Associates Can Say ‘Domo Arigato’ for AI That Isn’t Job Killer

Welcome back to the Big Law Business column. I’m Roy Strom, and today we look at the long road before law firms express their gratitude for generative AI. Sign up to receive this column in your Inbox on Thursday mornings.

In Big Law, it’s perhaps the biggest question looming behind generative artificial intelligence: Will it take lawyers’ jobs?

There is a budding, optimistic version of the story gaining some traction: AI will take away the drudge work, bolster profits and make everyone at the firm happy.

This optimistic scenario brings to mind the famous 1983 song by the rock band Styx, “Mr. Roboto.”

The song builds to a crescendo: “Thank you very much, Mr. Roboto, for doing the jobs nobody wants to. And thank you very much, Mr. Roboto, for helping me escape to where I needed to. Thank you!”

Few associates can probably imagine some day being able to say “domo arigato,” or thank you very much, to their AI replacers.

That’s because plenty of headlines have stirred job replacement anxiety for lawyers. In April, a Goldman Sachs report said 44% of legal tasks could be automated by AI.

The report fell neatly in line with the pessimistic version of the AI story: It is coming for associates’ jobs, it’s just a question of when. Never mind that the assumptions underlying the report rendered it borderline meaningless.

A set of law firm leaders recently weighed in on the question of when AI would replace associates. They were completely torn on whether to sing from the Styx or Goldman songbook.

Asked to predict AI’s effect on lawyer leverage—the ratio of lawyers to equity partners—77% of law firm leaders said there would be “no effect” by 2025, according to a Citi Private Bank survey. Only 13% said leverage would decrease—i.e., fewer associates for every partner.

No surprise there. Even if firms identify enough uses for the technology by 2025, they’ve been so historically slow to shed lawyers that it would be truly shocking if AI convinced them to lay off associates within the next year.

Things got more interesting when the leaders were asked to look over the next decade: 53% of respondents said AI would lead to a decrease in leverage by 2035. Still, more than one-third of law firm leaders anticipate the technology behind ChatGPT will have made no effect on leverage by then.

This seems … anticlimactic? And that itself raises a lot of questions.

The AI true believers might ask: Are one-third of law firm leaders naïve? Are they scared to tell associates the truth?

The survey skeptics might say: It’s too early to know the answer, and nobody should expect consensus on any event 10 years away. (Survey skeptics sound like a real buzzkill!)

One middle-of-the-road interpretation of the results is that firms, as a whole, are not expecting a significant decrease in leverage.

Gretta Rusanow, managing director and head of advisory services at Citi Private Bank Law Firm Group, said she interpreted the survey results as a “further illustration about how firms are not fearful of generative AI.”

Rusanow expects the composition of law firm leverage to shift over time as AI is adopted to handle more work tasks. There will likely be fewer first- and second-year associates and more senior lawyers who are able to give more strategic advice, she said. Indeed, only 39% of law firms told Citi they would have bigger first-year classes in 2025 compared to 2022.

“If you’re able to eliminate so much of the routine work, and a Big Law lawyer is now called upon for the more interesting advisory work, I can envisage we will see a reshaping of the leverage model, even if the size of law firms remains similar to where it is now,” Rusanow said.

This is becoming a somewhat common story around how AI adoption will impact Big Law’s workforce.

But the story is complicated by the business model partners rely on to generate massive profits: Selling associates’ time. We discussed the importance of leverage not long ago.

If law firms are indeed able to say “thank you very much” to AI, it will only happen because they’ve found a new way to charge for their services.

Cleary Gottlieb leader Michael Gerstenzang told a version of this story, saying AI would over time reduce the need for “brute force” lawyering and would help law firms move away from the billable hour.

Ralph Baxter, a former leader of Orrick Herrington & Sutcliffe, who now advises law firms and legal technology companies, is a believer in the optimistic scenario. One reason for his optimism is that law firm clients have expressed a willingness to pay law firms for their services.

“The firms will be able to charge fees that comport with the value they’re delivering, and I don’t know of any reason that those fees have to go down from where they are now,” Baxter said. “Competition might drive it there, but the market is speaking by saying they’re willing to pay what they currently pay.”

That brings up a question for clients: Why are you currently willing to pay these prices?

One common answer has been to ensure that associates will build up the knowledge and experience required to someday become a partner doling out critical advice. Clients have been willing to invest in young lawyers because time and experience have been the coin of the realm.

If that changes because of AI, the optimistic adoption story could turn ugly for law firm finances.

One solution for that conundrum, Baxter said, is for firm leaders to start speaking with clients now about how their workforce will graduate up the talent ladder in a new environment. Firms need to start working out new ways to be compensated for the value they provide.

“The firms that are best at creating genuine relationships with mutual understanding and trust will have a huge advantage on the questions you’re raising,” Baxter said. “They’ll be able to talk with the clients at every stage and the clients will already have a reservoir of trust there.”

If firms want to ensure their lawyers are happy with AI, they need to start work now on that new compensation model.

Only then will their associates sing like Styx. “Thank you! Thank you, thank you! I wanna thank you!”

Worth Your Time

On Big Law AI Adoption: Some top law firms are stress-testing artificial intelligence models, smashing attorneys and data scientists together to ensure machines don’t do anything to get companies in legal trouble, David Jolly reports.

On Bankruptcy Fees: A challenge to fees collected by Jackson Walker in 26 bankruptcy cases saw Judge Marvin Isgur question who would benefit, Evan Ochsner reports. The US Trustee’s office moved to disgorge the payments after learning that a bankruptcy judge failed to disclose a long-term relationship with a onetime Jackson Walker partner.

On Paul Weiss in London: Paul, Weiss, Rifkind, Wharton & Garrison has continued its dramatic London buildout with the hire of elite UK firm Linklaters’ global head of antitrust and foreign investment, Nicole Kar, Rose Walker reports.

That’s it for this week! Thanks for reading and please send me your thoughts, critiques, and tips.