May 17, 2021
A legal tech status report with Artificial Lawyer
Legal tech has been around for quite some time now, and according to many, it’s going better than ever. To find out, we sat down to discuss the past and present of legal tech with one of the people that know it best, the creator of Artificial Lawyer, Richard Tromans. What, in his opinion, has caused the recent boom in legal technology? And is a once lagging industry actually futuristic, or simply catching up with the status quo?
Back in 2016, Richard Tromans was a strategy consultant merging legal teams. At that time, like most businesses, law firms were taking stock of the unfolding situation as the UK voted to leave the EU; who would stay, and who would go? Not good for someone who relied on stability to merge law firms.
With a suppressed desire to write he was now seriously considering writing a blog to support his consulting work, the question was, what would he write about?
“It had to be something that I thought was important. Otherwise, after two or three blog posts it would die off, so it had to be something that could be sustained. One thing I've always been interested in was technology,” he tells me.
“The idea that a piece of software could read 5000 documents and tell you which ones you needed to review and not just that, but right down to a clause level, completely blew my socks off.”
“Looking back there, you realize that the idea of law firms merging with each other really is just like being in a Petri dish. If you're in the Petri dish it is pretty amazingly important, but as soon as you step out of that Petri dish you're like - who cares? What matters is what is coming out of the other end. What impact, what are the outputs actually having?”
Do you think some of this technology should have more of an influence on society?
Well, it's not really a question of should, it’s the other way around really. We should start off with - what does society need? Society is a rule-based civilization operating in a free market economy. How do we help it? How do we support it? We need lawyers, we need a whole bunch of legal businesses to help to deliver these legal needs, how we get there should be an open question.
Tabula rasa; how do we do this? In the same way that we need electricity; how should we get clean electricity? There are all kinds of options because the reality is, that it's not that simple, is that you already have an energy market, which is dominated by fossil fuel companies. Logically, you might say well, let's just get rid of all of that and just replace it. You can't, it's a transition and I guess the same as with the legal market and also in truth, the reality is, we're not going to get rid of the existing legal service providers at all. If anything they’re going to get bigger and more successful. What's going to happen is you can hopefully change their means of production.
Delivery method will change and that's what got me interested. The ability to read documents very quickly and I thought that changes the economic model of law firms. They bill by the hour and if you could do something faster, you're creating, hopefully, the same or better output at a different economic rate. And that's actually a huge change for an industry that has effectively been stuck in artisan methods.
Really we are talking about the simplification of repetitive tasks?
Yes, I’m trying to simplify these repetitive tasks, but the simplification again is just part of it, the simplification is actually really difficult. I started writing about these AI companies and it was partly, and this is the most incredible thing really because very few people were writing about it.
I go to the websites of big well-known legal websites like Legal Week. There would be nothing about them, or if they did they completely misunderstood. It was all about robots and whether lawyers are going to be replaced. You are just like what are they talking about!? I just charged ahead and then it just took off. It just exploded.
It makes sense. There's such a boom in legal tech right now, a real necessity for it, why do you think that is?
You put your finger on it by using the word necessity. There are two reasons. One is that it's possible. You go back 10-15 years, a lot of technology that is powering these changes would have been too expensive and too slow.
Also, it is a question of having the right people. There's been an explosion in data scientists, people with PHDs in coding and NLP, and all kinds of stuff.
It’s a bit like when desktop publishing arrived in the mid-90s. Basically, the late 90s desktop publishing went from being a very expensive business to being incredibly cheap because of things like Quark, good computers - like Apple - and new printing methods. You went from only very wealthy people who could own a newspaper to basically anyone could set one up overnight.
Most legal tech company startups since 2015 were created by young lawyers from large law firms who got sick of their jobs and then left. Most of them were not tech experts. They then met up, had friends or they went out into the market by finding tech experts to launch a company with.
And you know the reality is that they were only able to be successful because you know all the tech was available to them.
What we're looking at then is getting the timing right. The maturity and synergizing both together?
I think there is part of that, but also there is a kind of chain reaction in the way companies come to existence. The law firms play with them. Perhaps not seriously wanting to change.
But then it's already too late because by publicizing it now the clients get interested. The client starts to say, well, hold on a minute. What's all this stuff you're using? Does that help us? And are you using it to help us?
It starts to snowball and then the tech companies start talking to clients and it starts to have a life of its own. That's what's happened. Also, it's worth saying of course that legal tech has existed since at least the 1970s.
The idea of using computers to help with the legal profession in some way has existed since the 70s. But what happened? I think it’s like thinking back to strategic and productive technology, it just changed and I think also there are aspects, for example, the 2008 financial crash. It led, for the first time, for general counsel on mass, to start pushing back.
And you see the growth organizations like CLOC for example and then you have all the other legal tech conferences, you have got people like me doing Artificial Lawyer and also working as a consultant going round the market, and a dozen other people like me as consultants going round the market and they just pushing this idea. The funny thing is that the idea is not in the least bit radical.
Do you think more law firms are becoming accepting of change?
This has always been the problem with anything that focuses on technology, is that it's not actually about the technology. Technology is just a means to an end.
The reason why lawyers use natural language processing, doc review tools for example, or contract automation tools is not because they like using technology or have any interest, they don't necessarily have any interest in technology, and why should they?
They are just simply trying to do their jobs and respond to economic demands for efficiency, for speed, for risk reduction, for all kinds of things that you can't do with the standard artisanal model.
Another thing, of course, is very important to mention, it’s really not just all about technology it’s about new forms of specialized labor, so for the growth of ALSPs. Law firms building their own process groups. It's about rethinking that relationship.
You see law firms building tech consultancies, ‘legal ops’ groups, their own software companies and you might say it is all going a bit mad, law firms are turning into technology companies or whatever - they don't really, they are just simply trying to meet the needs of their clients, that's what it all boils down to.
You would think that in a world such as this, large corporations would be showering the in-house legal team with money to buy new technology, the reality is they're not. Inhouse legal teams actually find it hard, quite often, to get a budget to pay for legal tech.
In a funny way, lawyers have actually done their job so well they've managed to shroud everything by doing mystery and have kind of detached themselves from the rest of the company.
And this is kind of working against them, because when a lawyer says I need a budget to buy some technology, just as a legal team. The CFO goes well, you have your lawyers - You're special! You don't really need it, just carry on doing your magical legal thing.
Whereas if a lawyer said, look, we are just part of a company like you, we help to create contracts. Those contracts are vital for the whole business, this isn't just about a bunch of lawyers doing stuff that's kind of slightly scary and slightly hard to explain. It's true, it's a true input into the business but will help with the whole business.
But this is one of the problems, lawyers are kind of caught between two things. They want to be seen and taken seriously by the business, the real business - the CEO, or the shareholders, the CFO - but at the same time they feel most comfortable talking to other lawyers, that's the problem really. It’s the lawyers speaking to other lawyers - It's a bubble.
Because they identify and communicate on the same level?
They have all been taught the same way, they feel the same. The reason why corporates have in-house lawyers is that they are genuinely terrified of getting sued and put out of business. They have in-house lawyers debate the contracts to defend them, to control risks, to manage compliance.
Corporates are not crazy and for many of them, they go - we just don't really care about you being super-efficient. We just want you to protect us, you are a legal defense mechanism. But then there's also, in parallel, and kind of disconnect, the CFO then says “yes but you are just another part of his company and you appear to be really inefficient. Could you get more for less?”
And the lawyers are currently “well, which one is it? We're like these magical Wizards like Gandalf who do this magical thing up on the mountain somewhere and you don't know what we're doing. But you just throw money at us and hope it works and you don't ask any questions.” There’s that interplay there that hasn't resolved itself at all.
And then equally the law firms are also conflicted because they're trying to attract the attention of the buyers by saying, look at us. We're innovative.
The legal market is very strange in that you've got very contrarian, contradictory forces constantly at play throughout, and it all boils down, I think fundamentally, to the fact that lawyers have been allowed over centuries, even now, to be seen as ‘other’. To be seen as separate from the rest of the planet.
You really see this in America. There are a million lawyers in America. It generates, I think it's over $400 billion a year just in America.
So do you think everyone has seen a need for this form of technology and can make a business from it?
Yes, but I think the reason it works is that legal tech is a victim of its own success, really, that you can run a very small legal tech company with, I don't know a few million revenue. It would be quite happy. Almost like a little shop.
Why that happened is because the legal work is so atomized that if you had the top ten law firms in Denmark using your software, you could say it was great. That generates 2-3 million a year, that's fine.
Let's say every year they will get a few more clients. Don't worry about it, that's cool. They can operate like that, whereas most of the software you couldn't do that.
Do you think there's a lifecycle of this, will it continue to mature, or do you think we are in a window now?
Look. It should continue. You see loads of articles about how the legal tech world is going to consolidate. I don't think it will. Ever since I got into the legal market - and I should know because I actually used to try to help merge law firms together - people inside the legal market were saying it is going to consolidate. You know there will be five law firms - never happens.
And if anything, because of all the ALSPs arguably there are more providers than there were twenty years ago, not less. So the legal market is actually more diverse, more atomized, more complex.
The idea that the legal tech EU surge was going to completely transform the legal market just hasn't happened. It's been absorbed. And in part, it's been absorbed because they have the same ideology. Most people I've met in the legal set world are not trying to completely end the way the legal world works.
And it's also because any one of the very small numbers of people who I've met who said, this is going to completely replace lawyers, you look at it and you know you just go. Yeah, it's not, you’re completely deluded, you really are.
Legal tech is there to support the market as it is and hopefully, hopefully, making an impact where there is the most process.