Tuesday, March 8, 2011
This recent article in the NY Times has gotten a lot of attention about how smart computers are replacing dumb lawyers, particularly in the area of e-discovery. Inevitably, I suppose, Professor Krugman picked up on it to assert that not just lawyers, but many other white collar professionals are going to be hollowed out, outsourced and generally crushed by automation and outsourcing, and so we had better hurry up and promote unionism and redistribution. Bit of a non-sequiter, I know, but my purpose here is not to attack the good professor's tendentious ramblings. Rather it is to explain that the underlying claim is, if not nonsense, at least wildly exaggerated and probably fundamentally wrong.
I know a bit about law and technology. I became so intrigued with the application of network math to legal knowledge that I co-founded a company to improve legal search algorithms, which was technologically successful, at least. I have put money and time into the idea that technology can transform legal practice. I am a true believer, as far as that goes. But the notion that technology is going to replace lawyers the way it has replaced buggy whip makers or blacksmiths is foolishness, promoted by people who do not understand very deeply either the technology involved or what lawyers do. It is as ignorant as saying Google is going to make reading obsolete or Amazon is going to be the end of people buying stuff. Technology is a complement, not a substitute for law.
Most non-lawyers and a fair number of lawyers don't have a good understanding of the contributions that lawyers make to economic production. They see them as mere parasites and transactions costs. But this is more false than true. Lawyers do two things worth noting here. They add value in transactions and they help figure out how to divide value in transaction disputes. Take two companies that have decided on the level of business (the board of directors level) that there are synergistic gains to be had by merging the businesses. They think there are economies of scope and scale to be gained. Putting two businesses together, as a deal, however, is a very, very complicated business. You can't just decide to do it on the basis of a hand shake. Well, you could, but you would be an idiot if you did. Nor do the background rules of corporate, tax and other law provide a template you can just take off the shelf. All kinds of incentive, structuring and regulatory issues have typically to be resolved. It is very complex and as in any complex arena, there is plenty of room for creativity, deep knowledge, leadership skills and the other qualities that people are willing to pay for. It is not just a matter of rote implementation.
As an economy grows it gets bigger and more complex. There will be more not fewer transactions in this future world and more room for the lawyers who help figure out how to do them. Some aspects of implementing deals could be done by computers, such as searching through the text of thousands of leases to see if there are terms in them incompatible with say an asset deal. One can imagine computers being used in aspects of optimizing the tax consequences of deals. But no computer is going to tell you what is the best way to bring together two institutions with disparate cultures or whether entrepreneurial opportunities exist or not.
Litigation is in some ways the inverse of transactional practice. Value is divided rather than created and divided. But there is similar scope for creativity and tactical thinking. Yes, indeed, there is tons of scut work that has to be done in big litigation that traditionally has been done by paralegals under the supervision of junior attorneys. Much of this can be done by software and outsourced and more and more it will be. But I don't see computers figuring out litigation strategy or telling you when to hold 'em and when to fold 'em.
What lawyers do is fundamental to economic production. Engineers may deny this, but most of them still want the broadest possible intellectual property rights, as if they sprang like mushrooms from the ground. The more production there is, the more numerous and the more complex deals will have to be -- and for that you need lawyers. The more production there is, the more disagreements there will be about how to divide the gains. Lawyers add value to clients who want to optimize the results of these contests over wealth division. Technology helps create wealth and increases the complexity of everything, because it makes complexity more manageable. But this economic growth creates opportunities for lawyers more than it reduces the need for them.
Legal technology has already made enormous strides in the past 25 years. I am old enough to remember doing legal research before Westlaw and Lexis became inexpensive enough to use regularly. Before Page and Brin had ever tapped on a keyboard. Consider: have the huge strides in legal search, electronic databases, document storage and processing over the past 25 years reduced the number of lawyers or the volume of their business? Not that I have noticed.
The legal business is very much tied to the overall economy, and is probably more volatile than the market as a whole, but when business booms, the law biz has boomed with it. We're in the middle of a great recession, but when business comes back, law will come back with it.
Law is woven into our culture and our business culture especially. Saying business (both deals and lawsuits) will require fewer lawyers doing law in the future because of technology is like saying business will require fewer words, fewer ideas, and fewer conversations. If anything, I suspect the exact opposite is true. Technology makes the manipulation of abstractions such as language easier and cheaper. I suspect legal concepts, the division of assets and cash flows, property rights and other aspects of the cultural overlay we put on the material world, will get more sophisticated and more finely meshed as technology advances, and all this will create the demand for more, not fewer lawyers, the way the advance of medical technology has created demand for more not fewer doctors, at least until the government forbids spending more on them.