Why Elite Firms Are Ditching Time-Based Fees ft. Stephen Embry

We shouldn't think of hallucinations as just this sort of random event. It's an engineering flaw in the system. It's the way the system is built. So now we know that it's just not going to happen. It's a flaw. So when does that flaw manifest itself?

Good day and welcome to the Wealthy Entrepreneur Podcast. I am your host, Bob Gauvreau. It is great to have you with me. Here today. Today we are going to talk about all things legal tech, legal space, uh, law firm, uh, legal professionals, uh, law careers. It's going to be exciting. We're going to talk about all the different things that could be impacting this industry, specifically focused on technology. But before we get started, I want to remind you that this is the place where we dissect the elements that contribute to entrepreneurial success, from mindset and leadership to profits and revenue. Now today I'm excited to share and introduce you to Steve Embry, a lawyer, a writer, a thought leader at the intersection of technology and the legal profession. He's the voice behind Tech Law Crossroads, a no-nonsense platform exploring how innovation is reshaping the practice of law. On that note, we're diving into legal tech today. What's real, what's hype, and how law firms can adopt to stay competitive. And profitable. So without any further ado, I want to invite Steve, Steven Embry, onto the show and excited to share his insights with you today. Steve, thank you so much for your time. I really appreciate it.

Oh, my pleasure. Thank you for having me. I'm looking forward to it.

Yeah, it's really exciting. And, and, you know, as we sort of chatted before we jumped on, reading through your bio of some of the experience and knowledge that you have and the insights that I'm excited that you're going to bring to the audience today, a little overwhelming. You know, I was almost late for the podcast today having to go through all this detail, but, uh, super excited to have you join. And, and maybe you can kick us off, Steve. Just share a little bit about your journey, how you got started, and what brought you to where you are today.

Sure, sure. I, um, you know, I got out of law school, I don't know, more years ago than I like to think, and, uh, wanted to work for a larger firm. And went to work for a larger firm and had a good experience. I was just in the wrong city. I didn't like the place where I was, so I, and my wife wanted to move closer to home. So we moved back to closer to home and I was in a firm that it just didn't work out. Their practice criteria and their business development criteria were just not consistent with what I wanted to do. So I quit. Yeah. Which, you know, Looking back on it now, I'm thinking, what was I thinking?

But that can't possibly be true. That can't be true.

But it all, it all worked out. And then I got with another firm that was more positive. And then somewhere along the way, I began— I was placed on a team of people that were working on mass tort defense, um, very cutting-edge, high-exposure kinds of cases. All over the country. And so I said, this is for me. And I set sail after that to develop my expertise in that area and gradually worked my way up to— I had my own clients and my own practice. And that's what I did most of my career. And I would point out that a lot of that Doing that involved a lot of risk. They were calculated risks, but, you know, I would take financial risks. I would take, you know, make trips to see clients, try to develop things, try to work on my expertise, and it worked out. And one of the things that I— one of the lessons I learned from that is particularly looking at younger lawyers is you really need to become an entrepreneur with what you want to do with your life and career. And not— it's easy when you're in a large firm to think, I'm just an associate in a firm, I have no business development, no origination, you know, maybe that'll come someday. But if you really need to take charge of what you're doing for yourself to, to, to get where you want to go and achieve some success. Anyway, I did that for a number of years and then Oh, maybe 10 years ago or so, I left the practice or left the firm that I was with amicably, by the way. I mean, it was, it was, everybody was cool with it. Still have a lot of friends there. And it wasn't because I hated practice, the practice of law. It was because I had developed sort of this interest by necessity in technology, how to use technology. Because keep in mind, as a mass tort defense lawyer from Louisville, Kentucky, you better be willing to work remotely because you ain't going to do a lot of cases in your hometown. I had one or two in the state, but, you know, over however many years, but it all involved travel. So it was— I came to technology basically by necessity to do the kind of work I wanted to do. And And I began writing about it and founded my own blog, which I still have, Tech Law Crossroads. And I became, you know, that was more fun. And I'd reached the stage in my career where I could do that full-time if I wanted to. And so I left the practice of law. I still practice some on sort of advisory issues. If somebody wants, a client wants some advice about how to handle a, a large case or serial litigation, I'm available to do that. If somebody calls me and says, "We'd like for you to take a deposition," I'm like, "No, not gonna do that." Yeah, and it's sort of beyond my point in having access to the tools to do it with, particularly these days. So, you know, I write, I'm involved in industry organizations, bar associations, do presentations. Every now and then somebody will say, "Oh, it must be nice being retired." And I'll say, "Who the hell you talking about, man? I know how many hours I spent last year on stuff and it sure doesn't look like I'm retired." But it's the stuff that I love doing. So it, you know, there's not been one day that I've had since I left Gold Time Practice that I've regretted, you know, making the decision. It, you know, I think I add some value to people, and particularly with respect to somebody that's actually practiced for as long as I have and was in firm management and client development, business development, understands the business of law, at least that I was familiar with, understands clients. And there's not too many people in the legal technology space, writing space, that have had that kind of experience and background. So, you know, it's been a fun journey, that's for sure.

Absolutely. And so it's interesting, you said something right out of the gates that resonated with me. When I— before I got started, I worked at a large multinational firm as well. And, you know, it's interesting, you know, talking to the young lawyer or the young accountant who may be listening, or even the young entrepreneur who's who's working at an office, who's just waiting for their moment. It's amazing to think, you know, back where I was, the dream was to be the partner at that large firm.

Right.

And that was the dream before you got started. That was the dream. And it sounded like similar to you. But then when you got there, you realized, you know, the alignment of values and direction of where I wanted to go is maybe a different trajectory than where this firm is going. How hard was it for you to sort of make that decision and say, you know what, this is— as much as this was the dream, I need to do this for me and for my future.

Looking back on it, of course, in hindsight, things don't look as bad as they looked at the time. But I started with a firm that was very forward-looking and very aggressive about business development and very much, by the way, into automation, automating tasks. And, you know, the work that— funny story about that, about the firm. I was assigned to a sort of a, it was a federal black lung defense program. And that involved hundreds of cases, multiple clients, lots of letters, you know, a lot of communications, lots of filings. And it was a task to keep up with it. And one day my administrative assistant, they were called secretaries back then, She came in and she said, you know, I've been kind of watching what you're doing here. She said, I think we can automate some of this stuff that you have to get out and it'll save you all this time. And my reaction at the time was, please, help. Which, you know, I've since learned that there are a lot of lawyers that would've said, oh, you're just a dumb secretary, what do you know? Right. So, so she put together this program and we automated stuff and I'd get in the office at 8:30 and go home at 4:30. And all my compatriots were, you know, busting their butts trying to figure out how we did this. And so when I left the firm, I actually went to the managing partner and I said, you know, this person has done this, set this program up. I really think she needs to be a paralegal. And so they took my word for it and made her a paralegal. In fact, she became the chief paralegal of the law firm after I left. So that was the kind of background I came out of. And then I went to a firm that was completely different. Everybody in the firm, it was a smaller firm. Everybody in the firm went to either Harvard or UVA, University of Virginia Law School, weren't particularly enamored with somebody from University of Kentucky. And, and it was just a very demeaning, sort of miserable kind of place to work. And I I knew, I think Bob, I knew I had some talents and I really felt like based on my experience at the other firm that I would be okay because I could latch on and do things if I got myself in the right spot. So I made some, I had some network, I made some networking outreaches and it wasn't like I was just quitting with no hope of, you know, going to happen tomorrow. I had some ideas and fortunately they panned out. But, you know, I mean, sometimes you just, you just have to make those decisions. The worst decisions I think people make sometimes is trying to hang on too long with something they know is not working. And I've seen that with lawyers. I've seen it. Law firms are notorious with personnel decisions in that regard. And it's You know, sometimes you just have to, you just have to cut and go. And that's what I did. And fortunately it all worked out. Yeah.

And you sort of referenced as well, like educated risks, right? Like educated risk. You know, I think a lot of people think to, you know, entrepreneurship or jumping out and starting your own firm, it's like, oh, I'm just going to take the leap. It's like, well, have you planned this out? Have you set yourself up for success? You know, you do want them to be educated risks. You don't want to be just hopping into something without an idea of of how you get started. So I can appreciate that as well. You know, I think a lot of people, they jump into things not really fully understanding, just with an idea of, hey, I think I can make this work. I'm not sure how, but I'm going to jump.

Um, and yeah, right. At one point in my career, I, I had this idea that, you know, we would, we would take our team and create our own firm and just do mass tort work and not have to fool with all the the stuff that, you know, the rest of the firm. And my mentor, an older partner that I was working with, I was partner at the time too. So I pitched this idea to him and he said, well, that's really great. He said, let me ask you one thing. How are we gonna make payroll the first month when we don't have any revenue coming in because we've sent the bills to Quebec yet? I went, oh crap. Jeez, I hadn't thought of that one. But absolutely, your point, I mean, there are a lot of considerations when you want to do that. Now, having said that, it's much easier these days because of all the, the tools, technology, technological tools and AI tools that are out there to do that. But it does take some planning. And, you know, I came away from all of that with a greater appreciation of the firm that I was with because, you know, their, their financial wherewithal and backing enabled lots of things to be done. And, um, so, but yeah, you're right, it's, it's, you don't just jump. You think a little bit before you, before you take the leap.

Absolutely. And then you've sort of referenced legal tech a few times. When was the moment, you know, professionally for you that you realized technology was gonna ultimately fundamentally reshape the legal profession as it has? When did, when did you really think about that? Because it sounds like you were maybe an early pioneer.

And I've told this story many times. It's, I I don't know that it was that this happened, when this happened, that I understood that technology was going to change the practice of law. I understood it was going to change my practice of law. And so what happened was I had, we were on, my wife and I and our two kids, we were on the way to a vacation in Florida and we were driving because I was still, I might have been a third or fourth year associate, I can't remember exactly. And my wife was driving, you know, had a 5-year-old, a 3-year-old fighting, you know, and screaming, throwing stuff in the backseat, a lot of disruption. And I was working on this brief that I had to get out. I had papers everywhere, you know, sort of screaming and biting people's heads off. And my wife said, "Well, take a break, you know, read that legal periodical." And the legal periodical was American Lawyer, which was a paper periodical. And there was an article in there about Fred Bartlett, who's a Chicago litigator. Founded Bartlett and Beck. And he said, yeah, you know, they were interviewing him. He said, yeah, I'm at my condo in Colorado overlooking the mountains working remotely on a brief. And I looked at all my papers and I said, that's for me. That's where I want to go. And so, you know, and I was just at the time, I was just beginning my career in the mass tort field and working remotely. And so I latched on to technology because of its the freedom that it gave me to pursue the practice I wanted to do and pursue it from virtually anywhere, even back in those days when it was harder than, much harder than it is today. But so yeah, at that moment when I recognized that, I thought that's where the practice is gonna go and that's where we're gonna end up. If you wanna be something other than, you know, a local lawyer just doing local work, which is fine. I don't mean to denigrate that, but, you know, yeah, for me at the time, I had to use those tools to get where I wanted to go. And so, yeah, I always got a chuckle. I, you know, I was working as my kids got older and I got a lot of my own work. I'd work at home 3 days a week even when nobody else in the world did that. My partners all thought I was just, you know, I was just, you know, goofing off, at least until they got the ribbon out. My— the bills came rolling in, the money came rolling in. They said, well, stay valuable. Oh, you're okay. Yeah, you're doing fine. Oh, go ahead. But I got to do a lot of things with my kids because of that, uh, because, you know, for sure, you know, when you work remotely, you, you're able to structure your time, uh, much easier than, than when you're in the office. And, uh, so yeah, That's it. So when it all came, when the COVID hit and everybody was going, how are we going to work remotely? I was like, oh, it's no big deal.

I've been doing this for years.

Yeah, I don't know what all the complaining's about. This is pretty simple. And now we can do it by video.

Exactly. And I'm sure you probably got busier than ever at that point too, right? Where it was like, hey, you know what? I've already embodied this transformation for maybe even years. And now, you know, you're really a pioneer in that space. What would you say, Steve, is, is maybe the highest level of resistance or the rationale for resistance that you see with other lawyers? What's blocking them from, from buying into the use of technology?

Two things about lawyers that I've learned over the years. One, we're all skeptical of anything and everything, and that's by, by nature. I mean, our job is to point out risk to clients and how to avoid those risks. So it's right to be skeptical. And we're all independent. We all think we're special snowflakes, that our way of brewing things is the only way that works. And unlike, you know, like a corporation where you have a CEO and various levels of authority, I mean, if CEO says, you know, we're gonna buy Apple laptops, then that's it. In a law firm, you know, managing partner can say we're gonna buy Apple laptops and maybe, you know, maybe after 2 years of infighting that happens because of that independent. And so not only are we just independent by nature, but our part of the law firm business structure enables that independence. So yeah, trying to herd all those cats into, you know, a certain way of doing things and using certain tools is hard. And I say that, you know, the joke that I always heard is lawyers are like herding cats, which is an insult to the cats, which I think is sort of true. And then you add to that, you know, the nature of the work that we do is pretty demanding and pretty exacting. And being wrong about something, relying on a technology that creates a bad result, you just can't do it. And so it's not like being perfect is the enemy of good. Perfect, if it's sort of our, watchword, because that's what our clients expect. And that makes— sometimes makes adoption difficult. So you've got the independence factor. You've got this need that something— technology has to work this time and every time perfectly, which is, as you and I and most people know, that's not what technology is. I mean, there's always glitches in technology. So that's a hurdle. And then, you know, for some lawyers in some firms, we can't ignore the business model. The billable hour model, which you go in and say, I've got a tool that's going to enable you to, you know, get all this work done in half the time. And the lawyer says, oh, I— that's— I can't bill all that time anymore, right? Well, no. So now, you know, a lot is made of that. I will put a caveat on that. In my experience, if you ask a roomful of very talented high-end lawyers, and I'm in one or two organizations of lawyers of that caliber, if you ask them, do you have time to do everything you think needs to be done for your clients? Every one of them would say, absolutely not. I can't meet every need. I can't perform at the level that I'd like to perform. Even though they're doing great jobs, they can't do— they say, I can't do everything I want to do for my clients because I just don't have time. So it's, yeah, the billable hour model is, is, is an impediment. But for really good lawyers, I don't think that they factor that in. It's not like they say, you know, I don't want your tool because it's going to cut down on my billable hours. They say, I want your tool because it works. It's going to help me get work done and make a better result. For good lawyers, the billable hours take care of themselves. But as an industry, we've sort of overbuilt in a lot of ways because that's how we made a lot of money, frankly. And so it's a bit of an issue. The hangover from that is a bit of an issue because you've got law firms with billable hour quotas and demands. And so it's very, very tempting for some lawyers not to use tools that will that produce a bill of hours because they have goals they got to make and they can't make them otherwise.

So it's funny, my— one of my original coaches always said to me, the billable hour. And so accountants aren't far off of that, right? I think a lot of accountants are still doing billable rates, which we are. Like, there's, there's some element of it that still exists, but a lot of it is more fixed fee, fixed pricing, value pricing model. But I remember my coach saying, you know, the hourly rate times the number of hours just encourages you to be inefficient with your time, right? The more inefficient you are, the more money you make.

Right.

And that always sort of stuck with me, right? It's like, okay, so the outcome is no different, but if we're inefficient, we're more profitable and it costs the client more money. I always thought that was a strange thing, you know, and I didn't really think about it until he had pointed it out. I was like, yeah, that model is a little bit strange. So it's like, use technology to create that.

You're going to get your house painted and the painter says, hey, Bob, you don't mind, I'm just going to bill you by the hour. You go, are you out of your oven loving? Do you think I'm going to pay you by the hour to paint my house? You're crazy.

Yeah, but take all the time you need. Yeah, take all the time you need, but this is what I'm paying you.

Part of it though is the entire culture of most law firms— not plaintiffs contingency firms, of course, but most law firms for years has been billable hour model. It's how lawyers advance. It's how lawyers are valued. It's how they're compensated. The whole thing, the whole culture revolves around billable hours. And, you know, so that's hard to get rid of. And then on the flip side of that, for clients, particularly corporate clients, in-house counsel, Many of them have come from law firms, worked in law firms, and are kind of imbued with that culture. And it's often hard for them to change. Back in the early '90s, I actually did a flat fee on a national engagement for, for 2 years. And it was a very interesting experience because as soon as I got into it, a lot of my notions about what to do, how to staff, what to keep track of completely flipped. And so instead of thinking, you know, this case is going to take 20 hours to get to completion, you know, I wanted to say, how can we, how can we get that case to completion in 3 hours? Because that's how we made more money. And so we did a lot of things. We ended up actually putting together a program that, that got cases into mediation much faster and got them resolved much faster. But basically we ran out of We ran out of cases before we did anything else, but the reaction to it was interesting. You know, a lot of the— I needed associates to work on cases. I needed competent, really good associates to work on cases. I got a lot of pushback from them because, you know, they said, "Look, Steve, you know, we'd love to work on the case. Sounds really interesting, but we've got quotas, billable hour quotas we've gotta make, and yet you're telling us, you know, get this done." faster, you know, more efficiently than otherwise. And so, and then on the other hand, you had people who would partner, more partner problem, who would spend whatever time it took and more because nobody was really looking at the hours. So they could, you know, make themselves look more valuable. But the really interesting thing about that, keep in mind, this was in the early '90s. Not too many people were doing it. I went out and tried to sell that to other clients after that for years. And I say, you know, I've got an idea how we can get your case resolved much, much better and more efficiently. Let's do it on a flat fee. And we go through the whole thing. And at the end of it, they would always say, that's really a great idea, Steve, but we just can't do that. You know, we got to do it by the hour.

We want you to bill us by the hour.

All right. You know, but I would also point out that now for some types of cases, If I were an in-house counsel and I had a bet the company case, I would, I would say you're billing by the hour because I want no stone unturned. And if the bill versus the exposure doesn't make any difference, I would rather you, you know, do things you may not necessarily need to do but could lead to something than try to, and try to do it for less. So those kinds of cases, yeah, that billable hour makes sense. But I think we're rapidly reaching a point in the trajectory of the profession where it doesn't make as much sense. Now, how many people are going to adopt it and how they're going to go there, that remains to be seen. But, uh, you know, it is, it is a, uh, I think it's an inflection point in a lot of ways.

Well, and I was going to ask, you know, what that next step looks like, but I just want to point out that you're the chair-elect of the American Bar Association's Law Practice Division, right? Like, this is, this sounds like an extremely heavy title of influence in, in your space, right? So for you know, looking at innovative practices and leaders of initiatives and some of this change, like you're going to be involved with this in some way. So what does this evolution look like in the next 5 to 10 years, Steve?

Like, as far as billing models go, I would point out that I'm the, the former chair of the LP decision. My term ended, you know, a year or so ago, so But that doesn't change the question. And it's, I think we don't know yet, frankly, what's gonna happen. And we don't know yet in part because the AI technology is evolving so quickly. So if you were to say today, okay, you know, let's make a plan assuming that the AI technology and GenAI technology is what it is right now, that could be a crappy plan because a year from now it's going to be completely different. As a profession, there's some things that we need to concentrate on, and one is to think, what exactly is it that we as human lawyers can do that GenAI won't be able to do? We recently completed our tech show, which the LP Division puts on every year. We had a couple keynotes. One was by Jordan Furlong. And both the keynotes, the other one was by Noé Patel, who's the founder of, co-founder of The Verge. And both of them sort of came to the same place. You know, what, and I found this over my career, what clients want from their lawyers are first competence, but that's a given. We got a case one time, it was a huge case, terrorist kind of case. And the client put on a, asked several firms to come in for a dog and pony show. We were the only firm that was not from New York that went to the dog and pony show. We got the case. Years later, I asked the client, I said, exactly what it was, what was it that made you select us? And he said, well, you know, we knew you were competent. All the firms were competent. But he said, If we have to be, had to be in a foxhole with a group of lawyers for the next 5 years fighting this case, we'd just as soon be in a, with people we liked, you know, people we like being around, people whose company we enjoy. And so the point of that though is something that Furlong and Patel hit on, and that is clients want competence, yes, but they want somebody that's going to understand their problems, be empathetic with their problems, and is going to be there with them through every step of the way, who's not going to say, "Oh, we can't do that," or, "Oh geez, I understand what you want, how you want to, you know, how you want this to turn out. It can't happen." The better way is to say, "Okay, we understand how you want this to turn out. Let's work together and figure out how we're going to get there. It may not end up exactly as you want, but we're not going to say you can't do it. We're not going to say no." And that's the thing that I think lawyers often forget. You know, I was very, very aggressively tried to understand what a client's problem was when it came to these mass tort cases. A lot of it often was their fear of their product would get slammed in the marketplace and they'd lose market share. And that's, you know, that's a huge concern. But I try to understand that and I try to relate to what it was they wanted, both on a professional level and an individual level. I had a partner, and I wrote about this, and when I wrote about the keynotes at Tech Show, but had a partner who every Christmas he would give client reps that he worked with in a particular company a book. That was his Christmas present. And he didn't just give them any book. He understood because he talked to them, spent time with them, listened to them, knew their likes and dislikes, he knew the book that would resonate with them individually. And that was the book that he got him. And that, to me, that's an important lesson about where we want to go in the future as a profession and where our value is, to be able to have that kind of understanding that you can, you can know your client well enough to not only know, you know, how to practice a case, but, but what they're interested in, what their mindset is, what their concerns are, what their life is like. And that's— I don't think Maybe someday ChatGPT can replicate that, but I don't think it's going to be this week.

Yeah, no, I couldn't agree more. I think, you know, even I watched the— and I love the new generation coming up, by the way, like this is not necessarily a criticism, but you see how they've grown up with their communication channels. Definitely more, you know, tech phone-based conversations, text message. Not a lot of them are jumping on, taking a phone call or or even meeting in, in person. And I truly believe the differentiating factor of businesses that are going to excel— yes, we have to embody the technology and the AI, we can't ignore it— but those that can really master relationship skills and value-add are really going to be the people who win. And I know, you know, lawyers, no different than accountants, you know, we're we're key advisors to people, and the AI is only as good as the questions it's being asked. And I feel like we're almost interpreters in a relationship-based model where we need to understand the needs so that we can use the AI to come up with the best or formulate the best solutions or, or, you know, research in the best way. But you have to know the right questions to ask and I say that, you know, obviously we're in the tax space as well. And, you know, I see some different AI softwares coming out that are doing tax returns from start to finish for individuals. And, you know, you ask the question is, okay, well, what about this particular incentive that's available if they bought a commercial property? Are they aware that there's a $45,000 government incentive that could be available in this filing. If you don't ask or you don't bring up the fact that you have this property, the AI is not going to pick that up. And I think that's, you know, the value of the professional is still going to be there based on relationship, trust, and prompting in the right way or knowing the right questions to ask. So I don't know if you have any thoughts on that too, but I'm starting to get a little bit more passionate about it, Steve, as I'm getting older here.

Yeah, I think you're exactly right. And you know, and I'm sure you've experienced this a lot of times, and my clients were corporate clients, make no mistake. I mean, I was working with, you know, some of the leading Fortune 500 firms. But a lot of times, even their representative, they just wanted somebody to vent to. You know, they just wanted somebody to just say, goddammit, it's not right, and You know, I don't know if, you know, pardon my language, but that's part of it. And so as lawyers and as accountants, well, you mentioned tax, you know, and we were talking beforehand. I said, I don't know anything about tax other than, you know, tomorrow's the 15th and I just got an email that, you know, I have to pay some tax in. And, but that's part of it. You know, I was gonna call the guy and say, exactly why do I have to pay? It doesn't seem right, you know? And, you know, you say that to an AI and it just, You know, you say that's because, Steve, you have to pay it because you, you know, you made so much money. But a lot of it is, you know, you just want to be there for the client to vent and to show their outrage and why they think it's unfair and then to guide them through that process so that they don't go too far off the deep end. But so, yeah, it's understanding the client, knowing what to ask and listening. A lot of it is just listening, a skill that I've seen too many lawyers not have. And it's, you know, if you talk to your friends and acquaintances about, very much about lawyers, and these would be individuals, you know, the woman who needs a divorce or the guy that's got a property dispute with his neighbor, and ask them their opinion of lawyers, but what you hear back is not pretty. I mean, it's, well, you know, I went to call the lawyer and first thing they wanted was It was a $5,000 retainer. What, to get a property dispute resolved, they want $5,000 off the bat? And oh yeah, you know, if they don't spend the $5,000, they're keeping it. And then they're gonna bill me by the hour. 10 hours on top of it, you know? And then you gotta get a bill from 'em and it's got, you know, 10 hours for research. Like, what? Are you kidding? So, you know, it's, they don't have a, we don't have a very good reputation among many individuals and rightfully so because we don't listen to our clients and what they really want and what they need. Yeah. You know, I'm sure I've been guilty of it too, but listening and asking questions, you're right, is key, and it's going to continue to be key. And even on the flip side of that, if you want to use an AI tool effectively, you have to know how to ask the right question, right?

Exactly.

That's exactly it. It's a funny thing. I attended a conference last year of the American Association of Law Librarians, which they're a very knowledgeable group because they understand lawyers, they understand needs. It's not a librarian in a sense. They're really knowledge management people. But at one of the sessions, one of the presenters says, you know, what I have noticed about the use of AI by lawyers is the older, more experienced lawyers, once they understand the AI tool, they are much better at the prompts and asking the questions and knowing how to solicit what they want and need. And she said, and more importantly, They understand when they get an output, if it just doesn't look right, there's something wrong with it. That case, that doesn't sound like a decision a judge would make. So they see these things. And so it's gonna be important, I think, in the future for us to cultivate the kind of skills that those lawyers have now based on their experience with younger people who are much too tempted to just go ask ChatGPT and get an answer and run with it. So that's a challenge that we're going to have to meet if we're going to have good lawyers in the future. I went off on a tangent, I know, but—

No, no, that's okay. You know, it's interesting, like, I don't know if you're anything like me, but my kids and my wife make fun of me all the time for, and you sort of reference the older lawyers using it and using it in the right way. I have conversations with ChatGPT and Claude, really, you know, explaining to them what it is that I'm, and the rationale as to why I'm looking for a solution. And it comes back and it's really detailed. And, and to your point, I understand what it is that I would be looking for. I'm almost wanting them to recite it back to me almost as affirmation or to write it out so that I don't have to write it out. It's interesting. My kids make fun of me all the time, but they would approach it in a different way. But you know what? I'm really enjoying the use of it. And I, I think I mentioned to you before, you know, we do a lot of work with different legal software companies helping migrate their data from one solution to another. And, and one group that we work closely with is Clio. And I remember I was at the Clio Con a few years ago, and Jack Newton, the CEO, he said, AI is not going to replace lawyers. Lawyers who don't— lawyers who use AI are going to replace those that don't. And I felt like that was a really insightful way to think of almost every industry, to say, you know what, it's here to help support us, not to eliminate us, maybe create some efficiency, but maybe we could just get more outputs along the way. What do you see as a risk heading forward in the legal industry with the adoption of AI at such a fast pace?

Sound kind of silly. I mean, the biggest threat is the threat. And by that I mean concluding that this is such a threat that we have to do something about it to slow it or stop it, that that's the threat, because we're not going to slow it. We're not going to stop it. It is here. It is here to stay. And it's going to change many of the things that we do, just like the telephone changed the practice back in the, you know, whenever that was. And, you know, I've read accounts about that time and a lot of lawyers at the time said, we'll never use a phone in the practice because our clients want to come in and see us and talk to us in person. Yeah, that, that turned out well, didn't it?

Right.

Yeah. So just like with that, you know, it's, it's going to change a lot of things. What I think that we have to, to recognize is it is going to change and, and how we need to adopt, how we need to adopt our training, how we need to adopt the way we approach technology, of how we need to adopt skills relating to clients better. And I think, you know, to kind of go back to a point I made earlier, often I'm asked by younger lawyers, well, you know, what do I need to do? And I always tell them, as I said before, be an entrepreneur. And when it comes to technology, I think the same thing applies to all of us. We have to be entrepreneurs about technology and how it can help us not run from it, but run to it in a way that enables us to better serve our clients. Again, that doesn't mean ignoring the risks and ignoring the downsides. Yeah, it fab— it makes stuff up on occasion. It hallucinates. But, and I just wrote an article about this based on some interesting research from a group out of Georgetown, some engineers focusing on the legal issue. And one of the things that they noted is, you know, we shouldn't think of hallucinations as just this sort of random event. It's an engineering flaw in the system. It's the way the system is built. So now we know that it's just not gonna happen. It's a flaw. So when does that flaw manifest itself? And so we can define when it manifests itself. If we know that, then we can better handle the hallucinations. And it turns out the flaw manifests itself When you ask the system a novel question, a question for which there's really no easy answer from the internet. If you ask ChatGPT to explain the holding in Marbury v. Madison, they'll do a great job because there's 10 gazillion articles written about that case, you know, one of the most important cases in American jurisprudence. But if you ask it, you know, what's gonna happen in my case of Smith v. Jones next week, it, And because it's engineered to answer, it will give you an answer in its mind, if you say it's got a mind, that's a wrong way to look at it, but in its, the way it's set up, it's going to say, well, what would a case probably say? And what would that case's name probably be? Because it's just predicting. And so there you go. Here you go, Bob. Here's a case.

Yeah, 100%. Well, hallucinations, I think, is a huge risk. And I am aware of a certain case with a New York lawyer presenting to a judge case law that didn't exist in, in precedents and actually lost his license to practice law based on it. And I think it's a fairly popular case in understanding how to utilize AI or how not to. There's one of the risks is that AI will hallucinate. It will create answers because it needs, you know, it's programmed to provide solutions even if it has to make them up. And we need to be, we need to be careful. And that's, again, asking the right questions, I think, is super important.

Part of it too is, you know, we and I do this with ChatGPT. You probably do too. You start thinking of it as a person, you know. And so, you know, thank you very much. Or, you know, sorry to bother you. I know you're busy, but I got this little, you know, issue. Etc.

But I know I constantly think in my mind I need to stop maybe being so polite and wasting time saying please and thank you to ChatGPT.

Right. But you know, the, the, the problem with that is, um, if you ask an associate to do research on a project, there's no way in hell that associate will give you a made-up case. This is not going to happen, right? Because if they do, they're fired, right? If ChatGPT does it, you just say Damn you, I'm turning you off for a day. What a big deal. But the point is it's really got no sort of scruples associated with it. It doesn't have any penalty. It doesn't say, like a human would say, okay, I know I can't do that. Maybe I can fudge this a little bit, but I can't just make it up. But there's no preventing the GenAI tools from doing it. And not because they're evil, but that's how they're made. It is an engine, like the, like the researcher said, it's an engineering flaw.

Yeah. Well, and ethics, you know, taking into consideration the ethical approach to one situation over another, how do you prioritize ethically one outcome over another, you know, which may not align with how you or I would do it, but it would be different if they were to do it. It's, you know, we could probably go down that path. A long way, but it's kind of scary, you know? And even thinking about self-driving vehicles, how ethically a self-driving vehicle makes a decision of whether to swerve to miss a person or an animal, or, you know, which one would it choose to not swerve away from if you had to? Do you save the driver? Do you, you know, like there's a lot of things that come into question, and I think, like, you know, in the practice of law and the practice of tax, I think there's a lot of ethical requirements that they, you know, can't even really be taught, right? It has to be— and so much of it is based on professional judgment. It's like, how do you— how do we create that? Anyway, Steve, I have a bunch of rapid-fire questions for you. All right, so quick questions, quick answers from you. AI in law, what's the biggest opportunity or the biggest disruption?

Biggest opportunity is automating various tasks and getting, getting information quickly that heretofore took forever.

Data analytics. You did this, you did this a long time ago as well, right? So it's like you were the, you were the forefather of AI creating automations for us, right?

Right.

Back to your legal secretary who did such a great job back then. The one legal tech tool every firm should be using already.

ChatGPT or Claude or Perplexity or any one of those publicly facing ones with, of course, the various caveats of how not to use them. If you don't use them at all, you don't even have an appreciation of what they could do or what more sophisticated tools could do. And so you have to start someplace, do something with them, even if it's, you know, what's the best way to get from point A to point B, which, by the way, it doesn't really do particularly good at.

But it will, you know what it does do really well for me? I think social media is fantastic where I would write something out and the perfectionist, especially being a professional, you know, you would write it out 5 times, you'd edit it, you'd be thinking, oh, how do I make this sound better? Throw it in there and you say, this is how I want it to sound for these reasons. And it's really good at saving our time. With perfectionism, I feel, you know.

It's, it's super helpful. Where I found it really helpful is like marketing material. Like, I have to give a presentation next week, you know, what are my points, or what is my outline. Or for me, because I hate doing PowerPoints, which I think of the, you know, the world's— God's worst creation of the universe, you know. Now that you can't— it's not perfect, you have to sort of tweak them. But, uh, yeah, those kinds of things where the, the risks of making a mistake are are pretty low.

Yeah, exactly. Yeah. And you can proofread it as well still. And, and but you can do it quickly and, you know, it can, it can evaluate any of the previous historical posts for, you know, things that would pick up or have a greater reach or, you know, even hashtags and all that stuff.

So yeah, I would point out one thing in that regard. I've gotten pretty good at at reading social media posts that are entirely written by ChatGPT, and some of which are authored by people that I really respected and thought a lot of. And I just cringe when I see that. I'm just like, you're not even gonna take the time to write it yourself or at least work on it or edit it so it doesn't sound like it came, then why do it? You know, I mean, forget it. You know, I mean, those one-line sentences, you know, The saying, the quiet, anytime I see it, and Cat Moon is a friend of mine, she's a professor at Vanderbilt. She wrote this thing the other day about anytime I see the word quiet in a media post, I'm suspicious. So I'll never use the word quiet, you know, saying the quiet part out loud. I mean, it's just like, oh.

Right, yeah, yeah, exactly. Sorry. Okay, billable hour, outdated or evolving?

Evolving. As I said before, there will always be a place for the billable hour model, particularly in very large bet-the-company cases. But I think it's going to have to evolve because clients are going to demand it ultimately for various reasons, not the least of which is cost pressure.

Absolutely. The biggest mistake lawyers can make when adopting new technology?

FOMO. Fair. Yeah. Yeah. And I see this a lot. A lot of firms think, oh, we gotta have some AI tools, so let's go out and get some, without really saying what is it we want them to do, we want the tools to do, how are they gonna help us, and how intuitive is it to use them? So then they get something that nobody can use and it doesn't do anything that really helps anybody, so they've just spent a bunch of money for nothing, and then everybody's mad at that point, except the vendor who, you know, they care, they're happy, I guess.

Well, and I know, I don't know if you've had this too, but I know, CRM platforms, you know, looking at those, I've spent, I'm going to say, months researching and trying to find which one was going to be the perfect tool for us and our firm. And, and ultimately, there's no perfect tool, right? You want to find one that's really good and seems to fit and move forward with it. And, you know, don't, don't start getting distracted by the shiny object syndrome of all the other tools that are there. You know, pick something that seems reasonable and move forward with it. It's— you can really find yourself spinning with all the options and all the, all the new technology that's coming out.

That's exactly right. I mean, it's, you know, and vendors prey on that. I have a friend who's into marketing and, you know, she will go to one of these shows and walk up to a booth and they'll say, let me show you the demo. And she was so like, Don't you want to know something about what I do and what I need before you just slap me with a demo and think I'm going to buy it? Are you?

You know?

Yeah, but they do that because it works, I guess. But it's— yeah, I mean, it's— that's the critical inquiry before you start is, you know, what's it going to do and what problem is it going to solve?

Exactly. Steve, this has been so valuable. Thank you for a great conversation. Yeah, I do want to ask one last question. Of you, and I like to ask this, you know, thinking of your career, your profession, the evolution from where it started to where it is now, if you had one piece of advice for starting out, Steve, back in that, you know, the entry-level firm where you were an associate and you could give yourself some guidance back then, what would that piece of advice or what would that guidance be?

I guess it would be along the lines of that, that I said, I I always thought of myself— well, not always. I came to learn that thinking of myself as an entrepreneur— this is my business. I am my business. Whether I'm in a big firm, small firm, on my own, my business is me. My brand is me. Thinking of yourself that way leads you to opportunities that you wouldn't otherwise see. You know, instead of thinking, how is this going to get me my path to partner? You're thinking, how is this going to enhance my career that I want to have? So now, having said all that, to come back to your question, it just dawned on me that one of the things I wished I would have done sooner is to have defined where I wanted to go a little bit better, because there was a period of time there where I was floundering around. A mistake I made going to a smaller firm. If I had thought about what I really wanted to be and where I wanted to get to a little bit more, I wouldn't have made that mistake. But it was like, you know, oh, sounds great. You know, back hometown where I want to be. Everybody will be happy. And so, yeah, that's— I think those two cornerstones are pretty important for a career.

Absolutely. Now, you publish Tech Law Crossroads, which is your blog. Tell me a little bit about that.

I started it maybe 10 years ago, and, you know, I used to write pretty religiously for it. Then about a year ago, I started writing for Above the Law a lot more. And so most of my pieces for Above the Law also appear on my blog, but it's the Above the Law pieces are the things that I would have put on the blog, standalone pieces I would have put on the blog before, but they're still there. And every now and then I'll throw in something that has less to do with technology and more to do with other stuff. I wrote two articles, you know, the past end of last year on what I'd learned about traveling over my career, which is a whole lot. And so I had like 10 tips in one and then 10 tips in the other. And it was just fun things to write, you know, and that kind of things, you know, I still put up some of that on the blog. But so yeah, most of the stuff is all on the blog. It's also on Above the Law, which has been a really cool gig. Great people to work for and it's a good audience. And so it's been a lot of fun.

Awesome. Thank you again, Steve. This has been great. For everybody who watched, this has been the Wealthy Entrepreneur Podcast. Essentially, our goal here is to empower entrepreneurs, legal professionals with the financial confidence and the knowledge they need to be successful in their business, in their ventures, because truthfully, entrepreneurs are the most powerful group of humans moving the world forward in a positive way. And super grateful for the opportunity to continue to serve that market. Listen, Steve has shared so many insightful ideas with technology, ideas about how to find, you know, your true purpose and truly understanding some of the legal professional and where AI is taking the market. There's been so many great insights. If you have any sort of takeaways from this, grab this, share it out. Our goal is to maximize the impact of the information that we're sharing out. Leave a comment, ask any questions. We'll make sure we get either Steve or our team will reach out and answer those. Ultimately, we want to maximize the reach that we have. Once again, everybody, I appreciate your time, your energy, and joining us today, and I look forward to seeing you once again next week.