Big Law Is Questioning the ‘Magical Thinking’ of AI as Savior

Welcome back to the Big Law Business column. I’m Roy Strom, and today we look at how the hype around generative AI is changing at law firms. Sign up to receive this column in your Inbox on Thursday mornings.

The AI hype cycle has crested, or at least the stock market seems to have thought so. The change in sentiment is also filtering through the legal industry.

Law firm leaders and technology experts in the legal space, like amped up investors, are adjusting their near-term expectations. More are acknowledging that today’s AI tools are better at boosting back-office efficiency rather than redesigning how client work is handled. That takes the steam out of predicting a future without associates.

“We have to cut off the magical thinking that this is the electronic lawyer we’ve been waiting for,” said Ryan McClead, chief executive of Sente Advisors, a legal technology consultancy. “I don’t think that does anybody any good.”

Redesigning the way lawyers produce work for clients—or figuring out how to build a business model that plugs the holes AI blasts in the billable hour—are largely problems for another day, said Charles Adams, Clifford Chance’s global managing partner.

He compared the coming change to early in his career when red-lining technology eliminated the need for lawyers to manually mark-up changes to documents, blowing up a large portion of associate work. Generative AI will lead to a similar moment, he said, but nobody yet knows what it will be or when it will happen.

“When that happens, we’ve got to be ready both in terms of our business model, our organization, and our way of working,” Adams said. “That is what we’re kind of keeping our eyes on. And it’s very hard to read it right now.”

Companies, including professional services firms, have stalled in their use of generative AI, according to data from the Census Bureau. For nearly a year, it has asked companies if they are using the technology to produce goods or services. The portion of companies responding yes has flat-lined, hovering around 5% for all companies and shy of 13% for professional services firms.

Law firm partners pushed firms to invest in the technology, excited by its potential, said Sente Advisors’ McClead. That was a change from typical tech adoption, which usually requires convincing lawyers to get on board, he said.

“The flip side of this being the odd technology drive that’s being driven by lawyers is that the trough of disillusionment is going to be equally driven by lawyers,” he said. “We’re reaching a critical mass where they’re using it, finally, and saying: ‘But it doesn’t do what I thought it was going to do.’”

Melissa Sawyer, global head of Sullivan & Cromwell’s mergers and acquisitions group, told my colleague Mahira Dayal that today’s AI tools lack the accuracy and functionality that would make them useful in the dealmaking space.

“The tools that are available are not that reliable yet, and the accuracy ratings are not great,” said Sawyer, whose firm started an AI practice group in May. “The more complex deal work involves judgment, experience and creativity and the AI just isn’t there yet.”

McClead expects partners will begin to question the return on investments over the next six to 18 months.

The easier route to justifying the expense is to apply the tools toward back-office functions like generating bills or adhering to outside counsel guidelines, said David Cambria, a longtime legal department leader who recently joined Epiq to lead its legal advisory business. Those applications can produce tangible returns, and they don’t incur risks that come with relying on the technology to deliver client work, he said.

Sharis Pozen, managing partner of the Americas for Clifford Chance, is an early adopter of Microsoft CoPilot, a suite of generative AI tools applied to the software giant’s applications, across its workforce. She uses it to help summarize her tone in emails, she said, generating critiques of her friendliness or clarity.

“For one of my emails, it said you’re conveying a lot of anxiety and stress. And I was like, you know what, I want that conveyed. Because I have anxiety and stress about this,” Pozen said, adding, “I absolutely love it.”

The tool has also generated notes for video meetings with recruiters, saving staff time on a previously manual task, she said. The firm wants its lawyers to experiment with the technology and use it in ways that saves them time.

When it comes to investing in AI, law firms are torn between FUD—fear, uncertainty and doubt—and FOMO, the fear of missing out, Cambria said. The challenge is to find a balance, and Cambria suggested placing bets on technologies across functions from the back-office to custom-built tools.

“There is FUD and FOMO across almost everything,” he said. “Success comes by managing the change through those.”

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