This is a live post from the Reinvent Law Silicon Valley conference in Mountain View, CA. Please forgive any typos or errors in conveying what speakers say.
Dan Katz of MSU Law: The Future is Already Here – It’s Just Not Evenly Distributed
Storm brewing in legal. Complicated. though. Simple version:
1. Under-investment: senior partners of law firms have different views of decisions than more junior ones. Juniors may want to invest for long term but seniors want money in pocket now. Incentives are very strong to maximize current income over increasing the future value. (RF: I’ve long thought about the inter-temporal tensions of law firm partnership model.)
2. Dimensions of Competition: What are the differences between closely ranked AmLaw firms? (RF: or even those not so closely bunched in rankings>) If we can’t tell difference in substance, then focus on tech, design, and process. But firms that say they are different… it’s just a bumper sticker slogan. Compare to modern manufacturing, Fortune 500 logistics, or modern Operating Room..
3. Client Sophistication: GC face pressure still from financial crisis to limit legal spend. Legal exceptionalism is over. GC demands no junior lawyers; instead, work with unbundlers such as LPO, insourced services, or managed review companies.
4. Lawyer Regulation: Restrictions on non-lawyer ownership is big limitation on competition and innovation. That’s why UK has changed rules with Alternative Business structures. This rule protects lawyers, not clients. If law firms can’t raise capital and others can, then firms are at a disadvantage.
5. Legal Tech Industry: Bill Henderson asked at Legal Tech NY who are the long list of exhibiting? They are the companies who are raising capital and who are taking work away from BigLaw. How can law firms compete? They have to become the competition
6. Why Can’t a Law Firm become Something Different? Why don’l law firms have R&D departments? Individual partner incentive is to maximize short-term gain versus investing for future. Very hard to overcome. But it’s possible to start over. How can we see new players emerge in face of current regs. We see rise of new entities that combine law firms with related service entities (RF: see my prior blog posts on Clearspire Law). But legacy platform just doesn’t refer to software – it also refers to people. BigLaw lawyers are the installed base! No need to wait for Model Rule 5.4 to change… there are business models now that allow investment in legal market.