116 - Law Firm Generative AI Versus Culture

Jordan Furlong is the principal at Law21 and provides keynote presentations to law firm retreats and other firm events.

Jordan Furlong is a legal sector analyst, consultant, and forecaster who advises law firms and legal organizations about navigating the extraordinary changes transforming the legal world. Based in Ottawa, Canada, Jordan is a renowned keynote speaker and a widely read thought leader on the future of the legal profession.

To find out more about Jordan here is his Linkedin: https://www.linkedin.com/in/jordanfurlong/

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About Dan:
Dan provides law firm owners with the skills and capital investment to increase their profits while reducing their workload. Over the last five years, Dan’s clients have grown their revenues from 20% to 392% in one year while more than halving their workload.

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Transcript

Welcome to the Law Firm Owners Podcast. You are here with my host, Dan Warburton, and I have here a very special guest. His name is Jordan Furlong.

And as I was honest with him before I went live, his is the only newsletter I have that I actually makes it through to my main inbox. So that gives you an idea of how much I value this guest today. He is a legal sector analyst, consultant, and forecaster who advises law firms and legal organizations about navigating the extraordinary changes transforming the legal world.

He's based in Ottawa, Canada, and Jordan is a renowned keynote speaker and a widely read thought leader on the future of legal profession. And today, what we're doing is we're bringing together two of his thought leadership topics under the title of Law Firm Generative AI versus Culture. Jordan, it's great to have you here.

Dan, thank you very much. It's fantastic to be here as well. So what I find in the legal sector that there's a lot of talk about AI and how it's moving in, and I've got my ears to the ground with operatives that are saying to me, yes, no, it is really useful.

I have it draft up major pieces of work, but it obviously always needs still a lot more human work to polish off before it can be delivered as such. But me and you know that that technology is advancing fast. And at the same time, a lot of law firms, they have a terrible work culture.

People aren't engaged. There's a high staff turnover rate, people leaving their positions early. So in a world where we're moving into adopting, as the legal sector that's moving into adopting so much technology, where is the interplay between this technology and culture? Can you have good technology operating with a bad culture or does the bad culture need sorting out first before the technology can be put in place? What do you think? Yeah, and I think it's probably going to be a mixture or kind of a catalytic process.

And I do think AI fundamentally is a catalyst for any number of extraordinary changes within not just within law firms, within the legal sector generally. I mean, you made the point there at the start that AI can carry out any number of tasks. It's an amazing accelerant of legal work and process and activity.

And there was still the sense that people have, okay, well, it does this work really fast, but I have to go back and check it afterwards. We will still need lawyers to check the work and whatnot. And what I say to them sometimes when I get that response is, and when was the last time you checked your calculator with a pen and paper to make sure the addition and the multiplication was correct, right? It doesn't take long before a machine becomes so adept at a certain task and you become so accustomed to its operation, you simply stop checking it.

Now, I don't think we're at that stage with AI yet, but with some of the demos that I've seen, especially in terms of what legal research that is grounded in actual case law and so forth can do, I really think that if we're counting on, we will need lawyers to check the AI's work. I think that is a very weak floorboard to be standing on. But to your larger point around the culture, yeah, law firm cultures, it's a fascinating topic, right? Because I sort of say to lawyers and managing partners sometimes, what's the culture of your firm, right? They'll wax poetic about, oh, well, we have a culture of excellence, whatever that means, and a culture of collaboration, a culture of this and culture of that, and I said, whoa, whoa, whoa.

Here's what I think. I said, and that's not anything for you personally, your culture, it's not like the atmosphere. It's not like you walk in the front doors of your firm and you breathe in, oh my God, the culture is so good here, right? So your culture is an outcome.

It is the result of your actions. The actions that you take as a firm, it's what gets rewarded around here, what gets punished, what gets tolerated, what gets overlooked, all the things that you decide to do as a leader in your firm, whether it's explicit or implicit, these are the actions that you carry out. By doing so, by the way, you are simply expressing the values that you hold as a leader and as a leadership group, and all of these actions collectively, they produce the culture in your firm.

So bringing these two concepts together, one aspect of the way law firms operate is that they say to their lawyers, especially their associates, but still for some odd reason, their equity partners as well, you need to book a whole bunch of hours in order for us to make money. And if you're a lawyer in a firm, especially if you're on the younger side, this feels to you like it's an existential mandate. You must produce these hours, right? Going back, you know, I remember this story I read as a kid, the rocking horse winner, you know, there must be more money, there must be more hours, you know, pushing it forward.

And that will generate within the firm a sense of I am being driven hard. I'm only valued for my labor. I'm only valued for my effort.

And it drives a lot of people out of firms. So coming in for a landing on this, yes, it is very possible that if you introduce generative AI and you have this vast accelerant of work that you will decrease, I think significantly the number of hours that are available. But if you continue as a firm to say, it doesn't matter that we have this machine here, which has, you know, magically reduced hours, we're still going to judge you on your effort.

We're still going to push you to do more and more work. Your culture is not gonna change because what your culture is saying to your employees, you are a cog, you are a means to an end, you are a unit of production. And I don't care what kind of technology you're using, if those are your values, if those are your actions, your culture will continue to be very difficult.

Wow, I was not expecting that reply at all. Fantastic. Yeah, yeah, great.

And of course, yeah, if you've got a culture of being militant with your people, pushing them hard, you know, not thinking about them or what career progression they want or what they want to achieve as a by-product of their participation in a firm, then naturally you're gonna have a culture where people don't particularly wanna belong in it. They don't feel lit up by it as such. And what you're saying is you could implement AI and technologies on top of that, but that fundamental lack or ineffective leadership is only ever going to perpetuate a bad culture.

Yeah, I think so. I mean, your point about career progression, something I said to a manager partner a couple of months ago, I said, look, the vast majority of lawyers who enter your firm are not going to end their careers there, right? They're simply not. I would say 90% or more of people who'll come in.

And that doesn't mean they're gonna like leave within a couple of months, maybe they'll leave in five years, 10, 20. Maybe they'll retire, maybe not retire, but maybe they'll become a judge. Maybe they will go in-house, whatever, or they'll pursue other things, but they're gonna leave and they're gonna leave to go do something else.

And from their perspective, part of what they want from this job, in addition to a paycheck and the ability to advance in their own careers and so forth, but they wanna get better at what they do. They wanna learn new skills. They wanna meet new people.

They wanna expand their networks so that the next place they go, they can get a job that either pays them better or engages them more and so forth. So I say to them, one of the very top priorities of everybody who works in your firm is to get better at what they do. And if you don't have that same attitude towards them, if you don't look upon them as investments, not just for yourselves, but for them as well, then you're at cross purposes already.

And you're already going to be at loggerheads, fundamentally, because they will leave at some point to say, well, I don't understand why, we paid them well and they did this and they did that. So they left because they were stuck and they weren't moving forward. They weren't getting better.

And most of all, they felt like you didn't care all that much about whether they ever got better at what they did. So yeah, again, to tie this into AI, my view, I have several views in AI, but one of them is that because it is going to be such an accelerant of legal work, because it is going to essentially become a machine that is going to carry out a tremendous number of tasks that right now lawyers spend the majority of their billable time doing. And you can make the list of all the things that lawyers do every day that the machine's gonna be able to better than.

Okay, that's fine. The question for you as a firm is, so what are we going to do? Where will we find our engagement for our clients? What will our clients want us to do for them if the machine can do all the documentary work and the research work and even the advisory work, even the recommendation work, right? What it's left for us to do and why would anybody hire us? And for me, I keep coming back to, they're gonna hire you and keep coming back to you because you have built solid trusting relationships with your clients where they look to you for advocacy, they look to you for advice, they look to you for guidance, they look to you for trusted counsel. And if your firm is not geared towards developing those kinds of relationships with your clients and making sure that all of your employees, including your first and second year associates are not geared towards developing those skills, again, you've got some real challenges coming up.

So this is where you sort of said at the start, like it's AI versus culture. It can be for sure, but I think just as easily it can be AI and culture or finding a way to kind of build them both together and make something better and stronger for everybody who's at the firm. Yeah, I agree.

What I have found with the law firm owners that come to me for support is they're exhausted, they're burnt out, they're tired, they're fed up, they've had their clients for years, they're still doing the billable work for them, they haven't delegated it away down to their team. And so their team don't feel like they're being in the opportunity to shine. They're not agreeing on deadlines as such with their colleagues.

And so their colleagues, their associates can never prove themselves. And so with all of this, they then say, maybe I should be looking at AI and maybe I should be looking at these other forms of technology or workflow management software. And what I remind them of is, look, if your culture isn't one where people feel supportive and aren't feeling like they're getting that career progression they yearn for, no amount of technology is going to work because they're not going to want to put the effort in to change what they're doing or implementing anything new.

So where I stand, if we really look at AI versus culture, culture is always the foundation that needs to be in place first before new technology can be implemented, right? Oh, absolutely. Well, you know, it's the old saying, right, which has been around for years, culture eats strategy for breakfast. Now, as someone said to me the other day, okay, so what eats culture, right? You know, what's, you know, what's, and again, to me, what eats culture are fundamentally values of what the firm actually cares about.

But to your point about the leaders and the managers who are like, you know, it's all, it's just this drive to get more hours and drive to get more work and push and push all the time. And that's not to obviously sell short the fact that you do need work. I mean, there's like any entrepreneur, and I have to remind lawyers that they're entrepreneurs, sometimes that comes as a bit of a shock to them, but any entrepreneur has to be able to spend a certain, maybe even significant percentage of their time and effort geared towards how do I keep business coming in? How do I make sure I have new clients on the boil or on the back burner or within sight, that kind of a thing.

That's not to say that that's not real, it is. But it's in terms of how do you define productivity within your firm? That's a big thing I find when I'm talking to especially the larger firms, right? So I'll go to a large firm and I'll, this is a bit apocryphal, but I will say, who's your most productive lawyer? And they'll say, oh, that will be Bob, right? Bob billed us 3000 hours last year. And I said, well, number one, Bob needs intensive care.

But secondly, no, you're telling me who your highest billing and probably hardest working lawyer is, but that's not necessarily the most productive. Productivity isn't just the number of hours you can bill, even though the entire American large firm industry is built around this bizarre idea that it is. Productivity, as you know, in the business world, in the entrepreneurial world, is colloquially, how do we get the most bang for my buck? How do I maximize or amplify my outcome and my outputs with keeping my inputs fairly minimal, right? And AI is a tremendous way to go about doing that.

But at the same time, if you've got a law firm, like most law firms I deal with, that not only say to associates, you need to have 14, 16, 2000 hours, whatever a year to be able to bill, but even say to partners. I say to them like, why are you requiring your partners to bill hours? I thought the whole point of becoming a partner was that you didn't have to do this stuff anymore. You were getting off the wheel, but hey, that's fine.

But if you're still getting this idea that productivity means effort, I want to pull you back from that notion, right? And AI points us in that direction. You now have time. You are going to have time.

You're not gonna be happy about it necessarily because the work that used to take you four hours to do, it's gonna get done in about four minutes. And again, if you're billing, if you're selling your time, you've got a serious problem. But the time will then open up.

So what do you do with that time? And I wrote a piece which you may have seen called the AI Dividend. And I talk about different ways in which lawyers, I think the same thing applies to firms, can reinvest that time into ways of higher levels of productivity, higher levels of satisfaction, and so forth. So my advice to the lawyers who run firms in this regard is rethink what productivity looks like when in an era, in a market where more and more, you will be selling, again, the relationships, the guidance, the advocacy, the counsel that you provide because those things are not easily counted and quantifiable in terms of hours.

And you don't have to charge for them on an hourly basis, right? Most people wouldn't do that if given the choice. Yeah, absolutely, yeah. It's moving from selling effort in context of time and selling results.

And yeah, it's quite a shift to make. And as you say, once the work that takes four hours starts being done in four minutes, you cannot be billing like you did on an hourly rate as you did before. No, no, I mean, yeah.

And occasionally I come across lawyers who say something like, well, although it only took me four minutes, the amount of work we had to do to get to that point was worth two hours, so I'm gonna bill two hours for that. And it's like, you are on a slippery slope to disbarment if you keep that up. That's not the way it works.

Yeah, no, absolutely. Yeah, so there needs to be creative pricing brought into it, what's known as value-based pricing, of course. Yeah.

Yeah, I think so. And pricing is really, pricing's really hard. Okay, pricing's hard for everybody, right? Right off the bat.

Unless you are literally in the business of selling steel pipes and you know exactly down to the last quarter cent how much it cost you to produce that pipe, then you can build all those things in. But if you're in a professional line of work, and especially a line of work like law, which has almost no capital costs, right? You know, what are the costs that law firms generate? 80 to 90% are premises and talent. And that's basically it, right? We don't have factories, we don't have supply chains, we don't have, you know, we should have research and development, but we don't.

Right? So our cost base is, relative to other industries, quite low and mostly within our control, right? If we wanna have, look, if you wanna have an office in Canary Wharf, okay, that's fine, but you don't need to. You can have an office wherever you like, fundamentally. And if you wanna have a hundred lawyers, each of them making X amount of dollars per year, you can rent it, but that's within your control as well, to a certain extent.

You can manage all of these things. But, so that's the cost side of things, and lawyers and law firms should spend some more time thinking about that. But price, fundamentally, has got to be set with an eye towards your clients and your buyers.

And again, you made the point in terms of results. So when I, when lawyers ask me, if I can't bill by the hour, what can I bill by? And it's like, well, what do your clients care about? Yeah. In my experience, and I'd be interested in if this is the same for you, clients care about basically just three things.

The outcome that you help them achieve, the experience of getting to that outcome that they either enjoyed or endured, right? And the relationship they built or deteriorated with you and your team to get them there, right? And that's it. Outcome, experience, relationship, clients will pay for that. And if they're outstanding, clients will pay outstanding amounts of money for that.

So you can't do with an isolation. You can't go to a client and announce it. You do it after a conversation, after you talk, you ask, you listen, you gauge, and then you come out with a price.

And by the way, you'll never get that. There's no such thing as the right price. This is something I believe very strongly.

There's no such thing as the right price or a perfect price. There is only an acceptable price. Does it work for you? Does it work for the client? You got a good price.

And then the next time you can approach it differently if you like. Yeah, I like what you're saying. And some of the work I'm doing with one of my clients right now is around pricing.

And she's looking at value-based pricing. And what I said to her is, look, you're not just gonna switch from the hourly rate directly to value-based pricing and drop everything that you've known. However, you wanna start offering different options and you wanna be offering a higher priced option because you never know if they're gonna go for it or not.

So the three tiers that she's now worked on is an hourly rate, which is what it is before, a fixed price, which is based on the total amount of hours she thinks it's gonna take, and then she adds a certain chunk percent to make sure she's well covered for it. And that's her standard way of pricing as it's always been. And then another one is a value-based pricing, which is this if you want it done in 24 hours or a week.

And then you just double it, that's it. And just recently she had somebody go and taken her on the double the average price that she offers simply because that client valued the most was having it done in time. That's it.

So unless you make those offers, you'll never know. And at the same time, yeah, don't think you're gonna have to leave your hourly rate straight away, but you need to start offering these other fixed and value-based prices alongside your hourly rate. And you need to start doing that now because as you know, we know at some point AI is gonna take over the speed it takes to do this work.

And at least by then you've practiced already training your team and implementing fixed and value-based pricing. Yeah, I absolutely agree with all of that. That is like dead on.

And to your point about, and I love what you've gotten her doing is in terms of offering options, right? And I find two terms allow me to make a lot of progress with lawyers. One of them is pilot project, right? But this is just a pilot. We're just testing this out.

And I'm like, oh, okay, I get that. I'm okay that that doesn't trigger my fight or flight risk aversion instincts. And the other one is portfolio, right? When you can offer a portfolio of options to people.

And again, what I like about what you've got there is that number one, there's only three, right? And you wanna keep it simple. You don't wanna be giving eight or nine different price points to your clients because they're like, oh, I don't know what, you know? Like three, to my mind, five is absolute max, but I think three is the sweet spot. And I love the idea of saying to them, if it's urgent, this will cost you more, right? By the way, another way to look about it, look at it is this is my standard fee, but if you're not in a hurry, I'll charge you half price, right? You know? Yeah.

And that changes it around for them to say, oh, okay. Because, and that's advantageous to the lawyer as well because we know what clients are like. Everything's a board and everything's gotta get done right away because they're worried about something or they're like this.

But if you say to a client, okay, listen, I can get to this right now, it'll cost you X. But if in fact, it's not that urgent, because I've got a bunch of other things going on here, but if you can wait a couple of weeks for this, I can knock the price in half because I won't have to rush as much. They might think, oh, well, you know, it's not that urgent in a way, right? So again, it's being able to figure out what matters to the client, what are their pressure points, what are their priority points? And there's no way to know that unless you offer, and I like to say, engage in a conversation. Different pricing points is a way to engage in conversation because it's where the lawyer offers some choices and says to the client, what do you think? Do you have any questions? What else can I help you? What else can I provide to you to help you choose among these options? And that to me is like the ideal way to start a relationship with a client.

Yeah, yeah, nice. I never expected or foresaw this conversation was gonna take us down pricing, having started off with generative AI and culture. And at the same time, really all we're doing is we're drilling down to what's fueling looking at generative AI and culture, which is, you know, it's of course, it's money and it's also delivering a great service and, you know, having a good impact on our clients and solving their problems.

So it makes sense that we've ended up speaking more down the route, you know, looking at money. What would you say to a law firm owner who's listening to this at the moment, who's interested to start implementing generative AI, but doesn't know where to start? Any number of different things. First of all is to recognize that generative AI is a massive category and there's lots of different elements done within it.

And part of what you have to ask yourself before you start, you know, investing anything is what am I trying to achieve? Or what am I hoping to achieve? What do I think generative AI might do for me? Now, if you're at the point of saying, I honestly don't know, I've heard about all this stuff. I hear the horror stories, but people keep saying I should do something about it, but I just don't know. To which I say, all right, listen, go to OpenAI, download ChatGPT4 or whatever the recent one is.

For here in this side of the world, it's 20 bucks a month to subscribe and get access to their frontier models, which is great. I don't know what it would be elsewhere, but pull it down, get as many people who are interested and play with it, experiment with it. Don't use it for client stuff or anything like that, but just see what it can do.

Read about other people who are using it and what uses they can make of it, but learn this by doing, because that's really the best way to be able to do it. And once you do, it will start becoming clear to you very quickly what the implications are. So it was two years ago this month, as a matter of fact, that GPT-4 first came out and I had just begun running my sub stack.

And I said, well, this looks interesting. So I grabbed it, started playing with it. And after about half an hour, it's like, oh my.

And I wrote a post, one of the first things I wrote, which is like, so somebody has invented a words and language machine and it's going to change everything about the law because words and language is what we do. So, and it will become pretty clear. And if you ask it to do things such as, I'm going to upload into you a sample, it's maybe one from one of your precedents, a particular, here's an all precedent for statement of claim.

And here's a fake fact situation. Take these two together and give me a draft of a statement of claim that would meet these circumstances. And it will do it for you in about five minutes if it takes that long.

And you will look at it and you'll say what I said, oh my, right? Because you will appreciate. So step one, experiment with it, play with it. Yeah, yeah, yeah, brilliant.

The other thing I'd say as well is if you've got a team of people and they're all in similar roles, but everybody's doing the day-to-day operations in a different way, then you haven't got anything that needs particularly systemizing. And the first thing is to get an agreement with everybody on the procedure of how you do things around here and actually have everybody document the way they do things and then work together to formulate that so that everybody can agree on the same way they do the same processes throughout. Because then you can take that directly to start using technology to replace different parts of that workflow, right? Yeah, and I think it's a really important point is that for a lot of people say, oh, well, I wanna see how I can use AI to make my business more efficient.

And I wanna start by saying, I guarantee you there are tons of software programs on the market right now that have nothing to do with AI that can increase your efficiency and automate things that can be automated in terms of assembling documents and assessing contracts and all these things. They were around before JATCPT4 poked itself into the world. Look into those, right? Because there's the efficiency play which law firms could always really could have always been able to benefit from, get the work done faster, get the work done.

And again, as you know, one of the many benefits of automating a process in the law firm is not just that you're saving time, but you are actually refining and improving the quality of what you're doing. Because when we say, oh, well, just grab a precedent and you use that, every time you do, you are introducing a new type of human error into the process, right? So, again, to your point, part of the advantage of this is if we can settle on something like a best practice or a general standard, then we can move ourselves forward. Now, of course, the challenge is lawyers select, yeah, but I do things my way and I know how to do them and I'm very comfortable with this kind of process.

And that's always a bit of a tug of war, but in a lot of ways, I really think generative AI is going to, it might help us to leapfrog past those conversations a little bit to be able to say, you know what? What matters is if you need something done fast, the machine, doesn't matter what we call it, right? If it's AI, if it's automation, if it's whatever, we have a technology here, which is going to do it and it will take over this activity from you. Now, in every other type of work and type of industry, if you say to a worker, we are going to take this tedious task that you have to do and give it to a machine, they'd be like, thank you so much, I will name my children after you, right? Because this is a good thing. And if we didn't perversely incentivize effort for its own sake with the hourly model, which is not just for billing, but more importantly for compensation and advancement and status, then we wouldn't have that situation in law firms either.

So again, coming back to the idea of culture, if you are able to look at your law firm and say, we are not in the business of selling hours to clients, even though it looks that way, that's not the business we want to be in. We want to be in the business of providing outcomes and solutions that will make our clients' businesses and lives better and doing so in a way that is, of course, ethical, of course, high quality, but is also efficient and effective so that they get their work done faster, we get their work done faster, we get paid faster for it, and then we can take that extra time that we have saved and we can invest it in ourselves, in our professional development, in our clients and in getting new business. And so if the value of your firm is, we value productivity in terms of getting everybody more productive so that we're all engaged in our best work, our most satisfying work, our practicing to the top of our license, if that is your value as a firm to say, I don't want anybody here punching below their weight, which most of us do as lawyers.

I want us all punching at our weight class or higher. That is a value and you can express that value in decisions such as we are going to look away from hourly effort as the currency of productivity and production and value in this firm towards something else. And part of the reason we're doing that is that here comes AI, it's gonna eviscerate that old model anyway, so let's get after something better.

Yeah, absolutely. You're talking so much sense. I know that I'm just trying to think what are the kind of questions that the listener might be having right now? I think one of the other things is, is it possible to end up using too much AI and too much technology and relying on it too much? I mean, of course the answer is yes, but what kind of pitfalls are there that a law firm owner should be taking care of when looking at implementing AI? Right now, and this kind of goes back to your question of how does a lawyer in a law firm start adopting AI? So again, the first thing to do is to play with it.

The second thing to do with it, and this is like directly from, so I was attending online a day-long AI conference yesterday and the keynote speaker was basically the founder of one of the top AI legal research programs. And he leads off his presentation by saying, you need to understand this technology is in its infancy. It is still starting out, it's still developing, it's early.

I like to say it's actually the toddler phase, right? Because it's two years old, which means it's wandering around and sticking his fingers into things, so that's fine. But it's very early on. And part of the earliness is rough around the edges.

It does, you do not nearly as much as you used to have, you do still get hallucinations. You do still get work that is not yet ready to simply be shipped out sight unseen. We do still need lawyers to review that.

So yes, I think overly relying on it as if it is in fact the magic wand that can do anything you like, I think that can be problematic. But I think also if the risk of over-investing in AI is that you under-invest in people. So I'll give you an example.

Okay, again, I've been called in a fair bit the last couple of years. Interestingly enough, I write about AI a fair bit. I'm not a tech guy, right? So that I'm happy to write about it, but I'm not interested in as far as the tech is concerned.

I'm interested in so far as its implications for the business model. But what I'm getting called in a lot by sometimes quite large law firms is actually around talent. It's around their associates.

It's around, you know, and they say things like, well, we don't have the level of commitment that we want or they're not engaged or we don't like the productivity levels, et cetera, et cetera. It's remarkable how similar the concerns are, right? And then when you get into the firm and you start talking to people and you listen to what the partners are saying. And I don't just mean by the way, the old Frankie corner office partners.

I'm talking people in their thirties and forties, right? And they complain very quietly, but very intensely about, but they just don't wanna work hard. They don't wanna put in the hours. I had to put in the hours.

They don't wanna do it. I don't see why, et cetera, et cetera, et cetera. And so what I, and I see a lot of this, I see a real, and I think the generational tension is real.

I think the difference in values between generations, it can be overstated. No question about that. I mean, anything generational is by its nature generalizable, but there is a real difference in there.

The lawyers coming into the profession right now are not interested. I try to explain to them on time. I said, look, they're not interested in working as hard as they can.

That was your thing. They're interested in working as hard as they need to, right? Which is why they're the perfect generation, by the way, for AI, right? But the worry I have is this, law firms who are led by people who value the kind of things that got them to where they did. They see these younger people coming up.

They don't like their work ethic. They don't like their values. They don't like anything about them in a lot of ways, right? And here comes AI to say, oh, well, look, AI is here.

It can do the work of these slackers and it can do it much faster, et cetera, et cetera. So we're just gonna cut our huge swath of our associates off and just hire very small, very, very small number of associates and get the AI to do the rest of the work. Now, I do think that some element of this is inevitable.

I do think we are going to see within the next five years a significant drop off in new lawyer hiring. We're already seeing it in the American market to a certain extent. But to me, the danger, and this is to me, the danger of over-investing in AI, if you look upon it purely as a way to reduce your internal talent costs, I think you're not only missing the boat, but you are also cutting off the lifeline of your firm going forward.

People are going to matter in law firms. They're gonna matter because it's what clients will look for, right? Client, like right now, AI for legal use is being filtered through lawyers, right? All of the big legal AI companies, they're selling to lawyers, selling to law firms. There is a non-zero chance that at some point over the next five to 10 years, they'll say, you know what, this stuff is so good, it doesn't need the lawyer filtering.

We can sell it direct to consumer, right? And then lawyers should cut out of the whole process. I don't know how likely that is, but it's a non-zero possibility. But whether that happens sooner or later or not at all, it's not the answer, it's not the expertise, it's not the knowledge of the law or the ability to produce document that's going to matter.

What's gonna matter is, do you have good people who care about their clients, who give them good advice, counsel and guidance? And the only way you will be able to answer that question, yes, is if you invest in the right people and the right number of people, bring them along and get them to the point where they can have sterling careers at building those kinds of relationships, delivering those kinds of outcomes, to their clients. I guarantee you, if you take that approach, you will have a thriving law firm a generation from now because you invested in those people today. Yeah, brilliant, well said.

And the other thing I think that's overlooked is that it's actually only a small percentage of most people can afford legal services. And this rides alongside the saying that it's not AI that's going to replace lawyers, it's lawyers that know how to use AI are gonna replace other lawyers or beat the competition. And so when you look at this, you can use AI with your associates to increase their productivity.

In other words, the amount of hours and input and effort they need to put in gets reduced whilst the output gets increased. That's the increase in productivity. So then you free up all this time and what do you do with this time? Well, that's not the time to say, we don't need you anymore, dear associate, you're fired.

That's the time to say, well, now I've reduced the business's overheads by so much, what's the new business we can go after to fill up the rest of your time? And it's gonna be the remaining 60, 70, 80% of the market that usually can't afford law. So all of a sudden, if you bring up your culture and integrate it with technology effectively, you can start breaking into completely new markets and achieve whole new levels of profitability for your firm. Absolutely.

And this is the other piece of it. Most of my conversations around AI and the law are geared towards the supply side, lawyers and law firms and legal tech providers and so forth, entities, if you will, that are in the business of providing solutions or outcomes or results, what have you, the case might be. That's the supply side.

I think AI will have a dramatic impact on the supply side, but I think it is going to revolutionize the demand side because as again, as we know, as many studies across many countries have demonstrated time and again, 80, 85% of the universe of legal problems, situations, challenges, opportunities, they go unmet, undealt with for a whole bunch of reasons that are partly institutional failures, partly professional failures, partly market failures. And we can have a separate conversation about why we were at that point, but that's where we're at. I used to give presentations where I'd stick an iceberg on the screen saying, up here in the sunlight, that's where we are, and that's where the people who can afford our services are.

Down here in the cold, in the dark, holding their breath is everybody else, right? AI has the opportunity to lift that iceberg up and to get people in the position where they can say, wow, now I'm in the light. Now I can actually see what my legal rights are. I can see there are remedies available to me, and I have devices and machines that can bring me a good distance down the road.

I can fill out that form I need to send to the government. I can draft this document that the court will accept. Again, is that 100% quality today? No, it's not, but I don't think we're that far from it.

So the latent legal market is gonna become more and more, if you will, the patent or the visible legal market. People will come with an earshot, with an eyesight of the legal services ecosystem that they've never been able to glimpse before. And as a lawyer in a law firm, you should be, as part of your job, scouting out to see who's out there that we could bring in.

And maybe you build your own generative AI programs and you plunk them on your websites and you invite people to say, hey, come and make your own document. We'll take a look at it. We'll do this, we'll do that, and we'll help you along the way.

Or we'll use it as an outreach. We'll use it to brand ourselves to the people who we know are looking for these kinds of issues. Now, again, just because you can bring in, say, nine times as many clients as you used to, doesn't mean you're gonna get nine times of all this work, right? I mean, this is the whole Jeevans paradox thing.

It's true that technological advances do in fact increase demand, but it's important to understand a lot of what these new clients are bringing to you is also gonna get fed into the machine. It's also going to be done very quickly, but that's fine. You're, in a way, the work that has to be done isn't that important.

It's not material, especially if you're not billing for it. What matters is you have come and built and started a relationship with someone who needs help dealing with something in their life or in their business. That's what you're there for as a lawyer.

You're there to help people deal with stuff. And the more you can go out and find all these people newly emerged into the light to be able to build those relationships, bring those in, then again, your firm is not only on a very strong foundation, it's going to flourish in the future. Yeah, absolutely brilliant.

I could talk to you forever. I know it. And I could talk all day, so.

I've really enjoyed this conversation with you today. I will be putting a link in the description of this, which is for your website I've got here, jordanferlang.substack. Yeah, yeah. So I've got two, well, if you count Blue Sky, you've got three places to find me.

I'll get you a link in four, but that's kind of boring. But in terms of where, what I'm writing, the main place I am right now, I have a substack where I'm doing most of my publishing. Every couple of weeks, I put something out.

There's about 50, 60 articles here at the moment. I've also got a website called Law21, which is kind of like dormant for the moment. I'm in the process of kind of redoing it.

You'll find a lot of my old stuff there. If you're dying to read half a million words on legal innovation, that's where you can go. It's good for insomniacs.

But yeah, basically, if you want to interact with me and find what I'm talking about these days, the substack is the best place to track me down. Okay, fantastic. Jordan, I've absolutely enjoyed having you on the show.

I look forward to continuing. Yeah, that's been great, thank you. And I look forward to continuing to reading your content and to, yeah, seeing you about on LinkedIn.

And who knows, when the time is right, hopefully we can meet and it'd be great to share the stage with you sometime. That would be fantastic. Dan, thank you so much for your time today.

It's been great having a conversation with you. Hope you're well. Thank you, bye.

Bye-bye.