{"id":166879,"date":"2026-11-06T10:20:58","date_gmt":"2026-11-06T18:20:58","guid":{"rendered":"https:\/\/xira.com\/p\/2026\/11\/06\/it-all-hinges-on-judgment-and-human-connections\/"},"modified":"2026-11-06T10:20:58","modified_gmt":"2026-11-06T18:20:58","slug":"it-all-hinges-on-judgment-and-human-connections","status":"publish","type":"post","link":"https:\/\/xira.com\/p\/2026\/11\/06\/it-all-hinges-on-judgment-and-human-connections\/","title":{"rendered":"It All Hinges On Judgment. And Human Connections."},"content":{"rendered":"
\"\"
<\/figcaption><\/figure>\n

Right before ClioCon and the release of\u00a0Clio\u2019s Legal Trends Report<\/a>, an\u00a0interesting article<\/a>\u00a0appeared. Both the Clio Report and an\u00a0earlier one from 8am<\/a>\u00a0showed billable hours going up, even though AI was supposed to bring them down, a paradox which Joe Patrice<\/a> discussed in a recent article<\/a>. The article I\u2019m referring to suggests we aren\u2019t seeing, and may never see, the across the board efficiency gains from AI so many predict. Why? Because we\u2019re humans. Gulp.<\/p>\n

The article was by\u00a0Torsten Slok<\/a>, the chief economist and a partner at Apollo Global Management, a major alternative investment manager. Prior to Apollo, he worked for 15 years at Deutsche Bank. Before that, he was with the International Monetary Fund and the OECD.<\/p>\n

So he\u2019s no dummy. But he is known for challenging conventional wisdom. My kind of guy, since over the years I\u2019ve too often found that so-called \u201cconventional wisdom\u201d is, well, just conventional folly.<\/p>\n

Slok\u2019s Swimming Against The Stream<\/strong><\/p>\n

Slok\u2019s recent article certainly challenges what most people are thinking these days. He bluntly argues, \u201cDespite massive investments and widespread hype around artificial intelligence, the technology has delivered zero financial payoff to corporate America outside of tech.\u201d<\/p>\n

Whoa. Zero? That can\u2019t be, right? I mean, AI is supposed to have disrupted work and just about every business. But Slok says the data show that revenue per employee and profit margins have remained largely flat among S&P 500 companies outside the Magnificent Seven (think Apple, Microsoft, Nvidia, etc.). And importantly, says Slok, \u201cthere are still no signs of AI boosting productivity growth.\u201d<\/p>\n

What does that mean? \u201cWith no impact on the bottom line, mainstream corporate America is pulling back and starting to view token spending not as a source of growth but as a cost center that weighs on margins.\u201d (Tokens being the meter that runs every time you use an AI tool. I know, these guys can never use a term that we all understand.) That, in turn, means that mainstream corporate America may soon decide it doesn\u2019t need the new shiny AI toys. And won\u2019t be willing to pay for them.<\/p>\n

But That\u2019s Not All<\/strong><\/p>\n

But that\u2019s not all, says Slok. He speculates that turning AI into revenue growth and higher profit margins may not be as easy as everyone thinks:<\/p>\n

\n

AI may be a great calculator, but in business, intelligence is mostly judgment. Judgment depends on context, and the answer varies with which human or which model you ask. Perhaps most importantly, AI does not understand accountability, trust, culture, unwritten rules, ethical trade-offs or fairness, all of which shape reputational risk and ultimately drive revenue growth and profit margins.<\/strong><\/p>\n<\/blockquote>\n

Emphasis in original.<\/p>\n

Hmm. Judgment. Context. Ethics. Sounds like things most agree lawyers provide.<\/p>\n

AI and Legal<\/strong><\/p>\n

Which is why Slok\u2019s ideas are particularly chilling when it comes to AI hype in legal. Certainly, AI can boost profits in most any law firm by automating back-office tasks. But that mostly cuts costs. It affects revenue only indirectly, by giving the revenue producers more time<\/a> to bill hours. Which may explain what Clio and 8am are seeing. But beyond that, you run square into a paradox.\u00a0Every billable hour AI saves is an hour of lost revenue<\/a>. There is no getting around it.<\/p>\n

And as the cost of AI tokens goes up along with the price of those fancy AI tools, law firm management may ask a legitimate question. Why should we be buying stuff that\u2019s just going to reduce our profits?<\/p>\n

So unlike corporate America, where AI could conceivably increase revenue per worker and profit margins (even if it hasn\u2019t yet), given the predominant law firm business model, it may never do so.<\/p>\n

Of course, that\u2019s not the end of the story. You still have those law firm customers: the clients. Clients who could\u00a0start demanding to see AI use reflected in their bills<\/a>. Or they will vote with their feet and go to firms where they do see it. Or do more in-house.<\/p>\n

Law Runs on Judgment<\/strong><\/p>\n

But that\u2019s where the other part of Slok\u2019s hypothesis comes into play. Perhaps even more so than in any other business, judgment is critical to the successful handling of most legal problems. And things like context, trust, culture, and ethics go hand in hand with the exercise of that judgment.<\/p>\n

It\u2019s the ability to predict what your client will want, even before they know it. It\u2019s the ability to predict what your adversary will do. (There\u2019s nothing like telling your client at what point the other side will seek settlement. And being right.) It\u2019s knowing the difference between a fair and achievable result and one that will never happen. It\u2019s the basic understanding of ethics.<\/p>\n

Judgment Translates Into Value<\/strong><\/p>\n

So even if AI can reduce hours (and there\u2019s some question about that; stay tuned for more in my next article), the price of that judgment could go up. Way up. Judgment becomes more valuable when everyone else is thinking with AI. And as its price goes up, the savings from AI go down.<\/p>\n

Moreover, since so much of law hinges on judgment, judgment that AI can\u2019t provide, even widespread AI use would do little to reduce the value and overall cost of legal services. And if AI doesn\u2019t reduce the client\u2019s cost, the client has little reason to demand it. Or for law firms to buy those shiny new toys.<\/p>\n

In addition, even if legal America ever figures out how to make alternative fees work effectively, there will still be a premium on that judgment built into the fee.<\/p>\n

It\u2019s Still All About Us Humans<\/strong><\/p>\n

As the Clio study shows, the simple fact is that AI has not yet produced the same kind of savings on the substantive side that it has on the back-office side. And if people like Slok are right, then adoption of AI on the substantive side may be slow going. And that wholesale reduction in fees may never happen, at least in the ways we think.<\/p>\n

All of which is to say that it may not yet be time to accept all the conventional wisdom and AI gushing that\u2019s going on. AI may transform legal, but it probably won\u2019t do it in ways that can be and are being predicted. Unless it somehow replaces judgment and a human\u2019s ability to understand another human. Which is what practicing law is all about.<\/p>\n

In a world of conventional wisdom, it\u2019s nice to have someone like Slok track mud all over the carpet.<\/p>\n

\n

Stephen Embry is a lawyer, speaker, blogger, and writer. He publishes\u00a0<\/em><\/strong>TechLaw Crossroads<\/em><\/strong><\/a>, a blog devoted to the examination of the tension between technology, the law, and the practice of law<\/em><\/strong>.\u00a0<\/p>\n

The post It All Hinges On Judgment. And Human Connections.<\/a> appeared first on Above the Law<\/a>.<\/p>\n

\"\"
<\/figcaption><\/figure>\n

Right before ClioCon and the release of\u00a0Clio\u2019s Legal Trends Report<\/a>, an\u00a0interesting article<\/a>\u00a0appeared. Both the Clio Report and an\u00a0earlier one from 8am<\/a>\u00a0showed billable hours going up, even though AI was supposed to bring them down, a paradox which Joe Patrice<\/a> discussed in a recent article<\/a>. The article I\u2019m referring to suggests we aren\u2019t seeing, and may never see, the across the board efficiency gains from AI so many predict. Why? Because we\u2019re humans. Gulp.<\/p>\n

The article was by\u00a0Torsten Slok<\/a>, the chief economist and a partner at Apollo Global Management, a major alternative investment manager. Prior to Apollo, he worked for 15 years at Deutsche Bank. Before that, he was with the International Monetary Fund and the OECD.<\/p>\n

So he\u2019s no dummy. But he is known for challenging conventional wisdom. My kind of guy, since over the years I\u2019ve too often found that so-called \u201cconventional wisdom\u201d is, well, just conventional folly.<\/p>\n

Slok\u2019s Swimming Against The Stream<\/strong><\/p>\n

Slok\u2019s recent article certainly challenges what most people are thinking these days. He bluntly argues, \u201cDespite massive investments and widespread hype around artificial intelligence, the technology has delivered zero financial payoff to corporate America outside of tech.\u201d<\/p>\n

Whoa. Zero? That can\u2019t be, right? I mean, AI is supposed to have disrupted work and just about every business. But Slok says the data show that revenue per employee and profit margins have remained largely flat among S&P 500 companies outside the Magnificent Seven (think Apple, Microsoft, Nvidia, etc.). And importantly, says Slok, \u201cthere are still no signs of AI boosting productivity growth.\u201d<\/p>\n

What does that mean? \u201cWith no impact on the bottom line, mainstream corporate America is pulling back and starting to view token spending not as a source of growth but as a cost center that weighs on margins.\u201d (Tokens being the meter that runs every time you use an AI tool. I know, these guys can never use a term that we all understand.) That, in turn, means that mainstream corporate America may soon decide it doesn\u2019t need the new shiny AI toys. And won\u2019t be willing to pay for them.<\/p>\n

But That\u2019s Not All<\/strong><\/p>\n

But that\u2019s not all, says Slok. He speculates that turning AI into revenue growth and higher profit margins may not be as easy as everyone thinks:<\/p>\n

\n

AI may be a great calculator, but in business, intelligence is mostly judgment. Judgment depends on context, and the answer varies with which human or which model you ask. Perhaps most importantly, AI does not understand accountability, trust, culture, unwritten rules, ethical trade-offs or fairness, all of which shape reputational risk and ultimately drive revenue growth and profit margins.<\/strong><\/p>\n<\/blockquote>\n

Emphasis in original.<\/p>\n

Hmm. Judgment. Context. Ethics. Sounds like things most agree lawyers provide.<\/p>\n

AI and Legal<\/strong><\/p>\n

Which is why Slok\u2019s ideas are particularly chilling when it comes to AI hype in legal. Certainly, AI can boost profits in most any law firm by automating back-office tasks. But that mostly cuts costs. It affects revenue only indirectly, by giving the revenue producers more time<\/a> to bill hours. Which may explain what Clio and 8am are seeing. But beyond that, you run square into a paradox.\u00a0Every billable hour AI saves is an hour of lost revenue<\/a>. There is no getting around it.<\/p>\n

And as the cost of AI tokens goes up along with the price of those fancy AI tools, law firm management may ask a legitimate question. Why should we be buying stuff that\u2019s just going to reduce our profits?<\/p>\n

So unlike corporate America, where AI could conceivably increase revenue per worker and profit margins (even if it hasn\u2019t yet), given the predominant law firm business model, it may never do so.<\/p>\n

Of course, that\u2019s not the end of the story. You still have those law firm customers: the clients. Clients who could\u00a0start demanding to see AI use reflected in their bills<\/a>. Or they will vote with their feet and go to firms where they do see it. Or do more in-house.<\/p>\n

Law Runs on Judgment<\/strong><\/p>\n

But that\u2019s where the other part of Slok\u2019s hypothesis comes into play. Perhaps even more so than in any other business, judgment is critical to the successful handling of most legal problems. And things like context, trust, culture, and ethics go hand in hand with the exercise of that judgment.<\/p>\n

It\u2019s the ability to predict what your client will want, even before they know it. It\u2019s the ability to predict what your adversary will do. (There\u2019s nothing like telling your client at what point the other side will seek settlement. And being right.) It\u2019s knowing the difference between a fair and achievable result and one that will never happen. It\u2019s the basic understanding of ethics.<\/p>\n

Judgment Translates Into Value<\/strong><\/p>\n

So even if AI can reduce hours (and there\u2019s some question about that; stay tuned for more in my next article), the price of that judgment could go up. Way up. Judgment becomes more valuable when everyone else is thinking with AI. And as its price goes up, the savings from AI go down.<\/p>\n

Moreover, since so much of law hinges on judgment, judgment that AI can\u2019t provide, even widespread AI use would do little to reduce the value and overall cost of legal services. And if AI doesn\u2019t reduce the client\u2019s cost, the client has little reason to demand it. Or for law firms to buy those shiny new toys.<\/p>\n

In addition, even if legal America ever figures out how to make alternative fees work effectively, there will still be a premium on that judgment built into the fee.<\/p>\n

It\u2019s Still All About Us Humans<\/strong><\/p>\n

As the Clio study shows, the simple fact is that AI has not yet produced the same kind of savings on the substantive side that it has on the back-office side. And if people like Slok are right, then adoption of AI on the substantive side may be slow going. And that wholesale reduction in fees may never happen, at least in the ways we think.<\/p>\n

All of which is to say that it may not yet be time to accept all the conventional wisdom and AI gushing that\u2019s going on. AI may transform legal, but it probably won\u2019t do it in ways that can be and are being predicted. Unless it somehow replaces judgment and a human\u2019s ability to understand another human. Which is what practicing law is all about.<\/p>\n

In a world of conventional wisdom, it\u2019s nice to have someone like Slok track mud all over the carpet.<\/p>\n

\n

Stephen Embry is a lawyer, speaker, blogger, and writer. He publishes\u00a0<\/em><\/strong>TechLaw Crossroads<\/em><\/strong><\/a>, a blog devoted to the examination of the tension between technology, the law, and the practice of law<\/em><\/strong>.\u00a0<\/p>\n

The post It All Hinges On Judgment. And Human Connections.<\/a> appeared first on Above the Law<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"

Right before ClioCon and the release of\u00a0Clio\u2019s Legal Trends Report, an\u00a0interesting article\u00a0appeared. Both the Clio Report and an\u00a0earlier one from 8am\u00a0showed billable hours going up, even though AI was supposed to bring them down, a paradox which Joe Patrice discussed in a recent article. The article I\u2019m referring to suggests we aren\u2019t seeing, and may […]<\/p>\n","protected":false},"author":3,"featured_media":166826,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[16],"tags":[],"class_list":["post-166879","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-above_the_law"],"_links":{"self":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/posts\/166879","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/comments?post=166879"}],"version-history":[{"count":0,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/posts\/166879\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/media\/166826"}],"wp:attachment":[{"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/media?parent=166879"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/categories?post=166879"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/xira.com\/p\/wp-json\/wp\/v2\/tags?post=166879"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}