Managing Legal
So says Alex Hamilton, describing the gist of his recent speech to a conference about innovation in law practice — specifically about the role of artificial intelligence in companies’ creation and management of contracts.
A former partner at Latham & Watkins’ (2nd highest earning law firm worldwide in 2019 according to The American Lawyer) London office, and co-Chair of its global Technology Transactions Group, Hamilton founded Radiant Law in 2011, a law firm that supports large companies and banks in their major outsourcing and technology contracts, day-to-day commercial contracts, and contract review projects.
Radiant does contract automation in a big way — working with applications like docassemble (a free, open-source systems for guided interviews and document assembly originally created by a lawyer / computer programmer), and Contract Express (Thompson Reuters’ document automation software). Radiant’s mission is to free up businesses from manual drafting and review of masses of agreements by overwhelmed lawyers — replacing that traditional approach with faster, more accurate, and much cheaper contract creation and management.
So Hamilton’s description of the “circus of AI” does not reflect any skepticism about this technology’s potential for improving legal services.
Instead, lawyer and tech pioneer Alex Hamilton argues that his legal profession — my legal profession — is unserious about any meaningful use of AI for the foreseeable future (“AI and Contracting”, December 3, 2019).
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To an audience of law firms and investors last week, Hamilton began with a quote from Charlie Munger, Vice Chair of Warren Buffett’s Berkshire Hathaway, childhood friend, and long-time colleague of the Sage of Omaha:
“Never, ever, think about anything else when you should be thinking about the power of incentives.”
Boiled to its essence, here’s Hamilton’s argument, from his vantage as former leader in one of the world’s largest law firms:
One: The major decisions in law firms large and small are made by its partners (owners):
“The partnership model is an excellent way of preventing innovation because leaders are always at the mercy of their constituency, the partners, the most powerful of whom have done the best under the current way of working.”
Two: Law firm partners have prospered under the current legal business model, and that business model is based on setting price according to time spent — billable hours — rather than according to the value of the task performed:
“The partnership model in turn prevents most law firms from making the key radical change needed to make meaningful progress — getting rid of the time sheet. The time sheet and the billable hour incentivize maximizing time spent on delivering services, or at the very least, disincentivizes radical removal of time [from legal processes] … You get what you measure (because of incentives) and time sheets create hours.”
Three: Talk about AI in law firms is hype, meant to distract business clients from the fact that those law firms will never (any time soon at least) adopt AI to change the basics of their bread-and-butter — which consists of quotas of hours billed — that fill up the time sheets on which the law firm business model depends:
” … AI is the perfect topic to convince clients that you are doing something ‘innovative’ while actually really not doing anything much at all. It’s so perfect: It sounds exciting, it only threatens the jobs of paralegals doing document review … and nothing else has to change. Reduce the price on one part of the project to protect the rest. Perhaps I’m cynical to claim that the main purpose of buying an AI license is to put out a press release. Perhaps.”
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So who cares if law firms are being less than forthright about their enthusiasm for “innovation” and — related to it — whether or not they’re really adopting tech to enhance their work’s quality and speed, and make it cheaper?
And what does this have to do with the CEO, CFO, or any other P&L manager who’s concerned with preventing legal problems before they arise — and cutting their company’s legal budget?
This is what it has to do with that CEO, CFO, or other P&L manager:
- AI and other technologies promise better quality, more speed, and cheaper costs in legal work — but only if they’re actually used.
- Their reliance on the billable hour means that law firms won’t adopt AI or other technologies that seriously cut into the hours they want to bill.
- CEOs, CFOs, and other P&L managers need to use their purchasing power in Legal to get the same quality and cost efficiencies that they expect of every other corporate function.