Lawyers, Tech + the Means of Legal Production

‘The means of legal production’ is a phrase this site has been using since it launched, but what does it signify? And most of all, what goes into this means of production?

The term broadly can be defined as, at least in the way Artificial Lawyer uses it, all the inputs that go into making something in the legal sector, e.g. a contract, or completing a legal work process, e.g. a due diligence review.

The original term stems from the work of Karl Marx, who incisively analysed how the 19th century industrial economy operated, and then came up with an absolutely terrible and unworkable solution to cure all of its ills. However, some of the original analysis of the means of production still carries weight. (This article started off as part of a search for other inspiring economists to consider after writing about Clayton Christensen’s Innovators Dilemma, but as you’ll see, this isn’t really so much about Marx.)

The Means of Legal Production.

So, what goes into this means of production, at least at law firms? And who owns it?

• The lawyers (usually) own it – the first observation is that although some commercial law firms generate as much revenue as global manufacturing businesses, for example around 50 law firms generate over $1 billion per year in gross income, the equity partners still own these businesses. (And Marx would perhaps have been surprised at that, given that a law firm partnership is – in some ways – a ‘legal labourers collective’ that also employs many hundreds, sometimes thousands, of people, i.e. this is not some factory with a distant billionaire owner who never even visits the business. Some of the workers are the owners. That said, let’s not forget becoming an equity partner remains incredibly difficult.)
• The lawyers, despite all technological advances, remain the primary productive asset – this site is focused on how technology can improve the production of legal work, and there have been many notable developments and more arrive each week, but it’s the ‘knowledge capital’ of the lawyers – and the allied professionals in the non-fee-earning side of the business – that really are the greatest asset to the business. The knowledge, not just of the law, but how it works, how a legal process moves, how to manage something like a deal, how to engage with all the parties/regulators/financial institutions, how to negotiate, how to win a client, how to maintain a client relationship, how to mentor associates – and more. All of that is ‘knowledge capital’ and it cannot just be replaced or updated at the click of a button. As the saying goes, a law firm’s greatest assets leave by the main door every evening, and if you are a managing partner you have to hope that the next day they’ll all come back (or these days, hope they log back into the firm’s intranet again.) Then of course we have the majority of the lawyers – the associates, paralegals and professional support lawyers – who also are brimming with knowledge capital and are essential to the outcomes and outputs of the legal business. A simple test for this would be: what would happen if the associates decided not to work this week? The firm would grind to a halt, both from a productive and financial perspective. Again, it’s the human element that remains totally essential.
• The Allied Professionals – and then we have the huge supportive impact of the many professionals who are not fee-earners, from PR and BD, to the CFO and accounts team, to PAs, to CIOs, CTOs, and Innovation Heads, and more. Again, their knowledge capital is essential to the business and they also can walk out of the door any time they want, leaving the firm to figure out how to do marketing, to keep the DMS working, to implement a new NLP system, or to work out who gets paid and how much.

And we could add the relationships with other legal services businesses, such as ALSPs, that contribute hugely, in some cases, to certain work projects. And also the co-working efforts with inhouse legal teams, which are also essential. But, let’s focus on the law firms for now.

It’s only after we take account of the vast majority of the productive forces inside a law firm (i.e. the people above), and their huge knowledge capital, that we get anywhere near matters such as data and tech.

• Data and KM – one of the ironies about lawyers is that to some degree they ‘own’ the means of legal production, i.e. law firms are owned by the same people who lead the productive process, (except in some cases in the UK and other liberal market scenarios, along with ALSPs), and yet they cannot own the law itself. Statute law, (for now), remains accessible and is a public good – while case law remains something of a hot topic and isn’t 100% available to all unless they are willing to pay for it in many countries – although law firms cannot exclusively own this either. But, the one thing law firms do own is their own data and their own knowledge. They have:
  • Every contract they’ve ever made (…at least in theory they do…)
  • All legal documents in a litigation they’ve ever created (…also at least in theory they do…)
  • They have templates – or at least they should – for the above.
  • They have all the financial data around the work they’ve done so they know how much it costs – or least they should have, (while whether they know how to access it and connect it to the actual work product is another matter as well).
  • They have client lists and lists of the teams who worked on matters and who maintains client relationships… (…at least in theory they do…).

In short, they have the potential – and potential is the key word here as few fully exploit the opportunity – to turn themselves into a vast encyclopaedia about their own products. And that knowledge can improve productive processes via efficiency, and increase value for the firm and their clients.

The Technology

And now, we get to technology itself. As you can appreciate, if you ever wonder why most lawyers don’t feel that tech is the most important thing in their lives, it’s because of all of the above.

It’s worth saying that the knowledge and data part, without KM and CRM and financial accounting software systems would be largely unachievable. But, many lawyers will perhaps not see this as ‘technology-related’, but rather as information they feel should be at hand. They perhaps don’t notice it – and all the work that has gone into it – because it’s embedded into their desktop, (which they also don’t see as ‘technology’ as it’s become such a normal part of their lives, just as the furniture has). Although, it is essential to the operation of their business.

And then we finally get to the productive technologies, such as NLP systems that can help with contract negotiation, or due diligence review, or do litigation outcome analysis, or vastly speed up and improve litigation case law research, or support eDiscovery.

And then we also have document automation and legal workflow automation (no-code or otherwise) technology.

And then there are deal management tools. And expert systems.

And the list goes on of technology that drives efficiency, that crystallises and leverages knowledge inside the firm through software, that absorbs drudgery, and that allows the lawyers to be lawyers and to fully focus on their greatest assets: their broad knowledge capital, i.e. the knowledge of how to deliver a legal product/output to a client.

Overall, these technologies can – and do – change the means of legal production. But, clearly, as noted, they only add to the overall means of production that are very much grounded in the human. They are part of the mix.

[ There are also some narrow pathways, mostly in the consumer claims space, where almost an entire process can be performed technologically with very minimal human input – but these remain a small part of the picture and also can only happen because people have very carefully designed those pathways to be ‘hands-free’. ]

Conclusion

To wrap this up – for now – if Karl Marx were around today he would likely marvel at the ability of people to come together and create via their own ingenuity and their own knowledge, globe-spanning legal businesses that generate huge economic value. He’d also perhaps be surprised at the world of legal tech startups where people who are not necessarily rich can, with good ideas and their own knowledge and skills, (and some VC investment), build businesses that generate significant outputs.

Technology, the ‘industrial element’ one might say in the means of legal production, is becoming more and more important, and this site believes it has an enormously long way to go. But, when it comes to appreciating and evaluating the means of legal production, the human element in the law remains the dominant factor.

However, there is one vital caveat to this conclusion. Even though the human element remains pivotal and supreme in terms of value creation, as each year passes the ability of technology and how it is leveraged to create notable differences in the means of legal production will increase. Lawyers should not rest on their laurels, nor law firms believe that the landscape will stand still. Technology’s ability to embed itself within, and add value to, the means of legal production has only really just got started.