Like the swallows returning to Capistrano, every year, someone will predict the demise of the billable hour, and every year we all smugly dismiss their naiveté. Lawyers cannot change! The model is too entrenched! Clients will never go for it! Be gone from us with your silly “hot take.”
But here’s the thing… the Capistrano swallow population isn’t as predictable anymore. The population has dwindled over the years and the culprit is modern development (specifically new construction that reduced the local insect population if you’re a nerd and wanted to know why). Like those birds, law firms aren’t going to give up their routine on a whim, but must when they’re forced into it by slamming headfirst into the full-length window of technology.
Which is all a round about way of placing myself in the oft-mocked role of announcing the looming demise of the billable hour. I take on this task fully aware of the historic recalcitrance, but assured of one unassailable truth: lawyers really like money.
A new white paper from DISCO surveying 112 legal professionals reveals an industry coming to grips with the need to adopt generative AI — somehow — or risk becoming the Blockbuster Video of the Am Law rankings. Some 43 percent of the law firm participants felt pressure from leadership to adopt AI. For in-house legal departments, the number climbed to 64 percent. Of course, like every other industry, legal still has to consider exactly what this technology can do other than make them the butt of Above the Law jokes, but lawyers are, furtively, figuring out the right use cases.
“People realize that generative AI is here and that you need to adapt or die, so there is no resistance from people who want to stay employed; they are adapting,” concluded one respondent who has fully internalized the bleak, dystopian hell of late stage capitalism.
Bringing us to the billable hour problem waiting around the bend. The billable hour, the beautiful, terrible engine powering Biglaw since the names behind the most prestigious law firms in the world were busy fighting integration, isn’t exactly designed for a world where document review takes minutes instead of weeks. “There is also a billing issue because the premise that speed will reduce revenue remains a challenge,” notes the report.
It’s a challenge that isn’t going away unless law firms radically change their business model. How do these law firms make so much money?
For some it might be crime, but let’s stick to the firms where it’s leverage. It’s sitting atop a pyramid scheme of junior lawyers billing out $550/hour to do 300 hours a month on menial tasks in exchange for a vague promise to consider their equity partnership bids down the road and then yanking the rug out and making them permanent senior associates. That falls apart when a vendor provides an AI-driven point solution that handles that work.
An important semantic aside: AI won’t replace young lawyers, but it will mean firms need a lot fewer of them. Even in the eDiscovery space — one of the areas where AI is best suited to take on a huge bundle of the tasks typically handled for juniors, the report notes, “While there is increasing confidence in using GenAI tools for large-scale legal reviews, lawyers still see an ongoing need for human verification, prompt creation and oversight to get the most out of the technology while being able to responsibly manage it.”
Because, despite the messianic claims of the Silicon Valley bros shoveling VC cash into a furnace to make bots that hallucinate 1 percent less, AI simply isn’t capable of replacing the broad range of judgment even the lowliest of associates provides. But it can empower the lowliest of associates to cover the work previously handled by several associates. And when the lawyers at the bottom rack up fewer hours per client and the base of the whole pyramid contracts, there are only three ways to get that money back.
Remembering, again, that our lodestar remains: lawyers really like money.
They can “get more clients and do more work!” a business strategy that reads less like a global law firm and more like “what the underpants gnomes taught me about B2B marketing.” There are segments in the legal market — specifically the small to mid market — where efficient firms can replace revenue by serving presently unmet legal needs. But there’s a limit and at the top of the food chain, where clients already maximize their legal use cases, this is a fanciful plan.
They can charge a whole lot more per hour. This is the infamous $10,000/hour claim floated earlier this year. It could replace the revenue, but are there any clients with the appetite to report that they’re paying someone $10,000/hour?
Bringing us, inevitably, to rethinking the billable hour. It’s one thing to tell the market that you’re spending $10,000/hour and quite another to say, “we had been spending X on annual M&A services and we’re still paying X on annual M&A services.” If firms begin value pricing specific tasks, they can hand clients bills that unmoored from hours that keep the revenue constant. Clients will yelp about wanting to enjoy the fruits of AI efficiency, but at the end of the day they’ll suck up the cost of legal services like they always do. This is the only path for Biglaw that makes any sense.
To revisit an earlier quote with a slightly less cynical spin, will firms realize that generative AI is here and that they need to adapt or die? Because while on the surface that quote spoke to lawyers who wanted to stay employed adapting, it’s equally if not more true for firms that want to stay in business.
It’s possible to learn to coexist with modernity, but it takes adaptation. Look at the swallows who are now, finally, returning to Capistrano. They’ve found a way to thrive even without the same diet they enjoyed for decades. How’s that for a heavy handed metaphor?
Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter or Bluesky if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.
The post Law Firms Prepare To Automate Themselves Out Of Their Own Business Model appeared first on Above the Law.
Like the swallows returning to Capistrano, every year, someone will predict the demise of the billable hour, and every year we all smugly dismiss their naiveté. Lawyers cannot change! The model is too entrenched! Clients will never go for it! Be gone from us with your silly “hot take.”
But here’s the thing… the Capistrano swallow population isn’t as predictable anymore. The population has dwindled over the years and the culprit is modern development (specifically new construction that reduced the local insect population if you’re a nerd and wanted to know why). Like those birds, law firms aren’t going to give up their routine on a whim, but must when they’re forced into it by slamming headfirst into the full-length window of technology.
Which is all a round about way of placing myself in the oft-mocked role of announcing the looming demise of the billable hour. I take on this task fully aware of the historic recalcitrance, but assured of one unassailable truth: lawyers really like money.
A new white paper from DISCO surveying 112 legal professionals reveals an industry coming to grips with the need to adopt generative AI — somehow — or risk becoming the Blockbuster Video of the Am Law rankings. Some 43 percent of the law firm participants felt pressure from leadership to adopt AI. For in-house legal departments, the number climbed to 64 percent. Of course, like every other industry, legal still has to consider exactly what this technology can do other than make them the butt of Above the Law jokes, but lawyers are, furtively, figuring out the right use cases.
“People realize that generative AI is here and that you need to adapt or die, so there is no resistance from people who want to stay employed; they are adapting,” concluded one respondent who has fully internalized the bleak, dystopian hell of late stage capitalism.
Bringing us to the billable hour problem waiting around the bend. The billable hour, the beautiful, terrible engine powering Biglaw since the names behind the most prestigious law firms in the world were busy fighting integration, isn’t exactly designed for a world where document review takes minutes instead of weeks. “There is also a billing issue because the premise that speed will reduce revenue remains a challenge,” notes the report.
It’s a challenge that isn’t going away unless law firms radically change their business model. How do these law firms make so much money?
For some it might be crime, but let’s stick to the firms where it’s leverage. It’s sitting atop a pyramid scheme of junior lawyers billing out $550/hour to do 300 hours a month on menial tasks in exchange for a vague promise to consider their equity partnership bids down the road and then yanking the rug out and making them permanent senior associates. That falls apart when a vendor provides an AI-driven point solution that handles that work.
An important semantic aside: AI won’t replace young lawyers, but it will mean firms need a lot fewer of them. Even in the eDiscovery space — one of the areas where AI is best suited to take on a huge bundle of the tasks typically handled for juniors, the report notes, “While there is increasing confidence in using GenAI tools for large-scale legal reviews, lawyers still see an ongoing need for human verification, prompt creation and oversight to get the most out of the technology while being able to responsibly manage it.”
Because, despite the messianic claims of the Silicon Valley bros shoveling VC cash into a furnace to make bots that hallucinate 1 percent less, AI simply isn’t capable of replacing the broad range of judgment even the lowliest of associates provides. But it can empower the lowliest of associates to cover the work previously handled by several associates. And when the lawyers at the bottom rack up fewer hours per client and the base of the whole pyramid contracts, there are only three ways to get that money back.
Remembering, again, that our lodestar remains: lawyers really like money.
They can “get more clients and do more work!” a business strategy that reads less like a global law firm and more like “what the underpants gnomes taught me about B2B marketing.” There are segments in the legal market — specifically the small to mid market — where efficient firms can replace revenue by serving presently unmet legal needs. But there’s a limit and at the top of the food chain, where clients already maximize their legal use cases, this is a fanciful plan.
They can charge a whole lot more per hour. This is the infamous $10,000/hour claim floated earlier this year. It could replace the revenue, but are there any clients with the appetite to report that they’re paying someone $10,000/hour?
Bringing us, inevitably, to rethinking the billable hour. It’s one thing to tell the market that you’re spending $10,000/hour and quite another to say, “we had been spending X on annual M&A services and we’re still paying X on annual M&A services.” If firms begin value pricing specific tasks, they can hand clients bills that unmoored from hours that keep the revenue constant. Clients will yelp about wanting to enjoy the fruits of AI efficiency, but at the end of the day they’ll suck up the cost of legal services like they always do. This is the only path for Biglaw that makes any sense.
To revisit an earlier quote with a slightly less cynical spin, will firms realize that generative AI is here and that they need to adapt or die? Because while on the surface that quote spoke to lawyers who wanted to stay employed adapting, it’s equally if not more true for firms that want to stay in business.
It’s possible to learn to coexist with modernity, but it takes adaptation. Look at the swallows who are now, finally, returning to Capistrano. They’ve found a way to thrive even without the same diet they enjoyed for decades. How’s that for a heavy handed metaphor?
Joe Patrice is a senior editor at Above the Law and co-host of Thinking Like A Lawyer. Feel free to email any tips, questions, or comments. Follow him on Twitter or Bluesky if you’re interested in law, politics, and a healthy dose of college sports news. Joe also serves as a Managing Director at RPN Executive Search.
