AI Is Upending Law. Is That A Sign For The Rest Of Us? — With Melia Russell

0:00AI in law has come a long way since a lawyer was caught using fake ChatGPT generated cases and was sanctioned. The technology is upending the field and it may be a sign of what's to come for the rest of us. That's coming up right after this. Capital One's tech team isn't just talking about multi-agentic AI. They already deployed one. It's called Chat Concierge and it's simplifying car shopping. Using self-reflection and layered reasoning with live API checks, it doesn't just help buyers find a car they love. It helps schedule a test drive, get pre-approved for financing, and estimate trade and value.

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1:16Learn how Okta's identity security fabric can help you secure the next generation of identities, including your AI agents. Visit Okta.com. That's O-K-T-A dot com. Welcome to Big Technology Podcast, a show for cool-headed and nuanced conversation of the tech world and beyond. Today, we are going to talk about a fascinating story about how AI is upending the legal field. A hidden story, one that I've been hearing about privately, but I'm excited to speak with you about publicly. And we have the perfect guest to do it with us today. Malia Russell is here. She's a senior correspondent at Business Insider, and she covers how AI is changing the legal field.

1:55Malia, welcome. Thanks for having me, Alex. So let me take you back to June 2023. There's a Reuters headline. It says New York lawyer sanctioned for using Chachipiti cases in a legal brief. Basically, the lawyer put this argument out to a judge and said, these cases are support my argument, but those argument, those cases were completely fabricated by Chachipiti, got sanctioned. And the whole world said, if you are, you know, If lawyers use generative AI, they're going to include hallucinated facts and you can't trust them. But two years later, the field has come very far since then. So talk us through like the last couple of years and how AI tech has become a very useful tool for lawyers.

2:40That case struck fear in the hearts of lawyers across America and became the nightmare scenario that I think colored a lot of public perception of what happens when lawyers use AI. The reality is lawyers are using it every day without ending up in Reuters headlines or Business Insider headlines, although it does still happen. I think the latest count I read was like over 600 identified pleadings where lawyers had included content caught by a judge that was contained a hallucination from a general purpose chatbot or other tool. And what has shifted since 2023 is we have this Cambrian explosion of applications that are legally tuned for the legal professional.

3:37These are tools that understand the work they do. They have structure so that they know the right documents to pull at the right time. What are the models to turn on for the best outcome here? How do we protect confidentiality rules within the firm? There is Chat2PT for lawyers or Claude or Gemini, but there's also a completely new wave of point solutions that is delivering real results and real outcomes for lawyers. Yeah, and we talk often about where the ROI from AI is going to come from. And there have been a couple of areas that people have talked about. Coding is obviously the top one. Customer service is another.

4:25But one of the issues has been what happens when you get into a highly regulated field like law that can't afford mistakes, that can't afford fake cases, that can't afford hallucinations. And this episode came about because I was with a friend who's a lawyer at a football game, and he started telling me about all the different ways that his firm is using artificial intelligence. And it really stunned me because it was a clear case of how this can have a return on investment and how this can change the field. And I think, you know, I sort of teased this in the beginning, but it is a way that if you look at what's happening in law, you're going to see what's going to happen everywhere else.

5:09Let me give you one example, and I'm curious to hear if you hear more. So obviously a big part of a lawyer's job is search, searching through documents, trying to find other cases that may or may not be applicable for defense or prosecution or whatever it might be. The way that they've done it before generative AI has been using different terms and connectors. So you search for different terms that may be applicable for your case. Then you read some and you see, okay, is this something I can cite or not? What this person told me was instead of like basically doing this like keyword search, painstaking, time intensive, what they're able to do now is drop full sophisticated paragraphs into generative AI tools like Westlaw and it will return connected, relevant, and and important research basically back doing the research job for them effectively and fully minimizing the amount of time that they spend on this work.

6:11And the change here is that whereas before you had lawyers going into conference rooms, digging through filing boxes of papers, looking for the firing gun, if you will, Now they're turning to tools where you upload all of your relevant documents and depositions and interviews on a case. And you're able not to just search for keywords, but you're able to search for, you know, find all of the supporting evidence that X happened. And it's going to turn up what is related and saves them potentially weeks, months of work. Right. That is that's expensive work, by the way. I mean, what this what I think this is doing is it's compressing.

7:03I mean, you talked about it. You could take weeks of work and basically condense it into a prompt. What are the economic implications of that right away? Sure. And I'm going to give you a little bit of backstory. So I've been covering legal tech for about seven months now. And it came about because my editor-in-chief at Business Insider, long before she was a journalist, was a law school graduate and a law clerk. And she ran in social circles with a lot of lawyers. And what she kept hearing was this fear and paranoia around the death of the billable hour. Lawyers get paid by the hour. There are definitely exceptions to that where the work is more flat fee based.

7:46But if you're working with enterprise clients, you typically charge by the hour. And software that promises to save them time, that math doesn't math for them. When the risk is that it cuts into their revenue at the end of the year. What I found talking to lawyers is that there's still paranoia that this changes the business model for them. It will nudge them to look at alternative business models like switching to flat fee. Another one I hear a lot is that they're still going to charge by the hour, but the kinds of work they charge a billable hour for changes. You, a, you know, top partner at Quinn Emanuel might be billing$10 ,000 an hour because there's a lot of rote repetitive work that your class of associates used to do that you're doing with a generative AI tool now.

8:49So they can push aside some of the work they used to bill for and instead put the real premium on the human judgment that comes in after that kind of first pass work that happens with generative AI tools. You know, to take a step back, lawyers are notorious Luddites. And there's a few reasons for that. First, they work largely in documents. And for a very long time, software wasn't especially good at extracting meaning from text. You also had lawyers storing files on physical servers on premises for increased security and control over that data. Confidentiality is like the – Pretty important in that field.

9:41Pretty important in that field. Um, what changed is that ChatGPT offered law firms the greatest demo in the history of software for what it could do for the white collar professional. I think a lot of lawyers looked up from their screens after that moment and said, oh, this is going to transform us. What we saw was that the clients are now coming to the law firms and saying, we're seeing how AI is improving our efficiency internally. What's your strategy? Well, that's important because, like you said earlier, that lawyers have resisted this or they are – they bill by the hour. And that's another thing that I've also heard is that the clients have said, not only what's your strategy, but they're demanding it.

10:39They want to see the breakdown of the tools that they use. Because, again, if you're paying this fee per hour and your service provider is being intentionally inefficient, you're going to be pissed. And so, OK, maybe the fee per hour changes. But the clients are now coming to the lawyers and saying, do this. So the law field might not even have a choice here. It may just immediately go this way. Yeah. I think lawyers are realizing if they don't adopt it, their clients will find other firms that do. Can we pause for a moment just to appreciate the technology story here? Now, look, there's definitely lots of problems with the technology.

11:20But the fact that AI today is good enough that we're having this discussion for real, like a for real discussion that it can condense the work down from weeks to, you know, a couple of minutes or an hour. It's pretty remarkable. I mean, think about, again, this the story that everybody heard. 2023 lawyers like using a hallucinated case and sending it to a judge and getting sanctioned to now the technology is good enough that it is uh something clients are demanding their lawyers use yeah i think they're seeing that i mean one thing that's changing is that the basic the the general purpose tools are becoming good enough for a lot of legal work Um, the bread and butter of legal work is searching and writing text and, uh, AI that, that is the perfect surface area to apply AI.

12:20So it's kind of a no brainer on the part of the client and they're seeing their legal bills balloon year after year. It's, it's one of the bigger line items on, on their budget every year. And so they're saying, we want to know. I was actually at a legal conference recently. And on stage was the general counsel of a Mag 7 company. And interestingly, he was being interviewed by his own outside counsel. It was meta, right? I can't say it was off the record. Okay. It was a Chatham House Rules. But someone in the audience asked, do you expect you'll be saving money next year on your legal bills? And he said, I absolutely hope so.

13:09And like here the chair of his outside counsel is sitting right next to him. I did talk to, after his panel, another MAG7 GC who said, you know, we brought in all of our outside counsels for a summit about a month ago. and I stood in front of them and I said, I want to know what tools you're using, how you're tracking it, and what kind of cost savings I can expect. What do you think has helped on the technology standpoint to get the technology from the point where it was hallucinating a couple of years ago to now it's so good? Is it just that OpenAI's GPT models have gotten better and hallucinate less?

13:51Or is it the fact that companies like Westlake or sorry, Westlaw have decided to implement it and that's getting good? What do you think is happening on the technology front? So in legal tech, you have two companies that are the dinosaurs of this industry, LexisNexis and Thomson Reuters, which makes Westlaw. And the pitch they make to law firms and general counsels is that you should buy our software because when you're generating case citations, you can link those citations in a source of truth, which is our own vast repositories of case law. So their argument is that use us because we're going to limit hallucinations because we own the data.

14:45That has left a long trail of legal tech challengers to make the case that we can partner with the data providers to get around your hallucination concerns. they're increasingly working on features imagine like a spell check for okay I've completed this brief I want the AI to scan it that these cases match real cases does what my associate wrote here in this brief match more than 85 percent what you think the intent of the original case file says. So it's not just checking that it exists, but it can even check, does it match what the case law actually says? So the technology is moving really quickly.

15:41Law firms are, I think, completely puzzled what is going to be the vendor of choice here, and they are trying everything.

15:56LexisNexis and Thomson Reuters are like non-negotiators. They pretty much, if you're a big law firm, you have to have one or both of those software subscriptions because it's just like mission critical for the work that they do, that legal research. But they are buying licenses to so many other AI platforms and point solutions, testing all of them. And that has this effect of, you know, inflating those startups revenues and driving up their valuations. And we can get into that in a bit. But right. So basically, what you're saying is the key here is grounding the technology in the data, right? So Thomson Reuters has the data.

16:41LexisNexis has the data. And if you're able to connect that with the models, you'll have less hallucinations and make it useful. Yeah. And one of the BFDs in legal tech this year was Harvey announced a strategic partnership with LexisNexis. So Harvey is the goliath of the legal tech space. They make software that aims to help lawyers deliver legal services faster, more affordably, and at a higher quality. And they're AI native. AI native. They're funded by OpenAI. They were one of the first checks out of OpenAI's startup fund back in 2023 and had early access to GPT-4. they announced this year a strategic partnership with LexisNexis.

17:33So if a customer has a LexisNexis subscription and a Harvey subscription, they can now access LexisNexis within the Harvey app. So it made a very strong case that you can trust our results. I will say that lawyers are still hitting home to their junior lawyers, you need to check the work. I think what's so interesting about some of the sanction cases we've seen is that the lawyers are taking personal accountability for not checking the AI's work, and that kind of feels maybe an obvious thing to do. But, you know, there's a firm this year, one of the top 10 law firms in the United States, Latham and Watkins.

18:27And earlier this year, they were repping Anthropic in a copyright lawsuit. And one of the associates said that they had used Claude to help generate citations within an expert testimony that they submitted for part of this copyright case. And Claude had hallucinated the authors and title of a paper in one of the citations. So it's very meta in that you have a law firm representing Anthropik that used Anthropik's product and produced a hallucinated case. I mean, it was It was hugely embarrassing for all parties involved. And that is the terror striking big law right now. I think firms are really rethinking the way they train lawyers around this.

19:33And it starts at the onboarding. I know Latham and Watkins rolled out an AI academy recently for their entire first year associate class where they brought 400 lawyers into a conference hall in Washington, D.C. And for two days, they sat through product demos and they heard from general counsels at their clients. And they did listening sessions on how partners at the firm were using AI. And the through line in this talk was that we have exceptional standards here at Latham & Watkins and the final product is still your responsibility and you've got to keep your hands on the wheel. No, it's an interesting point and sort of brings up another thing that my friend told me about the tools that he's been using, that they get things wrong.

20:31But they also will get him or can get a lawyer a certain portion of the way there. And, you know, again, like it's doing all this research, it's pulling the relevant cases and coming to the wrong conclusion. But if you're a lawyer who has some seasoning and double checks the work, that actually that becomes the time save. So you don't necessarily trust it for the output, but you do rely on it for a lot of the work that it does. One of the interesting questions that I hear around legal AI is who gets the most use out of it? Is it the early career lawyer or a more senior partner? And to take a step back, the work that an early career lawyer is most similar to what the Gen AI tools are very good at.

21:19It's writing those citations and checking them. It's taking first passes at writing memos. It's sifting through digital filing boxes trying to find that firing gun. So there's – yes, they can use AI to speed up that work. But what's really interesting is that I hear the more seasoned attorneys are actually getting huge value out of using these tools because they can recognize more quickly looking at it what's not up to snuff. Like they have a BS radar that might allow them to say, OK, I just want to do a first pass with the Gen AI, but I can recognize more quickly what's real and what's not and allows them to just get to a better result faster.

22:11Yeah, it's very interesting in terms of the way that AI is used because, you know, there's been this question. Think about engineering, right? Does it make every coder a 10x coder or does it make a 10x coder a 100x coder, right? Does it make the superstars sort of unreachable because it puts this powerful tool at their hands and they really know how to use it? And there's been this debate, like for writing, for instance, like, you know, AI seems to just produce average writing, which is great because it brings up a lot of writers to average, which is a massive improvement for many writers. The other side of it is, you know, what can it really help the experts?

22:49But in law in particular, it seems like those that are those that have experienced or seasoned are going to get a lot from this and really be able to, like, maximize their productivity in a way they couldn't previously. I think that's right. And this came into question recently. There was kind of a super viral moment in legal tech a couple of months ago. There was an anonymous post on this subreddit for legal tech aficionados that asked, is anyone really using these tools? And this person claimed to be a former employee of Harvey, which who knows if that's really the case. But they were suggesting that only junior lawyers wanted to use Harvey because you figure, you know, the tropes that the younger lawyers are going to be more tech savvy and more they're using these tools personally.

23:53So it comes more naturally to them. But Harvey has certainly pushed back that they are seeing high adoption and engagement kind of across generations of lawyers and that they're actually seeing huge gains in usage, weekly active usage year over year. So let's end this section just talking again about the ROI question. it's interesting with law because you can't really like back it into a traditional roi calculation because you could be paying like 20 a month for chad chpt but that that probably you're not if you're using you know west law but um you could be paying let's say a subscription but that brings your work down by such a dramatic amount that you get to bill list so like you actually have a negative ROI, even as it's making you more productive.

24:50But I think that I actually would be curious to hear your perspective on how these companies are going to do the ROI calculation and whether we're just going to see this type of pattern repeat itself where the technology works in very impressive ways. But for industries and enterprises in particular, it changes the way that they've done business for so long that there will be, you know, just these speed bumps to try to get it working and rolled out. Well, something I hear from time to time is that it's harder to measure the work you could now do that wasn't possible before Gen. AI. So yes, you're maybe, maybe you do see a reduction in billable hours, but lawyers are telling me that they're able to dig deeper on cases because AI helps them be more efficient.

25:46And this is happening even at the, you know, really small and midsize law firm level. I talked to a solo practitioner. He's a civil rights lawyer in San Diego. He repped a family where the children had been unlawfully detained at the U.S.-Mexico border. And he spoke to me about how using tools, he was able to save time on generating citations or summarizing depositions. And he could use that time to think through his strategy better for the courtroom, to spend more time crossing the border to go meet with a family and glean more from them. This idea that there's so much more work to be done when you aren't just sifting through boxes, I think will be part of that ROI calculus for firms.

26:52I do think we're going to see what's happening in legal happen in accounting, happen in consulting. It seems to be happening in legal very quickly because I guess I'm not sure why exactly. I mean, I have a guess. It's just that it's words, right? It's words. Accounting is numbers. It's harder for these models to do, but it's words, semantic search. Like it's sort of, it's the low hanging fruit for generative AI where the others will, I think consulting, You know, it probably requires like some tool use. You know, you go in, you do calculations with code, same with accounting. But these things are just getting better and better at all these professional services tasks.

27:36And if what we're seeing now in legal is any sign that this is a conversation I think many industries will be having over the next couple of years, if not having now. And also a more optimistic spin on this is that, sure, maybe firms slough off the billable hour model and they switch to flat fee billing for more services. But they're also potentially going to save on labor costs if they start to displace lawyers because they can do more with the better software tooling. we might be looking at more profitable law firms in the future that run on leaner teams. And, you know, this is like I feel like we see this conversation playing out in in tech, the idea of the, you know, one person unicorn company.

28:28And I think we're going to see that model echo in law as well. All right. I want to take a break because, well, because we have to. But also, when we come back, I do want to talk about the employment question. I want to talk a little bit more about how individual lawyers are empowered. And then also how the clients using this stuff might change things in law. So that's coming up right after this. These days, it feels like every dollar should be working a little harder. But figuring out where to put your cash can be confusing. That's where Wealthfront comes in. Wealthfront is a tech-driven financial platform built to help you grow your savings into long-term wealth.

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30:46Wrapping gifts is the only sport you need to stay fit this season. Tis the season to discover great gifts at unexpectedly low prices. Sierra, let's get moving. And we're back here on Big Technology Podcast with Malia Russell. senior correspondent at Business Insider talking about how AI is changing law. Let me ask you this. So I'm a fan of WebMD. It's not the best website, but it does definitely allow me to go to the doctor's office when I'm feeling bad and say, I think that this might be the problem with me. Now, I did one search about scratchy throat and it suggested that I had Ebola, which was inaccurate, just for the record.

31:31So it can, yeah, that's good news. But it's even become, with generative AI, that exercise has become even more intense for me. I definitely will speak with like Dr. Chachiputti before I go into the doctor. And then I'll recite like sort of what I think is going on. And the doctor says, you're the most annoying patient in the world, but you might be onto something. And so I'm curious to hear your perspective about how generative AI might change the lawyer-client relationship where maybe the client will come in and have written the brief or have like, you know, can do some of their own research with these generative mentions and, you know, present similar cases or ideas to lawyers and whether it becomes more of a consultative type of approach when you go to a lawyer versus what typically happens now where the lawyer, you know, says, all right, you know,$15 a minute.