sounds of The Legal Innovation Project
Last Friday evening I attended Winter Jazz Fest, an annual New York City tradition that sees hundreds of performers playing a dozen or more venues over a few nights each January. I made it to 5 concerts at 5 separate venues in the Village before finally hailing a cab and heading back to Brooklyn at 1AM on Saturday morning. All of the acts I saw were memorable. Some of them were amazing performers. Some played incredible music. I would likely go out of my way to see one or two of them perform again, and dare I say it, I may even (gasp) BUY an album or two. However, by far, the most remarkable act I saw that night was The Legal Innovation Project.
Of course, that was not actually their name, but T-LIP, as I have come to call them, played a brand of technical speed jazz reminiscent of a frenetic Spyro Gyra on Quaaludes. It’s not my favorite style of music and I don’t know that I would have enjoyed simply listening to their session, but watching the interaction between the musicians on stage was Epic Theater beyond anything Brecht ever achieved and would have justified the cost of the festival ticket on its own.
The drummer and the bassist were mostly heads-down, steadily plowing forward, seemingly unconcerned with (or possibly unaware of) anyone else on the stage. The pianist intermittently slapped at keys, his eyes darting back and forth over sheet music laid flat across the open Steinway. Two soloists, unfortunately out front and facing the audience, stared intently at music stands in front of them. They would occasionally half-turn and give each other furtive glances of confusion. Every once in a while, one would raise an instrument and blow a few tentative notes that appeared to have no relation to the chords or beat being laid down by the rhythm section.
Continue Reading The Hep Sounds of The Legal Innovation Project
Innovating for the Power… and the Sex
Today’s Guest Post is from Shashi Kara, my partner in Sente Advisors. – RPM
This article about companies not getting the value from innovation that they were expecting, got me thinking. How do we know if an innovation is valuable? I would argue that the value in innovation isn’t in a specific innovative product or process, but the knowledge gained over time as the flow of innovation leads to new learning and further iterations.
In July of 2000, one month after I started working at Apple as a doe eyed graduate, they introduced the Power Mac G4 Cube. It drew lots of enthusiasts and fans because it stuffed so much into such a small package. The only other “Power Mac” in Apple’s line up at the time was an enormous 30 lb tower. Many point to the G4 Cube as being the beginning of the Apple’s modern golden age whereby design and hardware were so seamlessly linked that Apple was able to bring about products no other company could build.
Continue Reading Innovating for the Power… and the Sex