Monday, February 20, 2017
The Future of Law, Innovation and Disruptive Technologies
I want to thank Prawfs and Dan Rodriguez for organizing this symposium. I teach at the University of Florida. This includes both law school students and students in our College of Health and Human Performance (I always teach an overload for no additional compensation). Further, I teach a short course every year at Northwestern’s Master of Science in Law program – an innovative program which provides instruction in law, business and technology to non-lawyer professionals who desire some amount of legal astuteness in their careers. One day a week, I also serve as Senior Of Counsel at Wilson Sonsini Goodrich & Rosati, which helps to keep me up to date on legal practice innovations.
The current symposium is a way for us to think about the future of legal education – both for lawyers and non-lawyers. In many ways, both books (Richard Susskind & Daniel Susskind, The Future of the Professions: How Technology Will Transform the Work of Human Experts and Gillian Hadfield, Rules for a Flat World: Why Humans Invented Law and How to Reinvent It for a Complex Global Economy) suggest that the legal professional is in need of change. While most schools make changes at the margins, perhaps we should push for more significant change given these thought provoking books.
Susskind and Susskind suggest that we may be at the end of professional services firms because of various changes to the economy, including increased automation due to technological progress. This is only partially correct. Law has become a highly differentiated product. The low margin work that is a commodity product can be taken over by non-lawyers due to technology or competition from non-lawyers. Indeed, data shows that the area in which jobs have not recovered has been among solo practitioners. Many of the solos and small firm practitioners essentially were the equivalent of the live tax preparer at H&R Block – they provided the type of services that people could figure out on their own. Increasingly, many people use online tax services (including online H&R Block) instead of live services. Replace online tax services with online legal services and you have an understanding of how commodity legal work is a fundamental problem for those law schools that produce commodity lawyers (typically Tier 3 and Tier 4 schools). For such students who go into solo or small firm practice, the future may not look particularly good as technological innovation threatens such jobs.
In contrast, there will remain a place in law for higher margin complex work that cannot be automated via the internet and for which there are significant barriers to entry for non-lawyers such as accounting firms. It is the higher margin work such as complex litigation and regulatory work as well as sophisticated transaction where the legal profession will continue to have comparative advantage. Think, for example, of highly leveraged teams of lawyers that work on front page Wall Street Journal type deals. Because of the complexity of such deals, there will be significant number of M&A, corporate governance, antitrust, and tax lawyers in multiple jurisdictions who are necessary for the future of the practice of law. This work cannot be replaced by Big 4 accounting firms nor other people trained in fields other than law but who do the day to day marketing and supply chain contracts or legal and regulatory compliance on a daily basis.
In some areas, there is growth in law (and legal services) and this goes against the idea that the profession of law is at risk. In fact, as laws themselves in the regulatory state get longer and more complex, this is creating new opportunities for both lawyers and non lawyers (such as accounting and consulting firms and non-legal regulatory specialists) to generate new types of work based on new regulatory requirements that did not exist a decade ago. Susskind and Susskind also do not address that sometimes it is technology itself that creates new demand for law such as regulatory and litigation work surrounding issues around big data or IP litigation and mass tort law regarding issues like driverless car technologies. Of course, the problem with law schools is that schools underserve the growing demand for compliance and technology related courses. Many law schools also lack requirements for basic financial literacy for their students, which would allow students to better apply such learning to how best to solve legal problems based on economic problems.
Susskind and Susskind predict that professions in general are in trouble. For many of the same reasons, I think that their story is incomplete. Let’s take the example of a different profession – live music. Recorded music had a much smaller share of total music revenue in 1900 than today. There were no radio broadcast and no TV shows or movies that had live music. Professional musicians within the arts had prestigious jobs. However, even today there is still demand for live music because the experience is different than that of recorded music. Indeed, major performing artists that in a pre-Napster era may have made most of their revenue from their music catalogues now make their money off of their live shows.
Hadfield’s book is more nuanced and analytical than the Susskind & Susskind book. It is worth reading cover to cover as Hadfield offers a sophisticated analysis of how the world is changing law and its organization. One significant contribution that she makes is to note that the legal infrastructure has been too centrally managed and does not respond to market forces. At one point, she asks, “Where are the garage guys in law?” Part of the reason for the lack of innovation is because of the rigidity and high entry barriers that our legal professional organizations have set up. Hadfield suggests therefore that the legal profession has opened itself up it attack from disruptive technology along the model of what Clay Christensen has written about in his books.
Hadfield’s solutions are sensible – open up and properly regulate legal markets to promote innovation. Solutions include shifting risk to organizations better able to take on risk than traditional lawyer owned law firms and allowing for a network arrangement akin to the Big 4. Many prohibitions such as practice restrictions, fee splitting, advertising, etc., she explains, create a narrower possible business model for law firms than other service firms. Ultimately, Hadfield identifies three areas in which legal organization should be transformed” licensing entities to be legal providers, licensing multiple legal professions, and right regulation. Hadfield’s work is thought provoking. What is more, she may be right.
Posted by Daniel Sokol on February 20, 2017 at 10:50 AM | Permalink
Andy Perlman's most recent post in this series does not accept comments so I thought I'd respond here.
If the Suskind and Hadfield predictions are close to the mark, legal education ought to be taught in undergrad programs, like accounting, business management, finance, etc. Perhaps half to two-thirds of the students in law schools might be better off financially and professionally if they had earned an undergrad LLB from their flagship state school.
Posted by: John Steele | Feb 21, 2017 10:48:29 AM