Lawyers Will Need To Be Capitalists In The Age Of AI

Despite the billions of dollars invested in legal tech over the last few decades the legal world remains largely unchanged at its very core. Why is this? There are several reasons. One is because lawyers are not capitalists. But AI may change that.

The Means Of Production

To be called a capitalist is often seen as synonymous with simply being a lover of money. But, not so. People at the top of the societal tree were materially rich long before even the Pyramids were built. Being rich also doesn’t automatically make you a capitalist, at least not in the industrialised and modern sense of the word, (see ‘Technofeudalism’ by Yanis Varoufakis for an excellent overview of the many types of economic model created since humans first got organised – and there are many other definitions of capitalism, for sure, but this article keeps to the one here.)

A capitalist, following the Varoufakis world view, is someone who seeks to invest in and control capital goods, i.e. machines that manufacture things, or the engines that power those machines or enable them, in short the things that make something: the means of production.

You want to buy X product, or perhaps its output? Then you have to go to the business that makes X, or the outlet that has been supplied the product by the X-maker.

Because this thing is manufactured you can’t just go out and pick one from the branch of a tree, nor can you easily make one at home. So, you’re now on the consumer end of a supply chain where ‘the capitalist’ who ‘owns the means of production’ resides some distance away.

Now, being called ‘a capitalist’ still has negative overtones to it, but it really covers a huge swathe of regular businesses we all depend upon. They might be the owners of a pharmaceutical company, or they make washing machines, or cars, or….legal tech software that automates contracts, or allows you to instantly redraft a clause, or shows you all the case law that connects to your client, and more. They all have specialised tools and know-how, (and have assembled skilled labour) and leverage all of this to build a product someone else wants.

You get the picture. So, where do the lawyers fit into all of this? Well, that’s the problem, most of them don’t. Lawyers (mostly) don’t own the means of legal production. Why? Because they are the means of legal production.

The Means of Legal Production

If you or I wanted to create a law firm, all we need are some lawyers. We don’t even need an office these days, just several people willing to operate and share risk together under a single brand. And that’s it.

Once we are assembled, (or even if it’s just one solitary person), it’s a law firm, selling services and making a profit. We might buy in support services, perhaps even digital access to various software and KM tools, such as Microsoft Word, and Westlaw or LexisNexis for case law research, and many other legal tech tools.

But, we don’t own those things.

If I look up a case on Westlaw and mention it in a brief to a client, I do not own the data base it came from, nor the software system that someone else has built over many years to deliver it, nor the complex taxonomy they use to help us to find the right thing, nor all the other associated tools that come with such a system these days. We own none of it at all.

And yet, lawyers still get rich… (well, some do). In a world of capitalists and the products they control how is this possible?

Lawyers Still Get Rich

The only thing we, the lawyers in this hypothetical law firm, really own is ourselves: our experience, our well-trained minds, our ability to handle a client’s matters with vigour and determination, our ethical standing, our reputation for client service, our entire work culture, and perhaps we can mention our brand if word has got around, although without us doing our day job it’s not got much value on its own.

We also, if we are quite inventive, may own new ways of doing certain types of legal work, although those ways cannot be truly owned and may be copied instantly as soon as another law firm figures out how we draft terms in a deal or argue in court. Our ‘IP’, ‘our way of doing things’, may seem special to us, but it’s not impossible to replicate. Nor, as mentioned, can we own it. A lawyer cannot patent a speech they made in defence of their client, nor how they once drafted a change of control clause that everyone seemed to like.

In short, we own nothing – other than our past experience, whether that is intangible or in the form of past work product that we can refer to for ideas. We also make nothing that is material other than digital files that can be downloaded and printed onto paper (if a client wants to). That’s it.

In this regard a law firm is both highly fragile and also incredibly resilient at the same time. With nothing to own, there is nothing to lose except our old case files and billing data….and our people.

But, even if some of the lawyers choose to leave, we can survive, if sufficient talent remains and our finances can cover the short-term drop in income.

Meanwhile, with careful recruitment, or perhaps merger, we can grow the firm quite rapidly. We do not ‘buy’ the other firm, or teams of other lawyers – they choose to join us. After that we work, in theory, as one partnership, no matter where everyone came from. It’s a remarkable business model. And it works….exceedingly well! Or at least it has, up until now….

The Magic (And Limitations) of the Law Firm Model

As noted, the magic of being a lawyer is that you are, in yourself, the means of production.

Or, as one esteemed English barrister once told this site: ‘We are brains on sticks.’ And that’s a very good way of looking at it. (Plus, plenty of capacity for hard work and intellectual endurance.)

In short, the lawyer is the machine that mostly makes the thing that is sold, to use the parlance of industrial capitalists. They make the contract. They negotiate the deal. They apply their legal knowledge to the situation over and above anything they drag up from the KM system or other sources. They manage the dispute to its resolution. They are the producers, the managers, the doers in nearly all things. And in the essential areas where they don’t work there are multiple forms of support staff to help: for tech needs, with HR, with reception, with running the KM function, doing the accounts and collecting bills, and more.

And the word ‘mostly’ is important here. The legal tech that is used at present is in support. It assists. As noted above, the lawyer still rules the production process, even if they tap plenty of legal software and data from third parties. At least for now they do……

But, what happens when that software can do nearly all that a lawyer would do in a specific production process? What happens when genAI is really so proficient it’s far more than just an assistant whose work is far from the finished product, but acts like a trusted colleague which can produce just like the human lawyers in our hypothetical law firm?

Lawyers can embrace this change. For example they can see how they can expand what they offer clients by building legal tech solutions to provide finished ‘products’ directly that add to their total revenue. So, now they own some of this alternative means of legal production, i.e. via the saleable outputs that don’t come directly from the lawyers’ personal work.

They can also develop internal automated processes of their own that work especially well wherever there is a high volume of similar need, e.g. due diligence. Here, although there will be plenty of human lawyer input as well, they can at least own the ‘bespoke production line’ that they have designed using software – if they can build something that is so effective and distinct that it makes a difference economically to the firm.

I.e. they have some control over what is now an externalised and identifiable ‘machine’ for doing specific aspects of legal work. This is more than an ad hoc throwing together of several tech-supported tasks for each and every matter, it’s a distinct process, so distinct that in effect the firm could in theory lose all its lawyers aside from those that serviced this production line and there would still be something there you could point to and say: ‘Here is what makes X for the clients.’

The next question is then: who owns the software?

Not all industrial capitalists own the ‘plant’, the machinery, they use, nor have they invented it. Some rent it. Some buy it in from other producers. But, they do own the production facility and the design of how the production line works. Clearly, if you own all of it you have even more control. But, many firms may settle for buying in ‘the machines’ they need, as long as they can own the process – just as they today rent legal tech software to work in a support role.

And the question after that is: if you’ve got an externalised and distinct production line, built with legal tech, how will you charge for this?

This site’s answer is clearly: fixed fees. Or maybe clients pay an annual licence of some type. But, charging how long it would take a human lawyer to reach a final output for X legal task seems like a square peg solution for a round hole need.

Owning The Means of Legal Production

Law firms have been using tech for decades to support their work. But, this is evolving into something else.

What we may see more of is ‘additive’ projects, as noted above. For some years, many firms have been building tools which add to their revenue and don’t disrupt the lawyers’ work. E.g. law firm A builds a regulatory assessment tool that allows a client to do some Q&A via a chat interface and get a report. This is an activity that doesn’t remove income from the firm, but may well increase it.

The clients may pay a fee to use this digital facility – which the law firm owns, i.e. in this very narrow use case they DO own the means of legal production. Or, the law firm may offer it for free to act as a business development device that brings in more complex work. But, they still own it and control it.

But, what if we expand on that? What if whole swathes of billable work in, let’s say several years to come, are doable with genAI tools from nearly start to finish? What then? Law firms will have no choice but to try and own that process. Because if they don’t then someone else will. Or, one might say: where there is money to be made, there will always be an attempt at ownership.

The reason why lawyers don’t spend much time thinking about this is because the tools they use are still very much at the assistant level. But, as genAI develops, as agentic flows evolve and become more powerful, and entire work streams can be automated with only minor checks from a lawyer before a final ‘product’ is ready for the client….what then?

Lawyers may wake up one morning and realise that after centuries of working the same way they no longer have exclusive ownership over the means of legal production, nor have much control over it – other than how they manage the software made by others that produces the end products they then sell.

There is much more to explore here, but to sum up: as genAI develops over the coming years lawyers will have to start thinking more like industrial capitalists.

And when such an approach becomes widespread then there will be huge changes across the legal market. We are not there yet. But, this is definitely one possible future.

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N.B. in markets where external investment is allowed into legal businesses the outlook becomes even more interesting, as ‘new entrant’ entrepreneurs could truly take market share from law firms if they can ‘top and tail’ the automated output with some credible lawyers who retain client buy-in to act primarily as a quality control and business development team. I.e. new entrants could really own the means of legal production outright and take market share, e.g. a very advanced ALSP with the genAI tools that are yet to come.

P.S. There will be a series of related pieces in Artificial Lawyer exploring in more depth some of the themes above, with this piece as the foundation for those that follow.

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By Richard Tromans, Founder, Artificial Lawyer, Sept 2024

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