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Trends that will reshape the modern law firm: Future of law P1

David Tal, Publisher, Futurist
@DavidTalWrites
LinkedIn

Mon, 09/14/2020 - 11:13

Mind-reading devices deciding convictions. An automated legal system. Virtual incarceration. The practice of law will see more change over the next 25 years than it's seen in the past 100.

A range of global trends and groundbreaking new technologies will evolve how everyday citizens experience the law. But before we explore this fascinating future, we first need to understand the challenges set to face our practitioners of law: our lawyers.

Global trends influencing law

Starting at a high level, there are a variety of global trends impacting how the law is practiced within any given country. A prime example is the internationalization of law through globalization. Since the 1980s in particular, the explosion of international trade has led the economies of countries around the world to become more dependent on each other. But for this interdependence to work, the countries doing business with each other had to gradually agree to standardize/unify their laws amongst each other.

As the Chinese pushed to do more business with the US, the US pushed China to adopt more of its patent laws. As more European countries shifted their manufacturing to Southeast Asia, these developing countries were pressured to enhance and better enforce their human rights and labor laws. These are only two of many examples where nations have agreed to adopt globally harmonized standards for labor, crime prevention, contract, tort, intellectual property, and tax laws. On the whole, the adopted laws tend to flow from those countries with the wealthiest markets to those with the poorest markets.

This process of law standardization also happens at the regional level through political and cooperation agreements—ahem, European Union—and through free trade agreements such as the American Free Trade Agreement (NAFTA) and the Asia-Pacific Economic Cooperation (APEC).

All this matters because as more trade is done internationally, legal firms are increasingly being forced to become knowledgeable about laws in different countries and how to resolve business disputes that cross borders. Likewise, cities with a large immigrant population need legal firms who know how to resolve marital, inheritance, and property disputes between family members across continents.

On the whole, this internationalization of the legal system will continue until the early 2030s, after which competing trends will begin encouraging the rise of renewed domestic and regional legal differences. These trends include:

The automation of manufacturing and white-collar employment thanks to the rise of advanced robotics and artificial intelligence. First discussed in our Future of Work series, the ability to fully automate manufacturing and replace entire professions means that companies no longer need to export jobs overseas to find cheaper labor. Robots will allow them to keep production domestic and in so doing, reduce labor, international freight, and domestic delivery costs.
Weakening nation states due to climate change. As outlined in our Future of Climate Change series, some nations will be more adversely affected by the effects of climate change than others. The extreme weather events they will experience will negatively impact their economies and involvement in international trade.
Weakening nation states due to war. Regions such as the Middle East and parts of Sub-Saharan Africa are at risk of increased conflict due to resource conflicts caused by climate change and an exploding population (see our Future of Human Population series for context).
An increasingly hostile civil society. As seen by the support for Donald Trump and Bernie Sanders in the 2016 US presidential primaries, as seen by the 2016 Brexit vote, and as seen by the growing popularity of far-right political parties following the 2015/16 Syrian refugee crisis, citizens in countries who feel like they were negatively impacted (financially) by globalization are pressuring their governments to become more inward-looking and reject international agreements that reduce domestic subsidies and protections.

These trends will impact future law firms who, by then will have significant overseas investments and business dealings, and will have to restructure their firms to once again be more inward-focused on domestic markets.

Throughout this expansion and contraction of international law will also be an expansion and contraction of the economy at large. For law firms, the recession of 2008-9 caused a steep decline in sales and an increased interest in legal alternatives to traditional law firms. During and since that crisis, legal clients have placed a great deal of pressure on legal firms to improve their efficiency and reduce costs. This pressure has spurred the rise of a number of recent reforms and technologies that are due to change the practice of law completely over the next decade.

Silicon Valley disrupting law

Since the 2008-9 recession, law firms have begun experimenting with a variety of technologies they hope will ultimately allow their lawyers to spend more time doing what they do best: practicing law and offering expert legal advice.

New software is now being marketed to law firms to help them automate basic administrative tasks such as managing and electronically sharing documents securely, client dictation, billing, and communications. Similarly, law firms are increasingly making use of templating software that allows them to write a variety of legal documents (like contracts) in minutes instead of hours.

Aside from administrative tasks, technology is also being employed in legal research tasks, called electronic discovery or e-discovery. This is software that uses an artificial intelligence concept called predictive coding (and soon inductive logic programming) to search through mountains of legal and financial documents for individual cases to find key information or evidence for use in litigation.

Taking this to the next level is the recent introduction of Ross, a brother to IBM's famous cognitive computer, Watson. Whereas Watson found a career as an advanced medical assistant after its 15 minutes of fame winning Jeopardy, Ross was designed to become a digital legal expert.

As outlined by IBM, lawyers can now ask Ross questions in plain English and then Ross will proceed to comb through "the entire body of law and return a cited answer and topical readings from legislation, case law, and secondary sources." Ross also monitors new developments in law 24/7 and notifies lawyers of changes or new legal precedents that may impact their cases.

Altogether, these automation innovations are set to vastly reduce the workload in most law firms to the point where many legal experts predict that by 2025, legal professions such as paralegals and legal assistants will become largely obsolete. This will save law firms millions given that the average annual salary for a junior lawyer doing the research work Ross will one day take over is roughly $100,000. And unlike this junior lawyer, Ross has no problem working around the clock and will never suffer from making an error due to pesky human conditions such as exhaustion or distraction or sleep.

In this future, the only reason to hire first-year associates (junior lawyers) will be to educate and train the next generation of senior lawyers. Meanwhile, experienced lawyers will continue to remain gainfully employed as those in need of complex legal assistance will continue to prefer human input and insight … at least for now.

Meanwhile, on the corporate side, clients will increasingly license cloud-based, AI lawyers to provide legal advice by the late 2020s, sidestepping the use of human lawyers altogether for basic business dealings. These AI lawyers will even be able to predict the likely outcome of a legal dispute, helping companies decide whether to make the costly investment of hiring a traditional legal firm to apply a lawsuit against a competitor.

Of course, none of these innovations would even be considered today if law firms didn't also face pressure to change the bedrock of how they make money: the billable hour.

Changing the profit incentives for law firms

Historically, one of the biggest stumbling blocks blocking law firms from adopting new technologies is the industry-standard billable hour. When charging clients hourly, there's little incentive for lawyers to adopt technologies that will allow them to save time, as doing so will decrease their overall profits. And since time is money, there is also little incentive to spend it investigating or inventing innovations.

Given this limitation, many legal experts and law firms are now calling for and transitioning towards the end of the billable hour, replacing it instead with some form of a flat rate per service offered. This payment structure incentivizes innovation by increasing profits through the use of time-saving innovations.

Moreover, these experts are also calling for the replacement of the widespread partnership model in favor of incorporation. Whereas in the partnership structure, innovation is seen as a major, short-term cost borne by the law firm’s senior partners, incorporation allows the law firm to think long-term, as well as allowing it to attract money from outside investors for the sake of investing in new technologies.

Long term, those law firms who are best able to innovate and reduce their costs will be the firms best able to capture market share, grow and expand.

The law firm 2.0

There are new contenders coming to eat away at the dominance of the traditional law firm and they’re called Alternative Business Structures (ABSs). Nations such as the UK, the US, Canada, and Australia are considering or have already approved the legality of ABSs—a form of deregulation that allows and makes it easier for ABS law firms to:

Be owned in part or whole by non-lawyers;
Accept external investments;
Offer non-legal services; and
Offer automated legal services.

ABSs, combined with the technological innovations described above, is enabling the rise of new forms of law firms.

Enterprising lawyers, using technology to automate their time consuming administrative and e-discovery duties, can now cheaply and easily start their own niche law firms to provide clients with specialized legal services. More interestingly, as tech assumes more and more legal duties, the human lawyers may transition towards more of a business development/prospecting role, sourcing new clients to feed into their increasingly automated law firm.

Overall, while lawyers as a profession will remain in demand for the foreseeable future, the future for law firms will be one mixed with a sharp uptake in legal tech and business structure innovation, as well as an equally sharp decrease in the need for legal support staff. And yet, the future of law and how tech will disrupt it doesn’t end here. In our next chapter, we’ll explore how future mind reading technologies will change our courts and how we convict future criminals.