A lawyer’s ability to stand behind their legal work is a real advantage over legal AI. But for many clients, paying more to transfer risk to a lawyer is a luxury — and maybe soon, an unnecessary one.
As usual, I agree with you and Mr. Carr as well (valuable reads, always). In addition, and related to his query about pricing, QUALITY has entered the chat. It's part of value, to be sure, but with complete lack of quality standards in the profession/business of law, the time has come, surely, for us to get on (or at least closer to) the same page about how we define "excellence."
Regardless, all this does is confirm for me that the People, Process, Platform sequence remains the right approach to continuous improvement, irrespective of whatever AI or other solution is being considered.
Very insightful and interesting, as usual. I'd be very curious to hear your thoughts on reconciling the points in this piece with your points in the earlier piece on the potential of an AI-induced shift of lawyers to the "people law" sector. It seems that most needs arising in the people law sector come from a population that might not be willing to secure, or financially capable of securing, the accountability premium, as you put it.
Ben, I would say these two articles represent what you might call the "half-full glass" and "half-empty glass" perspectives on the future of lawyers. The first gives us a vision of how the legal profession could successfully adapt itself to a very different demand profile in the legal market; the second suggests what might happen if lawyers fail to manage that transition because they could not distinguish their offerings from what an AI could provide. The optimist in me hopes for the first; the realist suspects the second might be more likely.
I don't think the two visions are necessarily in diametric opposition, however. AI seems likely to produce two simultaneous effects that operate roughly against one another. The empowerment that AI will bring to the unrealized and unmet legal market will be extraordinary, bringing untold millions of people to a point where they can pursue legal remedies and opportunities that were previously inaccessible to them. But the same AI that enables people to pursue their legal options will also allow them to succeed in that pursuit without the need for lawyers' assistance. You could think of it as standing on the seashore, as one wave topples onto the shore while the undertow of the previous wave draws back out to sea.
My hope for the profession is that we're able to level up beyond the transactional implementation of legal tasks (which has defined most of our daily activities for most of the last century) and develop the capacity to provide people who have legal needs with trustworthy guidance, careful counsel, courageous advocacy, and steadfast support as they make their legal journey from problem to solution, or from opportunity to accomplishment. That, admittedly, will be a tall order, possible only if we significantly reconfigure lawyer identity and lawyer formation to focus on personal service to people and civic service to society. This is the message of my TECHSHOW keynote in a nutshell.
I don't know which of these futures, or any of the thousands of potential futures that await the legal profession, will end up manifesting themselves. One thing we've all learned over the past decade is the importance of preparing for the worst even while we hope and plan for the best. It seems to me that that's our job right now, to plan for a future where the legal profession has both market and societal value, and to prepare the profession to fulfil those callings.
If you want a recent analog, look at the story of Getty Images. In the early 2000s they had the advantage of access — to high-end photographers and their images, plus the equipment to make high-quality digital scans of them. But as digital camera quality increased and editing tools got more accessible, Getty could no longer compete on access alone. But they survived and thrived because of the risk transfer (indemnification) in their licensing. By vetting their content for copyright provenance and trademark clearing, and actually leveraging their legal team in their sales process to convey the importance of the risk-shift, Getty has remained the premier supplier of imagery to top companies.
What are your thoughts for what this means for pricing? The accountability premium chargeable by an institutional provider law firm does not, or at least should not, reflect the activity to generate the output. In this case, what’s the #NewLaw business model for the firm? I for one, continue to believe that the model must reflect some form of Delivered Value — and in my world as a buyer that meant Effectiveness (were my customer goals related to outcomes/results met?), Efficiency (at or below the mutually agreed budget/cost) and Experience (as a customer, did my experience with the provider meet or exceed expectations?). In other words, DV=E3.
Jeff, it's a good question, and an important one. A few thoughts:
1. The legal profession is very quickly going to have to get over its longstanding habit of connecting the price of legal services with the cost of producing them. Cost obviously sets a floor -- you can't charge less than your expenses and stay solvent -- but through the billable hour, it also sets a ceiling: You can't charge more than the time it takes for the people available to do the work required. This mental attachment of cost to price is so deeply ingrained in lawyers that most don't notice it and can't think beyond it. Really, that's probably the primary reason why AFAs haven't taken off: not because of lawyers' greed and complacency, but because of their failure of imagination.
Lawyers will ask me: "If I don't have the billable hour, how do I set my price?" To which I'm increasingly replying: "Set it to whatever the hell you want, so long as you clear your costs of doing business and you don't price yourself out of your markets -- and for that second point, you need to have excellent intel on what your competitors are collecting (not just charging)." I agree that client outcome, client experience, and client relationship allow you to differentiate your offerings and your price (https://jordanfurlong.substack.com/p/three-better-metrics-for-law-firm), at least for the time being. But generally, I've come to think pricing legal services isn't much more complicated than this.
2. "Risk transfer" as a saleable asset goes less to "what you can charge for your services" and more to "whether anyone will even buy your services." My view is that, in about 10 years' time (if it takes that long), there'll be no meaningful differentiation among legal artifacts and procedures and even basic strategies. Ask 100 lawyers or 100 law firms for a particular legal service and there will be astonishingly little variation in what is generated. (There's not that much now, admittedly; but mechanization and commoditization over the coming decade will remove almost all the little touches and quirks that individual lawyers or firms still display. Cookie-cutter legal services are coming, for better and for worse.)
In that kind of market, the "legal thing" your law practice generates, whatever it might be, will have no differentiating value. That's why the "risk transfer" theory is attractive, because it posits an asset by which a lawyer or firm *actually might* be able to stand apart -- the confidence that your reputation inspires among people who need the protection it provides. The IBM thing is still real, for a certain type of client and matter (as I argued in the post, these are relatively few). Indeed, I would suggest that it's *already* pretty much the only thing that distinguishes an AmLaw 25 firm from an AmLaw 125 firm (there's a whole side article to be written about the reputational impact of the AmLaw rankings themselves, and how much longer that will last).
But my larger point is that, in those markets where risk transfer has real value, its impact is fundamentally binary: Either you have the great reputation and you get the business, or you don't and you don't. How many "elite" firms can that kind of demand sustain? Certainly not 100. I'm not sure it's even 20. But for however many firms do make that cut, price will functionally be *immaterial*. If your firm has a reputation so solid and steel-reinforced that it will protect the continued employment of whoever signs off on the retainer, well, again, you can charge whatever the hell you want for that. How much is the GC's job worth to her? You can start setting your fee based on that.
I hear and agree with what you're saying about the importance of client value. But I suspect that *what clients value* is going to change as the supply side of the legal market rapidly commoditizes. As I said at the end of the post: If clients become the empowered arbiters of value in their legal purchases, lawyers are going to find that to be a very difficult transition. We've never seen, ever, a client-driven legal services market. When it arrives, it is going to blow our minds.
I couldn’t agree more and I for one am looking forward to that fireworks show — although I suspect it will be a slow tortuous burn as LawLand’s vested interests fight the shift tooth and nail!
Why wouldn’t the likes of Harvey work directly with insurance companies in the future, become the owner of client relationships through the logic of platform economics, and then just sub contract some tasks to lawyers?
As usual, I agree with you and Mr. Carr as well (valuable reads, always). In addition, and related to his query about pricing, QUALITY has entered the chat. It's part of value, to be sure, but with complete lack of quality standards in the profession/business of law, the time has come, surely, for us to get on (or at least closer to) the same page about how we define "excellence."
Regardless, all this does is confirm for me that the People, Process, Platform sequence remains the right approach to continuous improvement, irrespective of whatever AI or other solution is being considered.
Compellingly insightful, as usual
Very insightful and interesting, as usual. I'd be very curious to hear your thoughts on reconciling the points in this piece with your points in the earlier piece on the potential of an AI-induced shift of lawyers to the "people law" sector. It seems that most needs arising in the people law sector come from a population that might not be willing to secure, or financially capable of securing, the accountability premium, as you put it.
Ben, I would say these two articles represent what you might call the "half-full glass" and "half-empty glass" perspectives on the future of lawyers. The first gives us a vision of how the legal profession could successfully adapt itself to a very different demand profile in the legal market; the second suggests what might happen if lawyers fail to manage that transition because they could not distinguish their offerings from what an AI could provide. The optimist in me hopes for the first; the realist suspects the second might be more likely.
I don't think the two visions are necessarily in diametric opposition, however. AI seems likely to produce two simultaneous effects that operate roughly against one another. The empowerment that AI will bring to the unrealized and unmet legal market will be extraordinary, bringing untold millions of people to a point where they can pursue legal remedies and opportunities that were previously inaccessible to them. But the same AI that enables people to pursue their legal options will also allow them to succeed in that pursuit without the need for lawyers' assistance. You could think of it as standing on the seashore, as one wave topples onto the shore while the undertow of the previous wave draws back out to sea.
My hope for the profession is that we're able to level up beyond the transactional implementation of legal tasks (which has defined most of our daily activities for most of the last century) and develop the capacity to provide people who have legal needs with trustworthy guidance, careful counsel, courageous advocacy, and steadfast support as they make their legal journey from problem to solution, or from opportunity to accomplishment. That, admittedly, will be a tall order, possible only if we significantly reconfigure lawyer identity and lawyer formation to focus on personal service to people and civic service to society. This is the message of my TECHSHOW keynote in a nutshell.
I don't know which of these futures, or any of the thousands of potential futures that await the legal profession, will end up manifesting themselves. One thing we've all learned over the past decade is the importance of preparing for the worst even while we hope and plan for the best. It seems to me that that's our job right now, to plan for a future where the legal profession has both market and societal value, and to prepare the profession to fulfil those callings.
If you want a recent analog, look at the story of Getty Images. In the early 2000s they had the advantage of access — to high-end photographers and their images, plus the equipment to make high-quality digital scans of them. But as digital camera quality increased and editing tools got more accessible, Getty could no longer compete on access alone. But they survived and thrived because of the risk transfer (indemnification) in their licensing. By vetting their content for copyright provenance and trademark clearing, and actually leveraging their legal team in their sales process to convey the importance of the risk-shift, Getty has remained the premier supplier of imagery to top companies.
What are your thoughts for what this means for pricing? The accountability premium chargeable by an institutional provider law firm does not, or at least should not, reflect the activity to generate the output. In this case, what’s the #NewLaw business model for the firm? I for one, continue to believe that the model must reflect some form of Delivered Value — and in my world as a buyer that meant Effectiveness (were my customer goals related to outcomes/results met?), Efficiency (at or below the mutually agreed budget/cost) and Experience (as a customer, did my experience with the provider meet or exceed expectations?). In other words, DV=E3.
Jeff, it's a good question, and an important one. A few thoughts:
1. The legal profession is very quickly going to have to get over its longstanding habit of connecting the price of legal services with the cost of producing them. Cost obviously sets a floor -- you can't charge less than your expenses and stay solvent -- but through the billable hour, it also sets a ceiling: You can't charge more than the time it takes for the people available to do the work required. This mental attachment of cost to price is so deeply ingrained in lawyers that most don't notice it and can't think beyond it. Really, that's probably the primary reason why AFAs haven't taken off: not because of lawyers' greed and complacency, but because of their failure of imagination.
Lawyers will ask me: "If I don't have the billable hour, how do I set my price?" To which I'm increasingly replying: "Set it to whatever the hell you want, so long as you clear your costs of doing business and you don't price yourself out of your markets -- and for that second point, you need to have excellent intel on what your competitors are collecting (not just charging)." I agree that client outcome, client experience, and client relationship allow you to differentiate your offerings and your price (https://jordanfurlong.substack.com/p/three-better-metrics-for-law-firm), at least for the time being. But generally, I've come to think pricing legal services isn't much more complicated than this.
2. "Risk transfer" as a saleable asset goes less to "what you can charge for your services" and more to "whether anyone will even buy your services." My view is that, in about 10 years' time (if it takes that long), there'll be no meaningful differentiation among legal artifacts and procedures and even basic strategies. Ask 100 lawyers or 100 law firms for a particular legal service and there will be astonishingly little variation in what is generated. (There's not that much now, admittedly; but mechanization and commoditization over the coming decade will remove almost all the little touches and quirks that individual lawyers or firms still display. Cookie-cutter legal services are coming, for better and for worse.)
In that kind of market, the "legal thing" your law practice generates, whatever it might be, will have no differentiating value. That's why the "risk transfer" theory is attractive, because it posits an asset by which a lawyer or firm *actually might* be able to stand apart -- the confidence that your reputation inspires among people who need the protection it provides. The IBM thing is still real, for a certain type of client and matter (as I argued in the post, these are relatively few). Indeed, I would suggest that it's *already* pretty much the only thing that distinguishes an AmLaw 25 firm from an AmLaw 125 firm (there's a whole side article to be written about the reputational impact of the AmLaw rankings themselves, and how much longer that will last).
But my larger point is that, in those markets where risk transfer has real value, its impact is fundamentally binary: Either you have the great reputation and you get the business, or you don't and you don't. How many "elite" firms can that kind of demand sustain? Certainly not 100. I'm not sure it's even 20. But for however many firms do make that cut, price will functionally be *immaterial*. If your firm has a reputation so solid and steel-reinforced that it will protect the continued employment of whoever signs off on the retainer, well, again, you can charge whatever the hell you want for that. How much is the GC's job worth to her? You can start setting your fee based on that.
I hear and agree with what you're saying about the importance of client value. But I suspect that *what clients value* is going to change as the supply side of the legal market rapidly commoditizes. As I said at the end of the post: If clients become the empowered arbiters of value in their legal purchases, lawyers are going to find that to be a very difficult transition. We've never seen, ever, a client-driven legal services market. When it arrives, it is going to blow our minds.
I couldn’t agree more and I for one am looking forward to that fireworks show — although I suspect it will be a slow tortuous burn as LawLand’s vested interests fight the shift tooth and nail!
Why wouldn’t the likes of Harvey work directly with insurance companies in the future, become the owner of client relationships through the logic of platform economics, and then just sub contract some tasks to lawyers?