How AI is Shaping the Next Generation of Law Firms
With the rapid rise of Artificial Intelligence (AI), companies of all industries face the inevitability of incorporating emerging technologies into their business. The enigma facing company leaders is not whether they will include AI; rather, it is the logistics of implementing it. These logistical issues are innumerable. Where is the line drawn on how much AI is trusted to do? What safeguards can be established to guarantee AI does not make mistakes that harm a company? How can AI innovation be monitored internally, ensuring the firm is not falling behind relative to its competitors? Law firms present an interesting example of the potential impact AI may have on vital systems of our society. The consequences of an AI mistake do not just harm law firms’ bottom lines; they also could have disastrous impacts on the livelihoods of their clients. With this being said, AI is an invaluable resource and must be utilized as such. Not only does the responsible use of AI increase productivity by expediting tedious tasks such as document and contract review, but it also enhances law firms' research possibilities and enables them to offer more personalized, consistent feedback to their clients.
The use of AI dramatically increases the efficiency of laborious, logistical work. According to the Thomson Reuters Institute, their “data shows that AI could free up additional work time for law firm professionals at a pace of 4 hours per week within one year, which means if the average professional works approximately 48 weeks of the year, this will equate to roughly 200 hours freed up over the course of a year” (Thomson Reuters 2024). This reduction in time spent on mundane tasks, such as reviewing and crafting standardized documents, like contracts, is groundbreaking for several reasons. First, it enables employees to focus on maintaining and building new client relationships as well as brainstorming and working toward more long term goals for the firm rather than being so bogged down by the day-to-day work. Most importantly, this time saved from AI would alleviate the enormous mental toll burdening lawyers every day. With a lighter workload, employees would not only have more energy and focus for important tasks, but also experience greater job satisfaction, improved mental clarity, and heightened creativity. This would allow them to produce higher-quality work while reducing burnout and maintaining a better work-life balance.
In addition to automating routine tasks, AI is useful for making predictions when presented with large data sets. Further, “it can make automated predictions at far lower cost, and often at higher accuracy, than could human decision-makers” (Armour and Sako 2020, 27-46). This enhancement of law firms' ability to predict future legal trends is instrumental in improving case strategies, as it allows firms to analyze past rulings, client behavior, and general industry shifts in order to anticipate outcomes more accurately. With these insights, firms can streamline case preparation by focusing on the most relevant precedents and identifying key issues earlier. AI also aids in assessing the likely success of different legal strategies, determining when to settle versus pursue litigation, and prioritizing resources for high-impact cases. By leveraging AI-driven insights, law firms can offer more tailored advice, improving client outcomes and enhancing the efficiency and effectiveness of their services.
Currently, AI systems are far from perfect. They require human supervision and specific instruction, guiding AI toward avoiding errors. When it is used improperly, it results in crucial mistakes with real world consequences. One example is “Steven Schwartz, a personal-injury lawyer at the New York firm Levidow, Levidow & Oberman, who [in May 2023] used ChatGPT to help him prepare a court filing. [...] It created a motion replete with made-up cases, rulings and quotes, which Mr Schwartz promptly filed after the bot assured him that the ‘cases I provided are real and can be found in reputable legal databases’” (The Economist 2023). This blunder highlights an issue known as a ‘hallucination,’ where large language models (LLMs) create information that seems credible, but is entirely false. These hallucinations arise because LLMs generate responses based on patterns rather than verified facts (Shah 2023). While AI has great potential, it is still prone to such errors, and safeguards must be established to detect and address hallucinations before they cause legal or business-related consequences, as in Mr. Schwartz's case.
The generational divide in the legal profession significantly influences the adoption of AI technologies within law firms, carrying important micro-level implications. Younger attorneys tend to be more comfortable with technology and are more open to integrating AI into their daily practices. This familiarity not only enhances their ability to leverage AI tools effectively but also fosters a culture of innovation within their firms. In contrast, older attorneys typically adopt a more conservative approach, grounded in traditional practices and a cautious attitude toward technological change (Neves 2023). This reluctance can create a dispute about technology adoption, where younger lawyers advocate for AI integration to enhance productivity and improve client service, while their more experienced counterparts may resist, fearing job displacement or disruption of established workflows. From an economic perspective, this generational contrast affects the firms' risk appetite and resource allocation strategies. Younger attorneys may prioritize investing in AI to capture efficiency gains, leading to reduced labor costs and increased output per worker. In contrast, the hesitance of older attorneys to embrace such innovations can limit firms’ ability to optimize their human capital, resulting in lower overall productivity. Consequently, this divide can lead to disparities in the distribution of firm resources and client engagement strategies, as firms struggle to reconcile the need for technological advancement with the conservative instincts of their more traditional staff. If not addressed, these differences could hinder a firm's competitiveness in a rapidly evolving legal landscape.
Nevertheless, the widespread implementation of AI among law firms across the world must be understood in the context of the staunchly competitive market environment. Some might argue that AI could level the playing field in the legal industry because it would decrease the edge massive firms have from their sheer manpower advantage. “In large, complex lawsuits, [large] firms tell dozens of associates to read millions of pages of documents looking for answers to senior lawyers’ questions and hunches. Now a single lawyer or small firm will be able to upload these documents into litigation-prep AI and begin querying them” (The Economist 2023). This increase in competition would ultimately be healthy for consumers, as it gives them more options to choose from. Smaller law practices would be capable of providing services rivaling the big law firms. Additionally, they would likely be able to offer consultation at a lower price. Furthermore, others would contend that large corporations will still have an upper hand due to their vast resources and access to innovative technology. Tom Davenport, a contributor at Forbes, writes, “Market leaders, I have found, get an early start with generative AI, and A&O did so. They started working with the technology (using GPT-4 in beta) a month or so ahead of the ChatGPT announcement in November 2022. They also got early access to Harvey, a law-specific custom version of LLMs, shortly after it was announced” (Davenport 2024). Clearly, early access to AI is a competitive advantage for large firms, letting them get a head start on applying new AI features to their internal operations. But, the reality is that eventually everyone gets access to this AI at some point. Does this early access really give bigger companies that much of an advantage over competitors? If so, is this advantage even substantively significant enough to be cause for concern?
Lawyers are typically cautious due to their profession demanding two essential skills: intense preparation and the ability to analyze issues from multiple angles. Thus, it follows that these lawyers would be hesitant to adapt AI due to the unknown implications it will have on the industry. Examples of AI misuse like Mr. Schwartz’s case also serve as reasonable deterrents against firm leadership investing in AI internally. However, its positive impacts, most notably speeding up simple yet laborious tasks, are backed up by data. While hesitation remains, the structure of power in the legal world—where partners hold significant autonomy and decision-making authority—means that the future of AI implementation rests largely in their hands. Ultimately, it will be up to these leaders to proactively guide how AI shapes the future of their firms and the broader legal industry.
References
Armour, John, and Mari Sako. “AI-Enabled Business Models in Legal Services: From Traditional Law Firms to next-Generation Law Companies?” Journal of Professions and Organization 7, no. 1 (February 12, 2020): 27–46. https://doi.org/10.1093/jpo/joaa001.
Davenport, Tom. “Early Adopters of Gen AI in Law.” Forbes, June 1, 2024. https://www.forbes.com/sites/tomdavenport/2024/06/01/early-adopters-of-gen-ai-in-law/.
Neves, Barbara Barbosa, Alan Petersen, Mor Vered, Adrian Carter, and Maho Omori. “Artificial Intelligence in Long-Term Care: Technological Promise, Aging Anxieties, and Sociotechnical Ageism.” Journal of Applied Gerontology 42, no. 6 (February 17, 2023):1274–82. https://doi.org/10.1177/07334648231157370.
Shah, Deval. “The Beginner’s Guide to Hallucinations in Large Language Models.” Lakera, August 23, 2023. https://www.lakera.ai/blog/guide-to-hallucinations-in-large-language-models#:~:text=Oe%20significant%20issue%20is%20their,trust%20placed%20in%20these%20models.
The Economist. “Generative AI could radically alter the practice of law,” June 6, 2023. https://www.economist.com/business/2023/06/06/generative-ai-could-radically-alter-thepractice-of-law?utm_medium=cpc.adword.pd&utm_source=google&ppccampaignID=17210591673&ppcadID=&utm_campaign=a.22brand_pmax&utm_content=conversion.direct-response.anonymous&gad_source=1&gclid=CjwKCAjwx4O4BhAnEiwA42SbVEvYsrhvILyZEVciL_iCPX1PxqGSMuRpdYXCKmNZ7RHu8MsNgw2vWBoCeDAQAvD_BwE&gclsrc=aw.ds.
Thomson Reuters. “Future of Professionals Report 2024: An executive summary for the legal profession,” July 9, 2024. https://legal.thomsonreuters.com/blog/legal-future-of-professionals-executive-summary/.