The legal economy is moving upstream. Will you follow?

People and businesses want problems prevented, not solved. Corporate and public policy, aided by AI, will enable that. How will law firms and lawyers respond?

Illustration by Midjourney

Back in September 2019, I rang a warning bell for the legal profession, highlighted here:

Today’s legal market features increasingly knowledgeable and assertive clients choosing among a growing array of diverse service providers. In the result, sellers have more incentives to compete on price or quality (or both) and more tools with which to do it, thereby delivering greater value to buyers.

But one thing has remained largely constant: What lawyers do. For example, a client who retains a lawyer to defend against a litigation claim might require that the work be done on a fixed-fee basis, or be subject to project management. But the lawyer is still being hired to handle the litigation: to assess the claim and its likely outcomes, negotiate a settlement if appropriate, and proceed to trial if not.

But suppose that the client never approaches the lawyer in the first place. All the project management and fixed pricing in the world is irrelevant in the absence of the retainer. That’s not a matter of how lawyers do their work. That’s a matter of what lawyers are actually doing — or not being asked to do.

A substantial portion of the practicing bar makes its living primarily by managing, fighting, and winning (or losing) litigation. Today, however, clients have access to tools, procedures, and third-party options that enable them to fulfill their desire that litigation either never occurs, or disappears quickly and easily.

And if technology delivers on some of its more outlandish promises, soon enough we’ll see clients asking lawyers to [use AI to] answer complex legal questions or to provide “machine-learning-enabled judgment.” The truly disruptive impact of advanced technology in the law will be to reduce the incidence and volume of traditional legal work given by clients to lawyers. This isn’t just a market change; this is the emergence of a new legal economy.

The old legal economy consisted of paying lawyers by the hour to do every legal task that needed to be done. In the new legal economy, systems, software, and structures are going to integrate, automate, delegate, and eliminate countless legal tasks by which lawyers once made a living.

Last week, Bruce MacEwen, the dean of BigLaw bloggers, looked at the stats and asked: “What if litigation, as a pillar practice area, is in long-term secular decline?” Based on negative demand growth for litigation in the largest US law firms, and taking into account clients’ increasingly discretionary approach to lawsuits and generative AI’s impending evisceration of litigation hours, Bruce concludes the answer is yes, it probably is.

I think he’s right, and if so, the implications for law firms are extremely serious. But I also think this is a compelling illustration of what I wrote about nearly four years ago: The demand side of the legal market is evolving, in ways that will radically change what lawyers do. In particular, legal demand is moving upstream.

The “upstream” concept in legal originated in the in-house counsel world, where law departments had become the destination and choke point for every legal, risk, and compliance issue in the corporation. Overwhelmed by the demand and constrained by diminishing budgets, the Legal function turned to legal ops professionals who applied business and process management tools and to standards-setters like SALI that brought order to legal data chaos.

But behind all these efforts was a resolve on the part of chief legal officers not just to better manage the flow of demand, but ultimately to reduce the volume and intensity of that flow — to “Do Less Law,” in the words of Ron Friedmann. Better internal corporate practices — sensible policies, smart implementation, sound supervision — would strengthen knowledge, improve performance, and discourage misbehaviour among employees. Far better to train 1,000 managers on professional workplace conduct than to defend 100 charges of managerial sexual harassment.

In this way, the nexus of the legal issue or problem would be relocated to a point earlier in the process — with luck, sufficiently early that the problem could be detected sooner or even eradicated altogether, rather than accumulating, snowballing, and gaining so much momentum that it rolls right through the legal department and all the way out to an expensive law firm. The further down the hill the problem gets, the bigger, messier, and more destructive it becomes. So why not minimize or eliminate the problem at the outset?

Everyone will be happy with this outcome — except for the people at the bottom of the hill. Lawyers in general, and litigators in particular, are downstream entities — they usually enter the picture after prevention, alleviation, and negotiation have failed. They solve problems, and the messier and more expensive, the better. I asked back in 2019: “What happens to litigators when clients find ways not to litigate?” We might soon find out.

Now extrapolate further, and ask: “What happens to lawyers of all kinds when clients become empowered not just to handle their own legal issues in whole or in part, but even to arrange their affairs so that they never become ‘clients’ in the first place?” In that circumstance, I think lawyers have a problem.

Generative AI will be part of that process, as accurate and reliable legally trained Large Language Models gradually enter the consumer market and provide people with basic legal information and guidance to shrink the size or diminish the intensity of the problem they’re facing. But I can also envision public policymakers, in the not-distant future, making the same kind of calculation as corporate GCs: “If we enhanced our upstream problem prevention, could we reduce our downstream solution costs?”

Suppose, for example, that a government looked at all the court time consumed by intestate litigation and decided to reduce it by spurring people to get wills — for example, by making possession of a valid last will and testament a prerequisite for getting a driver’s license? (This would also oblige the government to make simple wills free and easy to obtain online.) What would happen to the intestate litigation bar in that scenario?

Or suppose that another government, appalled by the ongoing train wreck of family litigation, decided to try reducing marriage breakdowns by strengthening good marriages and discouraging poor marriages from the start — perhaps by making joint completion of an interpersonal communication, dispute resolution, and financial literacy course a prerequisite for obtaining a civil marriage license? The family law bar would certainly survive such a development — but I think it would be noticeably smaller in the aftermath.

Or suppose that any other government followed the example of British Columbia’s Civil Resolution Tribunal and set up a user-designed, user-centred, online dispute management system that allowed people to address everyday conflicts that might not ever make it to a courtroom, but whose early alleviation would reduce community friction and increase public satisfaction? What if, as a matter of public policy, governments decided to prioritize legal harm reduction in the civil sector?

These examples might seem far-fetched. But in 2019, it seemed a stretch to suggest that technology might someday “answer complex legal questions or provide machine learning-enabled judgment.” And less than four years later, here we are.

I’d encourage you to read my entire post from 2019 and Bruce’s article from last week, while experimenting with how LLMs (legally trained and otherwise) can safely and effectively be used in the practice of law. And I’d suggest you give some thought about how your own law practice could migrate upstream — closer to the nexus of a legal issue, to the trigger point of a legal problem, to where people and businesses increasingly want to deal with these matters.

If clients decided to pay you not to solve their legal problems, but to ward off those problems, reduce their likelihood, mitigate their consequences, take steps to ensure they didn’t reoccur, and build preventative systems and strategic risk frameworks to improve business productivity and personal satisfaction — how would your law practice change? What would you stop doing and start doing instead? How would you sell your services? What would you value and reward in your legal professionals?

You don’t need answers to those questions tomorrow. But I think you’re going to need them pretty, pretty soon.