1 00:00:00,151 --> 00:00:02,346 Ed Walters, how are you this afternoon? 2 00:00:02,831 --> 00:00:03,636 Hey, I'm Gray Ted. 3 00:00:03,636 --> 00:00:04,568 How are you? 4 00:00:04,645 --> 00:00:08,945 I'm doing amazing and I'm so excited to have you. 5 00:00:08,945 --> 00:00:12,805 This is a big milestone in legal innovation spotlight. 6 00:00:12,805 --> 00:00:14,912 This is our 100th episode. 7 00:00:14,912 --> 00:00:15,412 Amazing. 8 00:00:15,412 --> 00:00:16,653 Congratulations. 9 00:00:16,653 --> 00:00:19,334 I'm really proud to be a part of it. 10 00:00:19,594 --> 00:00:32,542 I feel like the uh radio caller, like long time listener, first time caller, like I've always enjoyed your podcast and it's awesome to be a part of this momentous hundredth 11 00:00:32,542 --> 00:00:33,572 recording. 12 00:00:33,810 --> 00:00:35,250 Yeah, it's exciting. 13 00:00:35,250 --> 00:00:38,110 You know, um, I think my listeners have heard me talk about it. 14 00:00:38,110 --> 00:00:41,270 I never had any aspirations with this. 15 00:00:41,450 --> 00:00:43,810 I, how it all kind of got started. 16 00:00:43,810 --> 00:00:46,610 It's a good time to kind of reflect a little bit. 17 00:00:46,790 --> 00:00:58,350 Um, I used to own a company called Acrowire and we were a consulting organization and we decided to productize and relaunch the company in January of 2022. 18 00:00:58,530 --> 00:01:03,442 And I was reaching out to, I had done business in legal at that point for 19 00:01:03,442 --> 00:01:05,742 I don't know, 14, 15 years. 20 00:01:05,742 --> 00:01:07,582 So I had a good Rolodex. 21 00:01:07,862 --> 00:01:17,162 I was reaching out and reintroducing us to the market and I was recording the conversations so I could go back and like refine my pitch. 22 00:01:17,162 --> 00:01:22,022 And as I'm going back through the conversations, I was like, wow, there's a lot of like good dialogue here. 23 00:01:22,022 --> 00:01:24,122 I ought to create a podcast. 24 00:01:24,442 --> 00:01:28,742 And it took me, I don't know, another six months to finally do it. 25 00:01:28,742 --> 00:01:30,962 But, um, I released it. 26 00:01:30,962 --> 00:01:40,662 like three episodes before Ilta a couple of years ago, didn't think anybody, 20, no, 2022 maybe? 27 00:01:41,102 --> 00:01:42,202 Yeah, 2022. 28 00:01:42,202 --> 00:01:45,933 It was right around the time of ChatGPT, which was pure coincidence. 29 00:01:45,933 --> 00:01:54,093 Innovation became such a hot topic post ChatGPT that I really kind of got lucky with that. 30 00:01:54,093 --> 00:01:55,153 But, 31 00:01:55,153 --> 00:02:01,124 Yeah, I threw a couple episodes out there and then went to Ilta and had four or five people stopped by the booth and said, Hey, I your podcast. 32 00:02:01,124 --> 00:02:01,606 It's pretty good. 33 00:02:01,606 --> 00:02:04,138 I'm like, how the hell did you find it? 34 00:02:04,138 --> 00:02:09,825 And then we're like, well, it just kind of popped up in my, know, you might be interested Q. 35 00:02:09,825 --> 00:02:15,917 so I kept doing it and you know, just week after week, it's a, it's a great learning experience. 36 00:02:15,917 --> 00:02:22,742 I get smooth, super smart people like you on the podcast and I learned a ton from my guests and um, 37 00:02:22,742 --> 00:02:31,528 You know, I incorporate those learnings and lessons into the next episode and, you know, hopefully the, uh, the audience gets, gets value from it. 38 00:02:31,528 --> 00:02:34,215 So yeah, I'm super super. 39 00:02:34,215 --> 00:02:35,147 popular though, right? 40 00:02:35,147 --> 00:02:37,783 So like now you have like a lot of listeners. 41 00:02:37,783 --> 00:02:43,604 It's no longer a surprise when someone comes up to you at a conference and says, I saw your podcast or listen. 42 00:02:44,044 --> 00:02:45,595 Yeah, yeah, no, it's true. 43 00:02:45,595 --> 00:02:55,053 And now, um, you know, when I do speaking, like I was just spoke at, cam and I for legal last week, actually their sister conference they had, it's called legal tech connect. 44 00:02:55,053 --> 00:03:05,739 And, um, I moderated the keynote panel and now whenever I do a panel or whenever I do a session, I always say, Hey, do we have any listeners in the audience? 45 00:03:05,739 --> 00:03:07,880 And like the number of hands keeps getting bigger. 46 00:03:07,880 --> 00:03:09,501 So it's, it's cool. 47 00:03:09,501 --> 00:03:10,866 It's cool to see. 48 00:03:10,866 --> 00:03:11,276 And 49 00:03:11,276 --> 00:03:12,838 You know, we don't make any money from this. 50 00:03:12,838 --> 00:03:19,545 It's really a labor of love and I think it does give us some credibility and some visibility in the space. 51 00:03:19,545 --> 00:03:20,818 But yeah, it's not. 52 00:03:20,818 --> 00:03:22,063 We're not making any money on this. 53 00:03:22,063 --> 00:03:24,373 It's just a lot of fun and I really enjoy it. 54 00:03:24,373 --> 00:03:31,433 And you have this amazing diaspora of 100 podcast guests in the world. 55 00:03:31,871 --> 00:03:32,231 Yeah. 56 00:03:32,231 --> 00:03:43,836 And you know, we've got it documented on our, so we have legal innovation, spotlight.com and we have past guests and you know, every once in a while I'll, I'll remember an episode 57 00:03:43,836 --> 00:03:53,010 where we talked about something that I want to kind of go back and reference, or maybe I want to send to a potential customer or you know, a colleague and man, I scroll through 58 00:03:53,010 --> 00:03:54,650 that list to have such great names. 59 00:03:54,650 --> 00:03:57,242 So, um, yeah, it's super cool. 60 00:03:57,242 --> 00:04:00,503 I'm honored that you're here for this, 61 00:04:00,809 --> 00:04:09,799 hundredth episode and I think most of our audience knows you but for those that don't why don't you tell us a little bit about who you are what you do and where you do it. 62 00:04:09,799 --> 00:04:10,319 Awesome. 63 00:04:10,319 --> 00:04:11,659 So I'm Ed Walters. 64 00:04:11,659 --> 00:04:16,970 I am the Chief Strategy Officer of Villex and the co-founder of Fastcase. 65 00:04:16,970 --> 00:04:19,570 I teach at Georgetown Law. 66 00:04:19,570 --> 00:04:23,350 I teach a class called Generative AI and Big Law. 67 00:04:23,350 --> 00:04:27,870 And I teach a separate class called the Law of Robots at Georgetown. 68 00:04:27,930 --> 00:04:34,201 In the winter, I teach at University of Chicago Law School where I teach Gen AI in legal practice. 69 00:04:34,201 --> 00:04:43,801 And I suppose at this point in time, we are right at the end of October 2025 for the sake of posterity. 70 00:04:43,841 --> 00:04:55,861 We have not yet closed the acquisition of Vlex by Clio, but at some point in the fourth quarter here that is likely to close and I'll take on a whole new role. 71 00:04:55,861 --> 00:04:57,921 So that's a little bit about me. 72 00:04:57,921 --> 00:05:02,572 I was a beer and softball lawyer at Covington and Burling before. 73 00:05:02,572 --> 00:05:04,013 starting fast case. 74 00:05:04,013 --> 00:05:05,875 I worked in DC and Brussels. 75 00:05:05,875 --> 00:05:07,486 I was a pretty good softball player. 76 00:05:07,486 --> 00:05:14,020 I bat right-handed, but I could hit to right field, which is usually good for a couple of runs in the first inning of a softball game. 77 00:05:14,020 --> 00:05:22,446 was the lawyer you would send summer associates to lunch with to convince them that you could have a work-life balance in a big law firm. 78 00:05:22,446 --> 00:05:26,939 Very proud to know my role in the big global law firm. 79 00:05:26,939 --> 00:05:27,406 time. 80 00:05:27,406 --> 00:05:27,736 Yeah. 81 00:05:27,736 --> 00:05:29,428 And we're going to talk a little bit about that. 82 00:05:29,428 --> 00:05:36,531 Just the process of new associate development and some of the challenges with it today and what that might look like in the future. 83 00:05:36,832 --> 00:05:43,997 But the last time that you and I spoke, we had a chance to meet at Ilticon this year and we were just kind of riffing. 84 00:05:43,997 --> 00:05:53,764 And we were talking about just like some of the cornerstones of the big law world and how 85 00:05:53,916 --> 00:05:59,339 In my opinion, incompatible they are with where we're going. 86 00:05:59,439 --> 00:06:20,151 And these are deeply entrenched, like fundamental cornerstones, cultural norms like the ruthless tracking and measuring of billable hours by attorneys, which drives the internal 87 00:06:20,151 --> 00:06:21,662 firm compensation model. 88 00:06:21,662 --> 00:06:26,095 the partnership model that operates on a cash basis, which is somewhat unique. 89 00:06:26,095 --> 00:06:39,212 You know, in the U S the IRS code requires that firms that companies in excess of 25 million in revenue, leverage in a cruel basis accounting system and professional services, 90 00:06:39,212 --> 00:06:47,409 not just lawyers, you know, the big four, other professional services have a carve out for, to operate on a cash basis. 91 00:06:47,409 --> 00:06:50,480 And that creates interesting dynamics. 92 00:06:50,480 --> 00:06:54,160 You know, there's been a very, well, why don't we start there? 93 00:06:54,160 --> 00:07:04,220 Cause there's a laundry list of like things that have to really get re-examined as we move into this next generation of legal services. 94 00:07:04,220 --> 00:07:13,400 But like, you know, with a partnership partnership structure and the, um, you know, ABA model rule 5.4 that doesn't allow 95 00:07:14,096 --> 00:07:19,401 external capital and non-lawyers to benefit from a legal practice. 96 00:07:19,401 --> 00:07:26,364 We're starting to see like the sandbox in Utah and the ABS rules in Arizona. 97 00:07:26,364 --> 00:07:29,145 what is your take on? 98 00:07:29,145 --> 00:07:39,793 My take is I see real challenges with the partnership model in a scenario where you have a tech enabled legal service delivery model that requires some R &D. 99 00:07:39,793 --> 00:07:41,853 I don't know, do you agree, disagree? 100 00:07:41,853 --> 00:07:43,169 What's your take on that? 101 00:07:43,561 --> 00:07:44,161 I agree. 102 00:07:44,161 --> 00:07:47,872 This is like several classes in Gen.ai and Big Law. 103 00:07:47,872 --> 00:07:50,032 We can do it in a couple of segments. 104 00:07:50,032 --> 00:07:50,152 Okay. 105 00:07:50,152 --> 00:07:56,343 So let's start with talking about the competition over profits per partner. 106 00:07:56,343 --> 00:08:00,623 Then we can talk about the leverage model of law firms. 107 00:08:01,063 --> 00:08:10,918 Then we can talk about what happens when a lot of the brute force compute for law firms gets created in software. 108 00:08:10,918 --> 00:08:16,772 Okay, so let's just describe the standard state, the state of the world today. 109 00:08:16,772 --> 00:08:27,230 Especially large law firms are in a dogfight with each other over very successful partners and their book of business. 110 00:08:27,550 --> 00:08:35,714 And you see this all the time, like an entire group will leave one large law firm and then go join another law firm. 111 00:08:35,875 --> 00:08:38,496 Okay, and the big fight here is over 112 00:08:38,600 --> 00:08:50,857 Mostly profits per partner, a measure of the profitability of the law firm and the compensation of the top lawyers in that firm, which means that firms that are very highly 113 00:08:50,857 --> 00:08:57,641 profitable can attract the best lawyers and the best practices, regardless of what the revenue is, right? 114 00:08:57,641 --> 00:09:06,596 Like you can have a firm that has a lot of revenue, but a lot of costs and not a lot of profit, and they will bleed lawyers to more profitable law firms. 115 00:09:06,596 --> 00:09:10,518 So I'm just describing, this is a huge fight inside of large law firms. 116 00:09:10,518 --> 00:09:16,121 The most lucrative books of business are migrating to the firms that have the most profit. 117 00:09:16,121 --> 00:09:22,663 And that measures in some sense the efficiency of the law firm, not the top dollar amount. 118 00:09:22,663 --> 00:09:24,063 Okay, that's one. 119 00:09:24,063 --> 00:09:26,864 Two, how do you build a profitable law firm? 120 00:09:26,864 --> 00:09:29,224 Like what are those profits made of? 121 00:09:29,625 --> 00:09:34,666 Well, for a hundred years, big law firms have used this kind of Cravath model 122 00:09:34,722 --> 00:09:35,822 leverage, right? 123 00:09:35,822 --> 00:09:44,442 You have equity partners at the top of the pyramid, and then a larger number of non-equity partners, and then associates, and allied professionals. 124 00:09:44,442 --> 00:10:00,362 And the idea is you, the equity partners, bill out associates at, you know, $1,800 an hour, but pay them $800 an hour, and then have $1,000 an hour of profit, you know? 125 00:10:00,362 --> 00:10:01,786 And so in this 126 00:10:01,826 --> 00:10:03,037 kind of consulting model. 127 00:10:03,037 --> 00:10:07,670 You are trying to create as many hours as possible for the people in the law firm. 128 00:10:07,930 --> 00:10:18,121 Those hours are arbitraged and the arbitrage, the cream from this, the profit sort of rolls uphill to the equity partners. 129 00:10:18,121 --> 00:10:21,042 And it works if you have like a lot of associates. 130 00:10:21,483 --> 00:10:26,647 The more associates and billable time you have, the more leverage the firm has. 131 00:10:26,647 --> 00:10:28,639 Now look, that doesn't solve all the problems. 132 00:10:28,639 --> 00:10:31,541 You still have to run an effective, efficient law firm. 133 00:10:31,541 --> 00:10:36,326 There can't be a lot of friction between those arbitraged hours and the equity partners. 134 00:10:36,326 --> 00:10:38,948 But that's sort of what makes a modern law firm. 135 00:10:38,948 --> 00:10:40,470 Okay, here's the challenge. 136 00:10:40,470 --> 00:10:52,371 A lot of the work that is done by the associates, that is arbitraged, that is used for leverage inside of large law firms, is brute force compute work that is paid for by 137 00:10:52,371 --> 00:10:54,092 corporate legal departments. 138 00:10:54,378 --> 00:11:02,077 It is document review, is drafting, it is legal research, is draft writing and proofing. 139 00:11:02,077 --> 00:11:02,347 right. 140 00:11:02,347 --> 00:11:06,360 So a lot of these tasks are document intensive. 141 00:11:06,700 --> 00:11:07,922 They take a lot of time. 142 00:11:07,922 --> 00:11:16,598 And that's in a lot of ways like both how large law firms train the associates to become partners down the road and make money. 143 00:11:16,598 --> 00:11:17,999 Okay, here's the problem. 144 00:11:17,999 --> 00:11:28,149 A lot of those tasks are being done by software already, and already the software is getting better at many of these tasks than human lawyers are. 145 00:11:28,149 --> 00:11:37,900 There was a Val's benchmark for legal research just last week that says that even the kind of brand new models are better at legal research than the lawyer benchmark. 146 00:11:37,900 --> 00:11:42,395 Faster, cheaper, more accurate, higher quality from blind reading. 147 00:11:42,395 --> 00:11:45,088 So what's happening is we're already starting to see it. 148 00:11:45,088 --> 00:11:54,805 The corporate legal departments are saying, if there's a better software solution for this job, maybe it's AI, maybe it's automation, maybe it's something else, I don't want to pay 149 00:11:54,805 --> 00:11:56,097 your associates to do it. 150 00:11:56,097 --> 00:12:09,040 So what happens when the bottom corners of that triangle of leverage begin to shrink, when it becomes more like a pipe or like a diamond, right? 151 00:12:09,481 --> 00:12:13,522 You know, the leverage kind of disappears. 152 00:12:13,522 --> 00:12:18,503 You don't have as many dollars flowing up, which means that partners start to shed. 153 00:12:18,503 --> 00:12:24,676 They go into other law firms, like the whole model, the business model for law firms. 154 00:12:24,676 --> 00:12:27,656 comes under a lot of stress at the very least, okay? 155 00:12:27,656 --> 00:12:40,296 So the estimates I've seen, Toby Brown has a really good study about this saying about 13 % of legal billable hours are at risk of displacement over the next five years. 156 00:12:40,296 --> 00:12:42,816 This was two years ago when he said it. 157 00:12:42,836 --> 00:12:49,816 So within the next three years now, 13 % might not sound like a lot, but that's the profit margin for most law firms. 158 00:12:49,996 --> 00:12:52,546 I 13 % of the... 159 00:12:52,546 --> 00:13:00,882 legal services market in the US, 573 billion, is about $75 billion that will be evaporated. 160 00:13:00,882 --> 00:13:11,729 And corporate legal departments are using software and doing some of that work themselves, or insisting that their law firms use software to do it and show them where the savings 161 00:13:11,729 --> 00:13:12,509 are. 162 00:13:12,730 --> 00:13:15,562 So look, I mean, this is like several... 163 00:13:15,562 --> 00:13:18,334 hour-long lessons in my classes. 164 00:13:18,334 --> 00:13:24,608 I'm not going to do like a two-hour seminar, but let's just say it is inevitable that software will take some of those hours. 165 00:13:24,608 --> 00:13:26,229 That's a consensus. 166 00:13:26,229 --> 00:13:27,209 Not all the hours. 167 00:13:27,209 --> 00:13:29,380 I'm not talking about magical robot lawyers. 168 00:13:29,380 --> 00:13:36,085 I'm just saying that some of those tasks get compressed in time, which means that the leverage comes under strain. 169 00:13:36,085 --> 00:13:37,956 May I just add one more thing to this? 170 00:13:38,457 --> 00:13:40,978 I'm sorry, I've turned this into a Ted talk. 171 00:13:42,279 --> 00:13:47,823 All right, so look, how do we train law students and young lawyers? 172 00:13:48,103 --> 00:13:53,907 We train them with brute force compute funded by corporate legal departments. 173 00:13:54,208 --> 00:13:58,531 We train them by having them do this grunt work, right? 174 00:13:58,531 --> 00:14:05,106 They hate it, clients hate it, and increasingly software is better at some of this work. 175 00:14:05,106 --> 00:14:16,304 Okay, this could be seen as a crisis because we no longer have that kind of work, the subsidized work that makes new associates into young partners. 176 00:14:16,405 --> 00:14:19,578 But I think we could also see it as an invitation. 177 00:14:19,578 --> 00:14:26,883 AI is an invitation to us to rethink what we're training lawyers to do and how we're training them to do it. 178 00:14:26,883 --> 00:14:30,161 If we are training young associates, 179 00:14:30,161 --> 00:14:34,720 and law students to be the lawyers of 2007. 180 00:14:34,981 --> 00:14:37,061 We're going to fail. 181 00:14:37,381 --> 00:14:47,492 If we're training them to learn how to do these kind of brute force compute tasks, computers will be better and faster at brute force compute. 182 00:14:47,492 --> 00:14:49,172 That is also inevitable. 183 00:14:49,172 --> 00:14:52,352 Not every task, many tasks. 184 00:14:52,592 --> 00:14:55,032 So let's take this opportunity. 185 00:14:55,276 --> 00:15:02,849 to say what things will lawyers do in 2027 that computers can't do, that AI is not good at? 186 00:15:02,849 --> 00:15:12,412 What uniquely human attributes are going to characterize the best lawyers in the world three years from now, five years from now? 187 00:15:12,412 --> 00:15:14,353 Let's identify those things. 188 00:15:14,353 --> 00:15:23,069 Counseling, discernment, human judgment, the ability to supervise software, to pick the right tool for the job. 189 00:15:23,069 --> 00:15:29,683 to understand the value of legal services, to weigh risks in collaboration with the client. 190 00:15:30,044 --> 00:15:38,848 These today are called soft skills, I think, but let me just encourage us to reframe them as human skills. 191 00:15:38,848 --> 00:15:45,410 And this is what we should be identifying as the key attributes of great lawyers five years from now. 192 00:15:45,630 --> 00:15:49,672 And then we should find ways to train 193 00:15:49,958 --> 00:16:04,086 law students and young lawyers to excel at these human characteristics of lawyer, instead of training them to figure out whether a period is italicized or not in a citation, which 194 00:16:04,086 --> 00:16:05,359 is what we're currently doing. 195 00:16:05,359 --> 00:16:13,714 So I think we could see it as a real challenge to this leverage model for law firms, but it is totally possible. 196 00:16:13,714 --> 00:16:24,510 that on the other side of this, we have law firms that have a different business model where the revenue might be even a little lower, maybe 13 % lower if we follow the stats, 197 00:16:24,510 --> 00:16:33,664 but more profitable, where the lawyers are happier, and where we are serving more people with legal needs than we currently do. 198 00:16:33,664 --> 00:16:37,516 mean, these are all huge opportunities. 199 00:16:37,716 --> 00:16:40,177 Now, I'm not even talking yet about A to J. 200 00:16:40,209 --> 00:16:43,889 and the legal market, I'm happy to get there if you want to. 201 00:16:43,889 --> 00:16:54,229 But even if we're only serving the same people we're serving today, there is the opportunity to do that better, to train lawyers, to be better human lawyers, and to 202 00:16:54,229 --> 00:16:59,009 deliver extraordinary value for corporate legal departments. 203 00:16:59,109 --> 00:17:08,080 This is, I mean, if we see this as a world of scarcity, where we're trying to preserve as much as we can from the business model from 2007, it's a disaster. 204 00:17:08,080 --> 00:17:17,511 If we view this through the lens of abundance, where we can do a lot more legal work and a lot better legal work and more of the work that we went to law school to do in the first 205 00:17:17,511 --> 00:17:21,647 place, this is an unprecedented opportunity. 206 00:17:21,647 --> 00:17:25,673 Yeah, you know, so I have a little bit of a difficult time. 207 00:17:25,673 --> 00:17:29,276 envisioning what law firms are going to look like in five years. 208 00:17:29,276 --> 00:17:38,584 But I have a pretty clear vision of how I see lawyers working in a corporate legal environment. 209 00:17:38,584 --> 00:17:45,009 And that's based on having spent 10 years in a risk management role at Bank of America. 210 00:17:45,009 --> 00:17:47,351 So I started off in consumer risk. 211 00:17:47,351 --> 00:17:49,453 I went all over the place, global treasury. 212 00:17:49,453 --> 00:17:52,014 I was then in anti-money laundering. 213 00:17:52,014 --> 00:17:53,636 I went to corporate audit. 214 00:17:53,636 --> 00:17:55,687 I was in regulatory relations. 215 00:17:55,889 --> 00:17:57,341 Almost in. 216 00:17:57,815 --> 00:17:59,825 had 5,000 lawyers report to you over that time. 217 00:17:59,825 --> 00:18:00,946 No, didn't. 218 00:18:00,946 --> 00:18:06,192 no, this is what's interesting is how infrequently we engaged with legal. 219 00:18:06,192 --> 00:18:09,886 Legal was almost a separate business. 220 00:18:09,886 --> 00:18:12,446 was so incredibly siloed. 221 00:18:12,446 --> 00:18:14,430 And we did a little bit of legal work. 222 00:18:14,430 --> 00:18:16,965 I've talked about it on here before. 223 00:18:16,965 --> 00:18:21,927 I filed a patent for something I developed, a regulatory measure tool. 224 00:18:21,927 --> 00:18:24,469 Basically, I built a tool that 225 00:18:24,473 --> 00:18:37,797 compiled all of the regulatory examinations from all of the alphabet soup, FINRA, the Fed, the OCC, FinCEN, and then local, you know, the Connecticut State Bank Examiner and 226 00:18:37,797 --> 00:18:45,359 compiled all this data and put it on a graph, a numeric value, and we called it the regulatory index. 227 00:18:45,359 --> 00:18:46,839 As part of it, it was really cool. 228 00:18:46,839 --> 00:18:48,360 And I'm not sure if it's still in use. 229 00:18:48,360 --> 00:18:52,121 This has gone back 20 years, a little over that. 230 00:18:52,138 --> 00:19:01,103 As part of that, I had to engage with legal to kind of get them up to speed on what, and it was done at such an arms length type relationship. 231 00:19:01,103 --> 00:19:13,590 They had a ticketing system that I had to create a ticket that said what I wanted to do, upload the documents, schedule time with someone fairly lower level and get everything in 232 00:19:13,590 --> 00:19:13,990 order. 233 00:19:13,990 --> 00:19:16,331 And then spoke with a more senior attorney. 234 00:19:16,331 --> 00:19:19,354 It was very much an arms length, transaction. 235 00:19:19,374 --> 00:19:21,405 And when I was out there doing 236 00:19:21,427 --> 00:19:23,188 very, very important. 237 00:19:23,188 --> 00:19:29,991 So AML, anti-money laundering, money laundering was one of the top three risks in financial services in my era. 238 00:19:29,991 --> 00:19:34,472 I'm not sure if that's still the case, but very important work. 239 00:19:34,492 --> 00:19:40,805 And the only time legal got involved is when things went sideways, right? 240 00:19:40,805 --> 00:19:42,596 So they weren't, they weren't involved. 241 00:19:42,596 --> 00:19:50,559 Now we had a few lawyers like Bill Fox, who it was the former head of Finson, the bank hired him away and he ran 242 00:19:50,577 --> 00:19:52,027 anti-money laundering at B of A. 243 00:19:52,027 --> 00:19:52,849 He was a lawyer. 244 00:19:52,849 --> 00:20:07,017 But the people who were crafting some of the detection mechanisms for money laundering or interpreting even the USA Patriot Act or the Bank Secrecy Act, we were doing that as 245 00:20:07,017 --> 00:20:10,428 non-lawyers in compliance and risk. 246 00:20:10,680 --> 00:20:19,904 And, we could request help from legal, but I see a world where legal is deeply embedded in the lines of business themselves. 247 00:20:19,904 --> 00:20:26,551 So today in risk management, you have the three lines of defense really for, I've talked about it before. 248 00:20:26,551 --> 00:20:36,745 have the line of business that those are the people who are trans transacting the consumer bank, the commercial bank, the wealth bank, and then you have risk management partners 249 00:20:36,745 --> 00:20:38,296 that are aligned to. 250 00:20:38,456 --> 00:20:39,627 specific lines of business. 251 00:20:39,627 --> 00:20:40,708 Then you have corporate audit. 252 00:20:40,708 --> 00:20:42,479 That's your third line of defense. 253 00:20:42,479 --> 00:20:49,665 And then we used to jokingly say the fourth line of defense is the Wall Street Journal because that's where you end up if the first three fail. 254 00:20:49,725 --> 00:20:54,210 But legal is not in any of those lines of defense. 255 00:20:54,210 --> 00:21:07,767 I see a world where as we get away from the, all of the mechanics, all the blocking and tackling and lawyers become more in advisory capacity and get embedded 256 00:21:07,767 --> 00:21:11,698 You'll get embedded with the consumer bank and actually look at their process. 257 00:21:11,698 --> 00:21:23,982 Don't have a, you know, a non-lawyer like myself, map the process and try to assess risk, not fully knowing the statutes and the interpretation and the case law around them. 258 00:21:23,982 --> 00:21:32,024 So I really see a more, of a, lawyers being more tightly coupled to the business that doesn't exist today in the enterprise. 259 00:21:32,024 --> 00:21:33,945 That's not how risk management works. 260 00:21:33,945 --> 00:21:35,445 At least when I left. 261 00:21:35,697 --> 00:21:44,517 So I don't know how that translates to the legal world, but that seems to be a very logical path inside the enterprise. 262 00:21:44,557 --> 00:21:46,808 Does that make sense to you or do you have a different vision? 263 00:21:46,808 --> 00:21:47,856 No, I think that's right. 264 00:21:47,856 --> 00:21:48,379 mean, we... 265 00:21:48,379 --> 00:21:51,400 Law has erected such a large wall. 266 00:21:51,761 --> 00:22:00,345 It's so complex and maybe intentionally inscrutable that it's very hard to integrate it into business processes. 267 00:22:00,726 --> 00:22:15,256 But I think if you were able to lower the wall using software or processes to popularize understanding of the law, to manage complexity in a more 268 00:22:15,256 --> 00:22:22,020 systematic way, I don't know what the right metaphor is, like piling dirt around the wall so that you can walk right over it. 269 00:22:22,020 --> 00:22:28,362 But I think the idea is we wouldn't need lawyers to help us catapult over the wall. 270 00:22:28,362 --> 00:22:35,084 We would need them to engineer turf so that it's not such a barrier to us. 271 00:22:35,104 --> 00:22:39,096 And then we can integrate the law more directly into the business. 272 00:22:39,096 --> 00:22:43,820 And this is, mean, I think for lawyers in-house, what a blessing, right? 273 00:22:43,820 --> 00:22:54,370 If you can be more involved with the business, if you could be like a value center and not a cost center, if you can help aid with internal compliance instead of being the last 274 00:22:54,370 --> 00:23:00,115 resort after the rails come off everything, like you'd said before, I think that would be a great role for lawyers. 275 00:23:00,115 --> 00:23:01,927 think lawyers would be really excited about that. 276 00:23:01,927 --> 00:23:06,567 Yeah, it seems like a, I think it's a win across the board, right? 277 00:23:06,567 --> 00:23:18,707 The business is going to win because they're getting that legal lens much closer to where it needs to be instead of, again, when things go sideways. 278 00:23:18,847 --> 00:23:28,367 And, you know, the way that, the way that many businesses engage with legal today is when something's on fire, it's very reactive. 279 00:23:28,367 --> 00:23:31,487 There's not, you know, it's not terribly proactive. 280 00:23:31,695 --> 00:23:42,610 So I think moving towards the proactive end of the spectrum seems to make a lot of sense and a place where lawyers could add a lot more value to the business. 281 00:23:42,610 --> 00:23:50,835 know, and something else, there's a, there's a friction today between, mean, I see it when I sell to law firms, you know, uh procurement, right? 282 00:23:50,835 --> 00:23:56,808 Procurement comes in marks up the, the, you know, our software license subscription agreement. 283 00:23:56,808 --> 00:23:59,319 And we have to go to the business and go, guys, this doesn't make sense. 284 00:23:59,319 --> 00:24:00,580 And here's why. 285 00:24:00,580 --> 00:24:04,622 And then they got to go talk to the lawyers and go, Hey, look, here's why we have that provision. 286 00:24:04,622 --> 00:24:06,764 And they're so far removed. 287 00:24:06,764 --> 00:24:11,757 It's, if they were more embedded in the process, they would understand. 288 00:24:11,818 --> 00:24:23,624 And, know, something else as a consumer of legal services that I have recognized is that lawyers are really good at identifying risk, but as a business person, it's not, that's 289 00:24:23,624 --> 00:24:25,605 only one half of the equation. 290 00:24:25,807 --> 00:24:31,821 In what business scenario do you not look at something in a risk reward on a risk reward basis? 291 00:24:31,821 --> 00:24:33,482 That's the nature of business, right? 292 00:24:33,482 --> 00:24:36,374 What do I have to put at risk and what's the potential outcome? 293 00:24:36,374 --> 00:24:47,511 but having a understanding of what the rewards are as part of whatever it is you're trying to do, get a contract across the goal line, um, sign a commercial lease. 294 00:24:47,511 --> 00:24:53,226 They're so risk focused having both sides of that risk reward scale. 295 00:24:53,226 --> 00:24:56,266 Having perspective on that, I think would add a lot of value to the business. 296 00:24:56,266 --> 00:24:57,226 For sure. 297 00:24:57,226 --> 00:25:00,726 And this is another place where we just don't train lawyers. 298 00:25:00,726 --> 00:25:02,906 It's not like lawyers couldn't see that. 299 00:25:02,906 --> 00:25:05,746 People go to law school and they become blind to the rewards. 300 00:25:05,746 --> 00:25:07,506 It's just not part of the training. 301 00:25:07,766 --> 00:25:16,057 You know, the training is really about risk and identifying it and wringing the last drop of risk out of every transaction, kind of regardless of the value, right? 302 00:25:16,057 --> 00:25:23,237 But when businesses do these deals, they're saying, look, this is a high value transaction. 303 00:25:23,237 --> 00:25:24,697 I'm willing to take some risk. 304 00:25:24,847 --> 00:25:34,823 And there are times when the cost of wringing the risk out of the business exceeds the cost of the risk times the likelihood it's going to occur. 305 00:25:34,823 --> 00:25:37,344 you know, this drives businesses crazy. 306 00:25:37,344 --> 00:25:38,255 I'm one of them, right? 307 00:25:38,255 --> 00:25:51,333 So I serve lawyers in my software capacity, but in the business capacity, I also employ a lot of law firms, you know, and in these transactions, I will see them, you know, arguing 308 00:25:51,333 --> 00:25:53,094 over like these very 309 00:25:53,490 --> 00:26:06,790 long tail risks and investing weeks or months trying to like extract the last little bit of risk out of a transaction at great expense, right? 310 00:26:06,790 --> 00:26:07,990 It drives me crazy. 311 00:26:07,990 --> 00:26:19,110 I mean, I would love to have a different kind of conversation saying, is this a risk we care enough about to try and remove it from the transaction or, you know, it's just not 312 00:26:19,110 --> 00:26:23,754 worth it to us to spend $19,000 to try to 313 00:26:23,762 --> 00:26:29,582 remove a one in a hundred risk of $19,000 occurring, right? 314 00:26:29,582 --> 00:26:31,373 $19,000 worth of risk occurring. 315 00:26:31,373 --> 00:26:31,903 Exactly. 316 00:26:31,903 --> 00:26:32,554 Yeah. 317 00:26:32,554 --> 00:26:43,881 It's, um, so I think, I think there would be great value to having a more integrated, relationship that again, today in the enterprise, it's very siloed as a small business 318 00:26:43,881 --> 00:26:44,282 owner. 319 00:26:44,282 --> 00:26:47,654 we engage law firms very regularly as well. 320 00:26:47,654 --> 00:26:56,009 And again, it's, it's also very arm's length, very limited view of what the reward side of the equation is. 321 00:26:56,113 --> 00:27:06,879 and a lot of conversation necessary to really help strike the right balance where if the lawyers were embedded more in the business, they would understand the reward side. 322 00:27:06,879 --> 00:27:17,465 What do you think about, you one thing you and I talked about the last time was like R &D and like what law firms should expect in terms of what sort of R &D investments are going 323 00:27:17,465 --> 00:27:20,236 to be required in this next iteration, right? 324 00:27:20,236 --> 00:27:20,956 Like 325 00:27:21,194 --> 00:27:31,484 Buying, I talk about it all the time, buying off the shelf tools, lawyers aren't going to be able to differentiate themselves and even risk having kind of a powered by, I call it 326 00:27:31,484 --> 00:27:32,785 the powered by problem, right? 327 00:27:32,785 --> 00:27:39,340 Like this is Kirkland and Ellis powered by Harvey or is this Harvey powered by Kirkland and Ellis? 328 00:27:39,340 --> 00:27:40,191 You know what I mean? 329 00:27:40,191 --> 00:27:43,254 The law firms need to be in the driver's seat and how do they do that? 330 00:27:43,254 --> 00:27:45,906 I think that some, some R and D it's going to 331 00:27:46,226 --> 00:27:48,918 a little bit of investment and a change in mindset. 332 00:27:48,918 --> 00:27:50,485 How do you see that picture? 333 00:27:50,485 --> 00:27:55,869 Well, I would say R &D is one of the key quirks of the law firm business model. 334 00:27:56,030 --> 00:28:00,665 Law firms are some of the biggest organizations in the world that just don't have R &D departments. 335 00:28:00,665 --> 00:28:02,887 There's not a good reason for them not to, they should. 336 00:28:02,887 --> 00:28:07,321 So I think that the best law firms are going to have to do R &D. 337 00:28:07,321 --> 00:28:12,295 The other quirk I'll say is that law firms are some of the biggest organizations in the world that 338 00:28:12,295 --> 00:28:13,817 don't have assets. 339 00:28:13,817 --> 00:28:17,610 I mean, they're consulting service delivery model businesses. 340 00:28:17,610 --> 00:28:18,942 They do have assets. 341 00:28:18,942 --> 00:28:21,243 And some of the biggest assets are data assets. 342 00:28:21,243 --> 00:28:30,847 They're sitting on this network drive full of templates, expertise, data that has real value, right? 343 00:28:30,847 --> 00:28:32,629 But it doesn't appear on the balance sheet. 344 00:28:32,629 --> 00:28:34,721 There's no way to commercialize it. 345 00:28:34,721 --> 00:28:44,628 So I would just say, like, I would love to see law firms doing some research and development into how to make those assets useful and how to deploy them in a way that's 346 00:28:44,628 --> 00:28:45,388 differentiated. 347 00:28:45,388 --> 00:28:49,041 I'll put my company hat on for a second. 348 00:28:49,041 --> 00:28:54,504 Like, we're actually making a pretty big bet on this at Villex in Vincent. 349 00:28:54,504 --> 00:29:02,675 We've created a tool called Vincent Studio that allows law firms to build their own AI tools using, you know, all of the 350 00:29:02,675 --> 00:29:10,482 kind of AI tools we've built into Vincent using our data and their data together to build these AI tools. 351 00:29:10,543 --> 00:29:21,392 So if you just buy any of the AI tools off the shelf, every law firm and every corporate legal department is going to have the same answers that come out of them. 352 00:29:21,713 --> 00:29:28,760 But if you're able to use them to unlock the proprietary advantage that is held by your data, 353 00:29:28,760 --> 00:29:36,704 Then you have something that's differentiated, that is marketable, that is highly valuable and not commoditized. 354 00:29:36,765 --> 00:29:39,016 But that requires R &D to your original point. 355 00:29:39,016 --> 00:29:42,268 It requires doing a little bit of experimentation. 356 00:29:42,508 --> 00:29:47,174 It will not be, you probably won't get a rabbit the first time you stick your hand into the hat. 357 00:29:47,174 --> 00:29:52,187 It might require a couple of tries and, you know. 358 00:29:52,355 --> 00:29:54,116 repeat attempts and iterations. 359 00:29:54,116 --> 00:29:57,518 But I mean, that's the whole point of research and development, right? 360 00:29:57,839 --> 00:30:03,823 It wouldn't be researched in development if it worked the first time you did everything. 361 00:30:04,023 --> 00:30:07,465 So I think this should be like a new mindset of law firms. 362 00:30:07,465 --> 00:30:14,922 It should be what kind of research can we do to create a differentiated product for legal services? 363 00:30:15,102 --> 00:30:19,961 Maybe it's in the content, maybe it's in the distribution, maybe it's in 364 00:30:19,961 --> 00:30:21,853 the services that you're able to offer. 365 00:30:21,853 --> 00:30:26,847 Maybe it's because of insights in one piece of work that you're able to apply to a different piece of work. 366 00:30:26,847 --> 00:30:30,870 But this all requires experimentation and R &D. 367 00:30:30,870 --> 00:30:33,692 Now I'll go back to the thing we talked about in the very top of this. 368 00:30:33,692 --> 00:30:37,276 Law firms are weird businesses because you pay out all the profits every year. 369 00:30:37,276 --> 00:30:44,552 And because of that, it doesn't really reward experimentation that pays off over years. 370 00:30:44,552 --> 00:30:52,543 I take a hit on profits per partner in 2025 to do R &D that's going to pay off in 2027. 371 00:30:52,543 --> 00:31:03,483 mean, 2027 is rooting for you to do that in 2025, but the partners of 2025 want their profits in 2025. 372 00:31:03,583 --> 00:31:11,674 So we need to find a way to balance this long-term sustainability of business, the research and development requirement. 373 00:31:11,674 --> 00:31:17,250 with the separate requirement that would pay out all the profits of the law firm in this year. 374 00:31:17,250 --> 00:31:27,066 And that if we don't have very high profits per partner, we're at risk of losing whole partnerships and whole groups from the firm to more profitable law firms. 375 00:31:27,398 --> 00:31:31,345 Exactly and god there's so many points I want to touch on there. 376 00:31:31,345 --> 00:31:32,840 First, I complete... 377 00:31:32,840 --> 00:31:34,082 like four hours to talk. 378 00:31:34,082 --> 00:31:38,169 It's gonna be like an amazing four hour conversation we have together today. 379 00:31:38,169 --> 00:31:42,802 You know, like, like Huberman and Rogan, they do a marathon podcast. 380 00:31:42,802 --> 00:31:47,275 Like I, I'm assuming they hit pause to take bathroom breaks because it goes on for hours. 381 00:31:47,275 --> 00:32:00,395 Um, but, so law firms have all of this knowledge and wisdom in, in many, much of that is memorialized in artifacts, i.e. 382 00:32:00,395 --> 00:32:03,848 documents that created winning outcomes for their clients. 383 00:32:03,848 --> 00:32:05,723 And that has to be leveraged. 384 00:32:05,723 --> 00:32:08,455 But there's a monumental challenge that we have right now. 385 00:32:08,455 --> 00:32:19,940 Having been in this space for almost 20 years, I have seen the lack of data hygiene that exists in the law firm infrastructure. 386 00:32:19,940 --> 00:32:23,494 Lawyers, many refuse to even profile a document. 387 00:32:23,494 --> 00:32:27,935 what type of document it is, what matter it relates to is typically 388 00:32:27,935 --> 00:32:33,229 table stakes, you know, a matter centric DMS takes care of that piece for you. 389 00:32:33,229 --> 00:32:37,712 But even just the most basic attributes about the document aren't there. 390 00:32:37,712 --> 00:32:53,644 Ask a lawyer to go back one year in a matter workspace and find the final document, the true final document, you know, final, final, final, final, final, initials date final. 391 00:32:53,644 --> 00:32:56,917 It's really difficult even for the lawyer who 392 00:32:56,917 --> 00:32:57,909 ran the matter. 393 00:32:57,909 --> 00:33:01,594 How is technology going to bridge that gap? 394 00:33:01,594 --> 00:33:06,422 I don't know, but I see a big problem and challenge that we got to get over with data hygiene. 395 00:33:06,422 --> 00:33:07,753 Do you see it as well? 396 00:33:08,171 --> 00:33:12,655 Yes, I tried to build one of these systems when I was in my law firm at Covington and Burling. 397 00:33:12,655 --> 00:33:17,320 I was part of a pilot group that created an early knowledge management system. 398 00:33:17,320 --> 00:33:26,639 It was kind of a network drive and every firm had like a metadata screen that you would add like who the author was and what kind of thing it was and who the client was and what 399 00:33:26,639 --> 00:33:29,191 the matter was, dot, dot, dot, dot, dot. 400 00:33:29,191 --> 00:33:32,526 It was required every time that you saved a document. 401 00:33:32,526 --> 00:33:35,047 The firm rejected it in every way. 402 00:33:35,047 --> 00:33:36,647 You can reject technology. 403 00:33:36,647 --> 00:33:39,659 People would not enter the data for these things. 404 00:33:39,659 --> 00:33:40,830 There are multiple drafts. 405 00:33:40,830 --> 00:33:43,471 Every time you save something, it would create a new version of it. 406 00:33:43,471 --> 00:33:44,522 It was a disaster. 407 00:33:44,522 --> 00:33:48,907 I don't think that lawyers will ever voluntarily create that metadata. 408 00:33:48,907 --> 00:33:54,288 I think any system that requires them to do that extra overhead. 409 00:33:54,310 --> 00:33:56,922 even for the purposes of data hygiene, is doomed to fail. 410 00:33:56,922 --> 00:34:01,085 And the good news is software is probably better at that than it ever has been. 411 00:34:01,085 --> 00:34:04,709 Good software can extract what the thing is, what draft it is. 412 00:34:04,709 --> 00:34:09,471 There are things that you can do in the architecture to make this easier as well. 413 00:34:09,471 --> 00:34:17,356 So again, I'm not trying to sell Clio right now, but so the idea of Clio work 414 00:34:17,398 --> 00:34:20,130 is that you will be doing that work in context. 415 00:34:20,130 --> 00:34:28,064 You do that within the context of a client and matter inside of Clio, which will be aware of where you are in the process. 416 00:34:28,064 --> 00:34:38,540 Everything that's happened up until that point, what your law firm does as a playbook for these things, what the bill says, what the client pays for and doesn't pay for. 417 00:34:38,700 --> 00:34:42,801 All of that context exists at the point where you're doing the work. 418 00:34:42,842 --> 00:34:43,902 And so, 419 00:34:44,138 --> 00:34:48,058 When you save that document, a lot of that already exists. 420 00:34:48,058 --> 00:34:50,418 We know that this is a motion to dismiss. 421 00:34:50,418 --> 00:34:52,118 We know what the client matter is. 422 00:34:52,118 --> 00:34:54,038 We know what stage it's at. 423 00:34:54,098 --> 00:34:56,218 We know everything about it. 424 00:34:56,218 --> 00:35:01,138 You know, who the lawyer is and what year she is in the firm. 425 00:35:01,138 --> 00:35:04,818 Like every single bit of this context we already have. 426 00:35:04,818 --> 00:35:10,338 And so I could just sort of save the metadata in the background, but then you have all the structured data. 427 00:35:10,338 --> 00:35:14,050 I'll just add to like one of the most important sources of 428 00:35:14,068 --> 00:35:18,021 This proprietary information is not in the documents, but in the bills. 429 00:35:18,021 --> 00:35:23,204 And most lawyers and law firms don't really have access to the billing system. 430 00:35:23,504 --> 00:35:25,045 But I think this will be different in Clio. 431 00:35:25,045 --> 00:35:26,969 You'll have access to your bills. 432 00:35:26,969 --> 00:35:32,352 And I think we could be creating a lot of interesting insights out of the bills. 433 00:35:32,492 --> 00:35:34,113 How long do matters take? 434 00:35:34,113 --> 00:35:35,214 The bill tells you that. 435 00:35:35,214 --> 00:35:37,565 How much does it cost to this stage? 436 00:35:37,961 --> 00:35:40,092 for this kind of matter. 437 00:35:40,413 --> 00:35:41,404 Bill tells you that too. 438 00:35:41,404 --> 00:35:44,636 This is different in this office versus this other office. 439 00:35:44,737 --> 00:35:47,490 Yeah, we knew all these things. 440 00:35:47,490 --> 00:35:53,135 this is one of the promises of uniting the business of law and the practice of law in Clio. 441 00:35:53,135 --> 00:36:00,661 It's one of the things we're going to be pushing on when the transaction closes sometime in the fourth quarter, which is to say, 442 00:36:00,795 --> 00:36:05,859 Yes, all these insights are in documents, but a whole separate class of insights are in the bills. 443 00:36:05,859 --> 00:36:14,773 Let's bring them all together and we'll make a very rich context that helps us draft more effectively, that saves the metadata in a more clueful way. 444 00:36:14,773 --> 00:36:27,290 And then like kind of automatically creates the metadata in a way that allows us to do better R &D and create new products and pull all these insights out. 445 00:36:27,290 --> 00:36:29,303 It doesn't require like 446 00:36:29,303 --> 00:36:32,486 manual scrubbing to clean the pan. 447 00:36:32,486 --> 00:36:34,118 We're starting with a nonstick pan. 448 00:36:34,118 --> 00:36:40,496 Because I don't think lawyers will ever do that kind of data hygiene, data governance. 449 00:36:40,496 --> 00:36:42,858 I think it's highly unlikely to ever happen. 450 00:36:42,858 --> 00:36:47,913 So we should build systems that are very resilient and do a lot of it for them for their benefit. 451 00:36:48,397 --> 00:36:59,471 You know, I think uh legal is really at the same place the auto industry was in 1913, which is the year that Ford deployed the assembly line. 452 00:36:59,471 --> 00:37:06,144 And that's not to say that we're going to churn out legal work like a factory churns out cars. 453 00:37:06,144 --> 00:37:07,354 That's not what I'm saying. 454 00:37:07,354 --> 00:37:14,260 But pre 1913, like automobile manufacturing was very much an artisan, bespoke process. 455 00:37:14,260 --> 00:37:14,894 And 456 00:37:14,894 --> 00:37:25,732 like supply chain and logistics and having, being able to repair a vehicle that required some specialty part, like Ford standardized all that. 457 00:37:25,732 --> 00:37:31,416 And I think we can learn some things by looking at how the auto industry transformed. 458 00:37:31,416 --> 00:37:37,011 First of all, the, the production is, was a, a very, of lessons there. 459 00:37:37,011 --> 00:37:41,736 They went from about 600,000 in 460 00:37:41,736 --> 00:37:46,040 1913 to over 6 million five years later ish. 461 00:37:46,040 --> 00:38:01,178 We saw a increase in capital expense and capital projects that improved quality and output that didn't really exist. 462 00:38:01,178 --> 00:38:05,999 quality control was also a very bespoke non-standardized process. 463 00:38:05,999 --> 00:38:08,961 So I think we can learn some things by looking at the auto industry. 464 00:38:08,961 --> 00:38:14,842 And I know lawyers are very, have a very visceral reaction. 465 00:38:14,842 --> 00:38:21,064 You know, it's like, okay, Ford factory iron ore goes in one end, cars come out the other. 466 00:38:21,064 --> 00:38:24,265 That's not how legal works today. 467 00:38:24,265 --> 00:38:24,845 Right. 468 00:38:24,845 --> 00:38:30,046 Um, I think there will, there are several areas of law where that model will apply. 469 00:38:30,199 --> 00:38:33,760 but it, it changed, it changed everything. 470 00:38:33,760 --> 00:38:43,917 What, mean, do you have any kind of, are there any mental models that we can look at from past experience that tell us how things may play out here in the legal world? 471 00:38:43,917 --> 00:38:45,747 Yeah, let's stick with cars for a second. 472 00:38:45,747 --> 00:38:52,941 I mean, I think you don't know this, but I actually wrote an article about this, about this exact moment in law on that same thesis. 473 00:38:52,941 --> 00:38:54,861 ah yes. 474 00:38:54,881 --> 00:38:55,271 Yeah. 475 00:38:55,271 --> 00:39:07,695 So if you've heard the term fit and finish, this was a stage in auto manufacturing at the end, one of the most expensive parts, where a craftsperson would make sure that all the 476 00:39:07,695 --> 00:39:10,003 panels fit together just right. 477 00:39:10,003 --> 00:39:11,904 because the parts weren't standard. 478 00:39:12,104 --> 00:39:17,387 So standard parts were an incredibly important part of the assembly line you were talking about. 479 00:39:17,387 --> 00:39:19,907 The idea of specialization. 480 00:39:19,968 --> 00:39:28,702 So it used to be the reason that there were so few cars that were creative was like one person was doing the wheels and the windshields and the paint. 481 00:39:28,702 --> 00:39:35,705 You you would have like one craftsperson building the entire car or like four, right? 482 00:39:35,737 --> 00:39:39,588 And so part of the assembly line was, look, we're going to have someone who specializes in windshields. 483 00:39:39,588 --> 00:39:40,298 That's all they do. 484 00:39:40,298 --> 00:39:42,139 They're going to become experts at it. 485 00:39:42,139 --> 00:39:45,081 And they're going to drop in 600 windshields a day. 486 00:39:45,081 --> 00:39:47,233 There was a change in the product. 487 00:39:47,233 --> 00:39:52,216 Maybe you've heard the expression, you can have any color model T you want as long as it's black. 488 00:39:52,216 --> 00:39:53,896 There's a reason for that. 489 00:39:54,076 --> 00:39:59,759 So one of the problems they found in production was the slowest part of the production of a car was paint. 490 00:39:59,759 --> 00:40:10,093 But Henry Ford himself found a paint that dried faster than any other automobile paint in the world, but it was only available in India black. 491 00:40:10,093 --> 00:40:22,924 And he said, look, we are going to reduce the number of options for the Model T for the purpose of making them more available and faster and less expensively for more people. 492 00:40:22,924 --> 00:40:25,375 And so look, this is where it hits home for me, all right? 493 00:40:25,601 --> 00:40:33,777 We are building the 1910 Model A in legal services, right? 494 00:40:33,777 --> 00:40:39,832 We are building highly bespoke, very expensive and slow legal services. 495 00:40:39,832 --> 00:40:48,279 And like the Model A, it's only affordable to the wealthiest people in the world or the most risk averse people in the world, I suppose. 496 00:40:48,279 --> 00:40:52,331 But the market for automobiles was vastly greater. 497 00:40:52,547 --> 00:40:59,079 Just like the market for legal services is vastly greater, there's so many people who need legal help and who can't get it. 498 00:40:59,240 --> 00:41:07,883 But one of the reasons they can't get it is because we insist on hand crafting every bit of legal services ourselves. 499 00:41:07,883 --> 00:41:15,337 We insist on the one-to-one hourly basis consulting model for each legal matter. 500 00:41:15,337 --> 00:41:19,009 When we could make a few adjustments to the process. 501 00:41:19,009 --> 00:41:19,809 Look. 502 00:41:19,941 --> 00:41:26,675 For the highly bespoke Bethic company litigation, one-to-one consulting is probably the way to go, right? 503 00:41:26,675 --> 00:41:38,130 But if we want to make the Model T and make it available for any American, anyone who has legal problems, we might have to make some changes to that production. 504 00:41:38,130 --> 00:41:44,603 It might be a slightly different product, and it might not be like a highly bespoke, highly customized thing. 505 00:41:44,923 --> 00:41:47,045 It might be India Black. 506 00:41:47,045 --> 00:41:54,536 You know, it might be a fast drying paint that we do for everybody to improve legal services for everybody. 507 00:41:54,536 --> 00:42:00,127 And look, it might not be the red car that you want, but it's better than walking. 508 00:42:00,127 --> 00:42:04,638 And we've created a legal services model where 80 % of people walk. 509 00:42:04,638 --> 00:42:13,282 So if there's ways of tweaking that business model, and maybe especially with software, you know, where we say there are highly routine legal matters. 510 00:42:13,282 --> 00:42:17,602 where everyone's doing these things in the exact same way. 511 00:42:17,602 --> 00:42:20,122 Non-disclosure agreement, all right? 512 00:42:20,122 --> 00:42:21,522 Who cares? 513 00:42:21,782 --> 00:42:24,202 Every NDA says the same thing. 514 00:42:24,322 --> 00:42:29,822 There is never a good reason for a client to pay for a customized NDA. 515 00:42:30,302 --> 00:42:42,232 We should take the NDA form that everyone in the world uses and add the names of the parties, unless it is like a highly sophisticated bespoke transaction or a special... 516 00:42:42,400 --> 00:42:44,611 non-disclosure requirement. 517 00:42:44,612 --> 00:42:50,576 And for 99 % of the NDA having world, we should have a standard NDA. 518 00:42:50,857 --> 00:42:53,530 And that's not controversial. 519 00:42:53,530 --> 00:42:56,756 And there's a bunch of contracts like this, a commercial lease. 520 00:42:56,756 --> 00:42:59,620 yeah, a simple agreement for future equity. 521 00:42:59,620 --> 00:43:03,826 all, the startup world uses the Y Combinator templates. 522 00:43:03,826 --> 00:43:07,411 We have templates for side letters as part of that. 523 00:43:07,411 --> 00:43:12,849 there are universally agreed upon templates in many areas of law. 524 00:43:12,849 --> 00:43:17,915 Yes, a term sheet for a series A investment, a safe transaction. 525 00:43:17,915 --> 00:43:20,067 It's not just litigation stuff. 526 00:43:20,067 --> 00:43:29,685 There's a lot of things that are very highly commoditized that we could use software to reduce the friction from and make them available to more people at better prices. 527 00:43:29,965 --> 00:43:36,851 Every time we do that, Jevon's paradox tells us if we reduce the cost of a service, more people will consume it. 528 00:43:36,911 --> 00:43:38,954 We will expand the size of the pie. 529 00:43:38,954 --> 00:43:49,101 mean, the US legal services market valued by the Thomson Reuters Executive Institute at $573 billion per year, that's just the 20 % that we serve. 530 00:43:49,101 --> 00:43:58,617 I if we find ways to lower the cost of the standard legal services, like standard parts in a car, more people will consume them. 531 00:43:58,617 --> 00:44:04,310 And like the Model T, we can make legal services that could be purchased by anybody. 532 00:44:04,310 --> 00:44:06,542 not just the wealthiest Americans. 533 00:44:06,542 --> 00:44:15,998 if 20 % of X is 500 billion that means X is 2.5 trillion, right? 534 00:44:15,998 --> 00:44:17,439 maybe. 535 00:44:17,439 --> 00:44:25,853 I'll be the first to say, I don't know that the 80 % that's unserved is dollar for dollar the same as the 20 % that's served to the wealthiest companies in the world. 536 00:44:25,853 --> 00:44:33,843 It might not be four times the size, but I would really doubt it if the 80 % isn't every bit as big as the 20%. 537 00:44:33,843 --> 00:44:41,230 So there's probably $500 billion a year of unmet demand for legal services. 538 00:44:41,230 --> 00:44:44,362 And if we as a profession don't go serve it, 539 00:44:44,362 --> 00:44:52,804 venture capital funds and software companies and maybe less scrupulous businesses are going to go try to meet that demand. 540 00:44:52,804 --> 00:45:06,449 So I think there's an urgency in this moment for law firms to figure out how to meet that service demand in an ethical, responsible, educated way, but maybe augmented by software. 541 00:45:06,449 --> 00:45:08,069 Look, I have a dog in this fight. 542 00:45:08,069 --> 00:45:10,390 I want law firms to be the ones who meet that need. 543 00:45:10,390 --> 00:45:12,150 I want them to serve people. 544 00:45:12,556 --> 00:45:17,141 with qualified legal services and not tech bros in Silicon Valley or something. 545 00:45:17,141 --> 00:45:23,426 Yeah, well we're almost out of time, I do want to like touch on one final point. 546 00:45:23,426 --> 00:45:24,877 have so much. 547 00:45:24,877 --> 00:45:29,771 We got through one section of a three-part agenda, um but... 548 00:45:29,771 --> 00:45:30,451 typical, right? 549 00:45:30,451 --> 00:45:36,491 I mean, just for your listeners, Ted has prepared like a very thorough agenda for this call. 550 00:45:36,871 --> 00:45:46,747 We have just answered like the third question out of 20 on the agenda with my apologies for waxing grand eloquent once again. 551 00:45:47,031 --> 00:45:48,552 No, this is great. 552 00:45:48,552 --> 00:45:51,055 And this actually falls in your camp. 553 00:45:51,055 --> 00:46:00,785 I'm curious in my experience, Big Law and practice management, excuse me, matter management, I haven't seen broad adoption. 554 00:46:00,785 --> 00:46:10,874 I've seen it within narrow practice areas within Big Law, but not is the Clio, I know Clio appears to be kind of moving up market and your. 555 00:46:11,298 --> 00:46:21,778 Um, your transaction seems like a stepping a step in that direction, but are, are tell us kind of what, what that picture looks like in a couple of minutes, if you can, where, 556 00:46:21,778 --> 00:46:23,701 Cleo's headed. 557 00:46:23,701 --> 00:46:24,031 sure. 558 00:46:24,031 --> 00:46:32,765 So at a ClioCon 2025, just two weeks ago, Jack Newton, the CEO of Clio, announced Clio for Enterprise. 559 00:46:32,765 --> 00:46:42,448 And I think there were some skeptics who said, look, the kind of matter management software that Clio built for mid-market and small firms won't scale to large firms. 560 00:46:42,688 --> 00:46:45,689 And Jack and the Clio team said, no, of course it won't. 561 00:46:45,762 --> 00:46:50,622 I think the big headline for Clio for 2025 was the acquisition of Vlex. 562 00:46:51,062 --> 00:46:58,702 But maybe just as importantly in 2025, Clio acquired a company in the UK called Sharedo. 563 00:46:58,922 --> 00:47:05,642 And Sharedo is now going to be the cornerstone for Clio for Enterprise, what they call Clio Operate. 564 00:47:05,642 --> 00:47:09,582 But it is the operating system for large law firms. 565 00:47:10,042 --> 00:47:14,162 And there are scores of large law firms, like 2,000 lawyers. 566 00:47:14,210 --> 00:47:19,071 who are using ShareDue as the operating system for a large law firm. 567 00:47:19,071 --> 00:47:23,172 And it's not trying to be the one piece that does everything. 568 00:47:23,212 --> 00:47:32,515 It connects like the document management system and the billing system and the complex checking system and the CRM for the law firm. 569 00:47:32,515 --> 00:47:42,490 whichever of those law firms don't have, ShareDue has like modules that you can use for billing or for matter management or for DMS. 570 00:47:42,490 --> 00:47:47,023 It is very intelligent software that helps all of those systems speak to each other. 571 00:47:47,023 --> 00:47:52,036 And I just want to say, like, Clio is not like a naive company. 572 00:47:52,036 --> 00:47:57,849 They don't imagine that small firm matter management software is going to work in the biggest law firms in the world. 573 00:47:57,849 --> 00:48:00,591 The Clio enterprise model is super sophisticated. 574 00:48:00,591 --> 00:48:08,023 The other thing I want to say is that it's not like Clio is starting from scratch, like knocking on the doors of the biggest law firms in the world, right? 575 00:48:08,023 --> 00:48:12,723 The biggest law firms in the world already use Clio for enterprise. 576 00:48:13,003 --> 00:48:16,434 They have subscriptions already to Vincent AI from Vlex. 577 00:48:16,434 --> 00:48:20,014 It's a large number of the biggest 100 firms in the world. 578 00:48:20,014 --> 00:48:23,214 Eight of the 10 biggest firms in the world use Vincent. 579 00:48:23,314 --> 00:48:26,885 I think it's 50 of the biggest 100 now who use Vincent. 580 00:48:26,885 --> 00:48:32,065 Many of the shared-you firms in Europe use Vincent today. 581 00:48:32,425 --> 00:48:35,321 Docket alarm for tracking dockets. 582 00:48:35,321 --> 00:48:42,801 and for docket research and docket analytics is used by a large number of the biggest 250 firms in the world. 583 00:48:42,801 --> 00:48:45,612 That's going to be Clio Docket and Clio Enterprise. 584 00:48:45,612 --> 00:48:52,063 And so all of these firms who are already using these systems will be under the Clio Enterprise umbrella. 585 00:48:52,063 --> 00:48:53,663 So we're not starting from scratch. 586 00:48:53,663 --> 00:49:02,414 We're going to start off with, I don't know, 400 firms who are already using Clio Enterprise or some part of the Clio Enterprise suite. 587 00:49:02,414 --> 00:49:05,738 All right, last thing about Clio Enterprise. 588 00:49:05,738 --> 00:49:08,723 I want to say this with the right level of humility. 589 00:49:08,723 --> 00:49:13,257 Do large law firms deserve awesome software? 590 00:49:13,257 --> 00:49:13,825 think they do. 591 00:49:13,825 --> 00:49:15,629 I mean, I think they do too. 592 00:49:15,629 --> 00:49:20,612 They have never asserted that in the market. 593 00:49:20,752 --> 00:49:34,027 Like large law firms have stitched together like some really crappy software, know, really crappy stuff from companies who abuse them for their legal research, for their CRM, for 594 00:49:34,027 --> 00:49:34,748 their billing. 595 00:49:34,748 --> 00:49:40,535 I think large law firms deserve awesome software that makes them better businesses. 596 00:49:40,535 --> 00:49:47,822 Clio is like, Clio has probably helped more law firms become great businesses than any company in the history of the world. 597 00:49:47,822 --> 00:49:56,731 Okay, like they pioneered this with small law firms by understanding the business of law firms, finding what the KPIs are for great law firms. 598 00:49:56,731 --> 00:50:02,505 sampling the DNA of the best law firms and then helping to democratize that. 599 00:50:02,505 --> 00:50:06,890 So people who run law firms can make those law firms great businesses. 600 00:50:06,890 --> 00:50:09,951 Are large law firms exempt from that? 601 00:50:10,072 --> 00:50:14,526 Do large law firms not deserve to run like great businesses? 602 00:50:14,526 --> 00:50:20,881 Or should they just be like this Frankenstein monster of stitched together crappy software? 603 00:50:20,881 --> 00:50:21,751 Look, I... 604 00:50:21,751 --> 00:50:25,123 This is so simple to me, like it is inevitable. 605 00:50:25,344 --> 00:50:31,467 What we're creating with Clio Work and with Clio Enterprise is going to be gorgeous. 606 00:50:31,468 --> 00:50:37,143 It's going to help the firms that use it be way more successful and way more profitable. 607 00:50:37,143 --> 00:50:39,544 The software is going to work better together. 608 00:50:39,544 --> 00:50:49,571 And even if they don't trade out their billing system or their conflict system or their CRM system, they all work together better in Clio Enterprise. 609 00:50:49,641 --> 00:50:57,336 formerly ShareDue, now Clio Operate, than they ever did with whatever APIs were pulling together inside the law firm. 610 00:50:57,477 --> 00:51:06,104 I think large law firms deserve great software, beautiful software that helps them to run great businesses. 611 00:51:06,104 --> 00:51:07,275 I think you think the same thing. 612 00:51:07,275 --> 00:51:09,566 You're helping them do that as well, right? 613 00:51:10,127 --> 00:51:17,982 So this is not Clio trying to sell small law firm software into large law firms. 614 00:51:18,356 --> 00:51:28,984 This is Clio saying we already have like lots of law firms who use pieces of the Clio world in dockets, in Vincent, in Cheridoo. 615 00:51:28,984 --> 00:51:30,906 We're going to bring all these things together. 616 00:51:30,906 --> 00:51:38,764 We're going to create a successful platform for large law firms to manage their various systems and replace the worst of them over time. 617 00:51:38,764 --> 00:51:42,318 And I think they deserve to have software that works exquisitely. 618 00:51:42,318 --> 00:51:45,146 just like small firms do, just like medium-sized firms do. 619 00:51:45,146 --> 00:51:46,847 I think it has to be clear. 620 00:51:47,186 --> 00:51:55,331 I think large law firms are going to insist that their operating system have access to the business of law and the practice of law. 621 00:51:55,332 --> 00:52:02,997 The best research and drafting and matter management and transactional software that exists in the world. 622 00:52:02,997 --> 00:52:05,289 We're gonna build it and people are gonna love it. 623 00:52:05,289 --> 00:52:06,230 Well, it's exciting. 624 00:52:06,230 --> 00:52:08,571 I'm excited to see the journey. 625 00:52:08,571 --> 00:52:15,696 I remember early days at ABA tech show and Cleo and I think Jack was still in the booth. 626 00:52:15,696 --> 00:52:20,219 You know, back in those early days and it's fun to see all the success. 627 00:52:20,219 --> 00:52:24,881 Congratulations to you guys on, you know, your merger. 628 00:52:24,881 --> 00:52:33,096 It's, it's a lot of fun to watch and I'd love to have you back on a future date and talk about all this other great stuff that we planned on talking about. 629 00:52:33,096 --> 00:52:34,119 but didn't get to. 630 00:52:34,119 --> 00:52:35,139 Awesome. 631 00:52:35,619 --> 00:52:37,939 Let's book it every hundred podcasts. 632 00:52:37,939 --> 00:52:39,679 I'll be there for 200. 633 00:52:40,039 --> 00:52:42,008 We can reflect back. 634 00:52:42,008 --> 00:52:42,639 Perfect. 635 00:52:42,639 --> 00:52:43,140 All right, Ed. 636 00:52:43,140 --> 00:52:45,403 Well, listen, thanks so much for being a part of this. 637 00:52:45,403 --> 00:52:53,763 It's been super fun, super special, and I'm sure I'm going to run into you probably at TLTF Summit in just a few weeks. 638 00:52:54,087 --> 00:52:56,776 Ted, congratulations on 100 podcast episodes. 639 00:52:56,776 --> 00:52:58,442 That's an amazing milestone. 640 00:52:58,442 --> 00:53:00,428 I think it's just terrific. 641 00:53:00,428 --> 00:53:01,404 Congratulations. 642 00:53:01,404 --> 00:53:02,324 Thank you. 643 00:53:02,324 --> 00:53:03,724 I appreciate it. 644 00:53:03,724 --> 00:53:05,784 All right Ed, have a good rest of your day. 645 00:53:06,924 --> 00:53:07,835 All right, take care. 00:00:02,346 Ed Walters, how are you this afternoon? 2 00:00:02,831 --> 00:00:03,636 Hey, I'm Gray Ted. 3 00:00:03,636 --> 00:00:04,568 How are you? 4 00:00:04,645 --> 00:00:08,945 I'm doing amazing and I'm so excited to have you. 5 00:00:08,945 --> 00:00:12,805 This is a big milestone in legal innovation spotlight. 6 00:00:12,805 --> 00:00:14,912 This is our 100th episode. 7 00:00:14,912 --> 00:00:15,412 Amazing. 8 00:00:15,412 --> 00:00:16,653 Congratulations. 9 00:00:16,653 --> 00:00:19,334 I'm really proud to be a part of it. 10 00:00:19,594 --> 00:00:32,542 I feel like the uh radio caller, like long time listener, first time caller, like I've always enjoyed your podcast and it's awesome to be a part of this momentous hundredth 11 00:00:32,542 --> 00:00:33,572 recording. 12 00:00:33,810 --> 00:00:35,250 Yeah, it's exciting. 13 00:00:35,250 --> 00:00:38,110 You know, um, I think my listeners have heard me talk about it. 14 00:00:38,110 --> 00:00:41,270 I never had any aspirations with this. 15 00:00:41,450 --> 00:00:43,810 I, how it all kind of got started. 16 00:00:43,810 --> 00:00:46,610 It's a good time to kind of reflect a little bit. 17 00:00:46,790 --> 00:00:58,350 Um, I used to own a company called Acrowire and we were a consulting organization and we decided to productize and relaunch the company in January of 2022. 18 00:00:58,530 --> 00:01:03,442 And I was reaching out to, I had done business in legal at that point for 19 00:01:03,442 --> 00:01:05,742 I don't know, 14, 15 years. 20 00:01:05,742 --> 00:01:07,582 So I had a good Rolodex. 21 00:01:07,862 --> 00:01:17,162 I was reaching out and reintroducing us to the market and I was recording the conversations so I could go back and like refine my pitch. 22 00:01:17,162 --> 00:01:22,022 And as I'm going back through the conversations, I was like, wow, there's a lot of like good dialogue here. 23 00:01:22,022 --> 00:01:24,122 I ought to create a podcast. 24 00:01:24,442 --> 00:01:28,742 And it took me, I don't know, another six months to finally do it. 25 00:01:28,742 --> 00:01:30,962 But, um, I released it. 26 00:01:30,962 --> 00:01:40,662 like three episodes before Ilta a couple of years ago, didn't think anybody, 20, no, 2022 maybe? 27 00:01:41,102 --> 00:01:42,202 Yeah, 2022. 28 00:01:42,202 --> 00:01:45,933 It was right around the time of ChatGPT, which was pure coincidence. 29 00:01:45,933 --> 00:01:54,093 Innovation became such a hot topic post ChatGPT that I really kind of got lucky with that. 30 00:01:54,093 --> 00:01:55,153 But, 31 00:01:55,153 --> 00:02:01,124 Yeah, I threw a couple episodes out there and then went to Ilta and had four or five people stopped by the booth and said, Hey, I your podcast. 32 00:02:01,124 --> 00:02:01,606 It's pretty good. 33 00:02:01,606 --> 00:02:04,138 I'm like, how the hell did you find it? 34 00:02:04,138 --> 00:02:09,825 And then we're like, well, it just kind of popped up in my, know, you might be interested Q. 35 00:02:09,825 --> 00:02:15,917 so I kept doing it and you know, just week after week, it's a, it's a great learning experience. 36 00:02:15,917 --> 00:02:22,742 I get smooth, super smart people like you on the podcast and I learned a ton from my guests and um, 37 00:02:22,742 --> 00:02:31,528 You know, I incorporate those learnings and lessons into the next episode and, you know, hopefully the, uh, the audience gets, gets value from it. 38 00:02:31,528 --> 00:02:34,215 So yeah, I'm super super. 39 00:02:34,215 --> 00:02:35,147 popular though, right? 40 00:02:35,147 --> 00:02:37,783 So like now you have like a lot of listeners. 41 00:02:37,783 --> 00:02:43,604 It's no longer a surprise when someone comes up to you at a conference and says, I saw your podcast or listen. 42 00:02:44,044 --> 00:02:45,595 Yeah, yeah, no, it's true. 43 00:02:45,595 --> 00:02:55,053 And now, um, you know, when I do speaking, like I was just spoke at, cam and I for legal last week, actually their sister conference they had, it's called legal tech connect. 44 00:02:55,053 --> 00:03:05,739 And, um, I moderated the keynote panel and now whenever I do a panel or whenever I do a session, I always say, Hey, do we have any listeners in the audience? 45 00:03:05,739 --> 00:03:07,880 And like the number of hands keeps getting bigger. 46 00:03:07,880 --> 00:03:09,501 So it's, it's cool. 47 00:03:09,501 --> 00:03:10,866 It's cool to see. 48 00:03:10,866 --> 00:03:11,276 And 49 00:03:11,276 --> 00:03:12,838 You know, we don't make any money from this. 50 00:03:12,838 --> 00:03:19,545 It's really a labor of love and I think it does give us some credibility and some visibility in the space. 51 00:03:19,545 --> 00:03:20,818 But yeah, it's not. 52 00:03:20,818 --> 00:03:22,063 We're not making any money on this. 53 00:03:22,063 --> 00:03:24,373 It's just a lot of fun and I really enjoy it. 54 00:03:24,373 --> 00:03:31,433 And you have this amazing diaspora of 100 podcast guests in the world. 55 00:03:31,871 --> 00:03:32,231 Yeah. 56 00:03:32,231 --> 00:03:43,836 And you know, we've got it documented on our, so we have legal innovation, spotlight.com and we have past guests and you know, every once in a while I'll, I'll remember an episode 57 00:03:43,836 --> 00:03:53,010 where we talked about something that I want to kind of go back and reference, or maybe I want to send to a potential customer or you know, a colleague and man, I scroll through 58 00:03:53,010 --> 00:03:54,650 that list to have such great names. 59 00:03:54,650 --> 00:03:57,242 So, um, yeah, it's super cool. 60 00:03:57,242 --> 00:04:00,503 I'm honored that you're here for this, 61 00:04:00,809 --> 00:04:09,799 hundredth episode and I think most of our audience knows you but for those that don't why don't you tell us a little bit about who you are what you do and where you do it. 62 00:04:09,799 --> 00:04:10,319 Awesome. 63 00:04:10,319 --> 00:04:11,659 So I'm Ed Walters. 64 00:04:11,659 --> 00:04:16,970 I am the Chief Strategy Officer of Villex and the co-founder of Fastcase. 65 00:04:16,970 --> 00:04:19,570 I teach at Georgetown Law. 66 00:04:19,570 --> 00:04:23,350 I teach a class called Generative AI and Big Law. 67 00:04:23,350 --> 00:04:27,870 And I teach a separate class called the Law of Robots at Georgetown. 68 00:04:27,930 --> 00:04:34,201 In the winter, I teach at University of Chicago Law School where I teach Gen AI in legal practice. 69 00:04:34,201 --> 00:04:43,801 And I suppose at this point in time, we are right at the end of October 2025 for the sake of posterity. 70 00:04:43,841 --> 00:04:55,861 We have not yet closed the acquisition of Vlex by Clio, but at some point in the fourth quarter here that is likely to close and I'll take on a whole new role. 71 00:04:55,861 --> 00:04:57,921 So that's a little bit about me. 72 00:04:57,921 --> 00:05:02,572 I was a beer and softball lawyer at Covington and Burling before. 73 00:05:02,572 --> 00:05:04,013 starting fast case. 74 00:05:04,013 --> 00:05:05,875 I worked in DC and Brussels. 75 00:05:05,875 --> 00:05:07,486 I was a pretty good softball player. 76 00:05:07,486 --> 00:05:14,020 I bat right-handed, but I could hit to right field, which is usually good for a couple of runs in the first inning of a softball game. 77 00:05:14,020 --> 00:05:22,446 was the lawyer you would send summer associates to lunch with to convince them that you could have a work-life balance in a big law firm. 78 00:05:22,446 --> 00:05:26,939 Very proud to know my role in the big global law firm. 79 00:05:26,939 --> 00:05:27,406 time. 80 00:05:27,406 --> 00:05:27,736 Yeah. 81 00:05:27,736 --> 00:05:29,428 And we're going to talk a little bit about that. 82 00:05:29,428 --> 00:05:36,531 Just the process of new associate development and some of the challenges with it today and what that might look like in the future. 83 00:05:36,832 --> 00:05:43,997 But the last time that you and I spoke, we had a chance to meet at Ilticon this year and we were just kind of riffing. 84 00:05:43,997 --> 00:05:53,764 And we were talking about just like some of the cornerstones of the big law world and how 85 00:05:53,916 --> 00:05:59,339 In my opinion, incompatible they are with where we're going. 86 00:05:59,439 --> 00:06:20,151 And these are deeply entrenched, like fundamental cornerstones, cultural norms like the ruthless tracking and measuring of billable hours by attorneys, which drives the internal 87 00:06:20,151 --> 00:06:21,662 firm compensation model. 88 00:06:21,662 --> 00:06:26,095 the partnership model that operates on a cash basis, which is somewhat unique. 89 00:06:26,095 --> 00:06:39,212 You know, in the U S the IRS code requires that firms that companies in excess of 25 million in revenue, leverage in a cruel basis accounting system and professional services, 90 00:06:39,212 --> 00:06:47,409 not just lawyers, you know, the big four, other professional services have a carve out for, to operate on a cash basis. 91 00:06:47,409 --> 00:06:50,480 And that creates interesting dynamics. 92 00:06:50,480 --> 00:06:54,160 You know, there's been a very, well, why don't we start there? 93 00:06:54,160 --> 00:07:04,220 Cause there's a laundry list of like things that have to really get re-examined as we move into this next generation of legal services. 94 00:07:04,220 --> 00:07:13,400 But like, you know, with a partnership partnership structure and the, um, you know, ABA model rule 5.4 that doesn't allow 95 00:07:14,096 --> 00:07:19,401 external capital and non-lawyers to benefit from a legal practice. 96 00:07:19,401 --> 00:07:26,364 We're starting to see like the sandbox in Utah and the ABS rules in Arizona. 97 00:07:26,364 --> 00:07:29,145 what is your take on? 98 00:07:29,145 --> 00:07:39,793 My take is I see real challenges with the partnership model in a scenario where you have a tech enabled legal service delivery model that requires some R &D. 99 00:07:39,793 --> 00:07:41,853 I don't know, do you agree, disagree? 100 00:07:41,853 --> 00:07:43,169 What's your take on that? 101 00:07:43,561 --> 00:07:44,161 I agree. 102 00:07:44,161 --> 00:07:47,872 This is like several classes in Gen.ai and Big Law. 103 00:07:47,872 --> 00:07:50,032 We can do it in a couple of segments. 104 00:07:50,032 --> 00:07:50,152 Okay. 105 00:07:50,152 --> 00:07:56,343 So let's start with talking about the competition over profits per partner. 106 00:07:56,343 --> 00:08:00,623 Then we can talk about the leverage model of law firms. 107 00:08:01,063 --> 00:08:10,918 Then we can talk about what happens when a lot of the brute force compute for law firms gets created in software. 108 00:08:10,918 --> 00:08:16,772 Okay, so let's just describe the standard state, the state of the world today. 109 00:08:16,772 --> 00:08:27,230 Especially large law firms are in a dogfight with each other over very successful partners and their book of business. 110 00:08:27,550 --> 00:08:35,714 And you see this all the time, like an entire group will leave one large law firm and then go join another law firm. 111 00:08:35,875 --> 00:08:38,496 Okay, and the big fight here is over 112 00:08:38,600 --> 00:08:50,857 Mostly profits per partner, a measure of the profitability of the law firm and the compensation of the top lawyers in that firm, which means that firms that are very highly 113 00:08:50,857 --> 00:08:57,641 profitable can attract the best lawyers and the best practices, regardless of what the revenue is, right? 114 00:08:57,641 --> 00:09:06,596 Like you can have a firm that has a lot of revenue, but a lot of costs and not a lot of profit, and they will bleed lawyers to more profitable law firms. 115 00:09:06,596 --> 00:09:10,518 So I'm just describing, this is a huge fight inside of large law firms. 116 00:09:10,518 --> 00:09:16,121 The most lucrative books of business are migrating to the firms that have the most profit. 117 00:09:16,121 --> 00:09:22,663 And that measures in some sense the efficiency of the law firm, not the top dollar amount. 118 00:09:22,663 --> 00:09:24,063 Okay, that's one. 119 00:09:24,063 --> 00:09:26,864 Two, how do you build a profitable law firm? 120 00:09:26,864 --> 00:09:29,224 Like what are those profits made of? 121 00:09:29,625 --> 00:09:34,666 Well, for a hundred years, big law firms have used this kind of Cravath model 122 00:09:34,722 --> 00:09:35,822 leverage, right? 123 00:09:35,822 --> 00:09:44,442 You have equity partners at the top of the pyramid, and then a larger number of non-equity partners, and then associates, and allied professionals. 124 00:09:44,442 --> 00:10:00,362 And the idea is you, the equity partners, bill out associates at, you know, $1,800 an hour, but pay them $800 an hour, and then have $1,000 an hour of profit, you know? 125 00:10:00,362 --> 00:10:01,786 And so in this 126 00:10:01,826 --> 00:10:03,037 kind of consulting model. 127 00:10:03,037 --> 00:10:07,670 You are trying to create as many hours as possible for the people in the law firm. 128 00:10:07,930 --> 00:10:18,121 Those hours are arbitraged and the arbitrage, the cream from this, the profit sort of rolls uphill to the equity partners. 129 00:10:18,121 --> 00:10:21,042 And it works if you have like a lot of associates. 130 00:10:21,483 --> 00:10:26,647 The more associates and billable time you have, the more leverage the firm has. 131 00:10:26,647 --> 00:10:28,639 Now look, that doesn't solve all the problems. 132 00:10:28,639 --> 00:10:31,541 You still have to run an effective, efficient law firm. 133 00:10:31,541 --> 00:10:36,326 There can't be a lot of friction between those arbitraged hours and the equity partners. 134 00:10:36,326 --> 00:10:38,948 But that's sort of what makes a modern law firm. 135 00:10:38,948 --> 00:10:40,470 Okay, here's the challenge. 136 00:10:40,470 --> 00:10:52,371 A lot of the work that is done by the associates, that is arbitraged, that is used for leverage inside of large law firms, is brute force compute work that is paid for by 137 00:10:52,371 --> 00:10:54,092 corporate legal departments. 138 00:10:54,378 --> 00:11:02,077 It is document review, is drafting, it is legal research, is draft writing and proofing. 139 00:11:02,077 --> 00:11:02,347 right. 140 00:11:02,347 --> 00:11:06,360 So a lot of these tasks are document intensive. 141 00:11:06,700 --> 00:11:07,922 They take a lot of time. 142 00:11:07,922 --> 00:11:16,598 And that's in a lot of ways like both how large law firms train the associates to become partners down the road and make money. 143 00:11:16,598 --> 00:11:17,999 Okay, here's the problem. 144 00:11:17,999 --> 00:11:28,149 A lot of those tasks are being done by software already, and already the software is getting better at many of these tasks than human lawyers are. 145 00:11:28,149 --> 00:11:37,900 There was a Val's benchmark for legal research just last week that says that even the kind of brand new models are better at legal research than the lawyer benchmark. 146 00:11:37,900 --> 00:11:42,395 Faster, cheaper, more accurate, higher quality from blind reading. 147 00:11:42,395 --> 00:11:45,088 So what's happening is we're already starting to see it. 148 00:11:45,088 --> 00:11:54,805 The corporate legal departments are saying, if there's a better software solution for this job, maybe it's AI, maybe it's automation, maybe it's something else, I don't want to pay 149 00:11:54,805 --> 00:11:56,097 your associates to do it. 150 00:11:56,097 --> 00:12:09,040 So what happens when the bottom corners of that triangle of leverage begin to shrink, when it becomes more like a pipe or like a diamond, right? 151 00:12:09,481 --> 00:12:13,522 You know, the leverage kind of disappears. 152 00:12:13,522 --> 00:12:18,503 You don't have as many dollars flowing up, which means that partners start to shed. 153 00:12:18,503 --> 00:12:24,676 They go into other law firms, like the whole model, the business model for law firms. 154 00:12:24,676 --> 00:12:27,656 comes under a lot of stress at the very least, okay? 155 00:12:27,656 --> 00:12:40,296 So the estimates I've seen, Toby Brown has a really good study about this saying about 13 % of legal billable hours are at risk of displacement over the next five years. 156 00:12:40,296 --> 00:12:42,816 This was two years ago when he said it. 157 00:12:42,836 --> 00:12:49,816 So within the next three years now, 13 % might not sound like a lot, but that's the profit margin for most law firms. 158 00:12:49,996 --> 00:12:52,546 I 13 % of the... 159 00:12:52,546 --> 00:13:00,882 legal services market in the US, 573 billion, is about $75 billion that will be evaporated. 160 00:13:00,882 --> 00:13:11,729 And corporate legal departments are using software and doing some of that work themselves, or insisting that their law firms use software to do it and show them where the savings 161 00:13:11,729 --> 00:13:12,509 are. 162 00:13:12,730 --> 00:13:15,562 So look, I mean, this is like several... 163 00:13:15,562 --> 00:13:18,334 hour-long lessons in my classes. 164 00:13:18,334 --> 00:13:24,608 I'm not going to do like a two-hour seminar, but let's just say it is inevitable that software will take some of those hours. 165 00:13:24,608 --> 00:13:26,229 That's a consensus. 166 00:13:26,229 --> 00:13:27,209 Not all the hours. 167 00:13:27,209 --> 00:13:29,380 I'm not talking about magical robot lawyers. 168 00:13:29,380 --> 00:13:36,085 I'm just saying that some of those tasks get compressed in time, which means that the leverage comes under strain. 169 00:13:36,085 --> 00:13:37,956 May I just add one more thing to this? 170 00:13:38,457 --> 00:13:40,978 I'm sorry, I've turned this into a Ted talk. 171 00:13:42,279 --> 00:13:47,823 All right, so look, how do we train law students and young lawyers? 172 00:13:48,103 --> 00:13:53,907 We train them with brute force compute funded by corporate legal departments. 173 00:13:54,208 --> 00:13:58,531 We train them by having them do this grunt work, right? 174 00:13:58,531 --> 00:14:05,106 They hate it, clients hate it, and increasingly software is better at some of this work. 175 00:14:05,106 --> 00:14:16,304 Okay, this could be seen as a crisis because we no longer have that kind of work, the subsidized work that makes new associates into young partners. 176 00:14:16,405 --> 00:14:19,578 But I think we could also see it as an invitation. 177 00:14:19,578 --> 00:14:26,883 AI is an invitation to us to rethink what we're training lawyers to do and how we're training them to do it. 178 00:14:26,883 --> 00:14:30,161 If we are training young associates, 179 00:14:30,161 --> 00:14:34,720 and law students to be the lawyers of 2007. 180 00:14:34,981 --> 00:14:37,061 We're going to fail. 181 00:14:37,381 --> 00:14:47,492 If we're training them to learn how to do these kind of brute force compute tasks, computers will be better and faster at brute force compute. 182 00:14:47,492 --> 00:14:49,172 That is also inevitable. 183 00:14:49,172 --> 00:14:52,352 Not every task, many tasks. 184 00:14:52,592 --> 00:14:55,032 So let's take this opportunity. 185 00:14:55,276 --> 00:15:02,849 to say what things will lawyers do in 2027 that computers can't do, that AI is not good at? 186 00:15:02,849 --> 00:15:12,412 What uniquely human attributes are going to characterize the best lawyers in the world three years from now, five years from now? 187 00:15:12,412 --> 00:15:14,353 Let's identify those things. 188 00:15:14,353 --> 00:15:23,069 Counseling, discernment, human judgment, the ability to supervise software, to pick the right tool for the job. 189 00:15:23,069 --> 00:15:29,683 to understand the value of legal services, to weigh risks in collaboration with the client. 190 00:15:30,044 --> 00:15:38,848 These today are called soft skills, I think, but let me just encourage us to reframe them as human skills. 191 00:15:38,848 --> 00:15:45,410 And this is what we should be identifying as the key attributes of great lawyers five years from now. 192 00:15:45,630 --> 00:15:49,672 And then we should find ways to train 193 00:15:49,958 --> 00:16:04,086 law students and young lawyers to excel at these human characteristics of lawyer, instead of training them to figure out whether a period is italicized or not in a citation, which 194 00:16:04,086 --> 00:16:05,359 is what we're currently doing. 195 00:16:05,359 --> 00:16:13,714 So I think we could see it as a real challenge to this leverage model for law firms, but it is totally possible. 196 00:16:13,714 --> 00:16:24,510 that on the other side of this, we have law firms that have a different business model where the revenue might be even a little lower, maybe 13 % lower if we follow the stats, 197 00:16:24,510 --> 00:16:33,664 but more profitable, where the lawyers are happier, and where we are serving more people with legal needs than we currently do. 198 00:16:33,664 --> 00:16:37,516 mean, these are all huge opportunities. 199 00:16:37,716 --> 00:16:40,177 Now, I'm not even talking yet about A to J. 200 00:16:40,209 --> 00:16:43,889 and the legal market, I'm happy to get there if you want to. 201 00:16:43,889 --> 00:16:54,229 But even if we're only serving the same people we're serving today, there is the opportunity to do that better, to train lawyers, to be better human lawyers, and to 202 00:16:54,229 --> 00:16:59,009 deliver extraordinary value for corporate legal departments. 203 00:16:59,109 --> 00:17:08,080 This is, I mean, if we see this as a world of scarcity, where we're trying to preserve as much as we can from the business model from 2007, it's a disaster. 204 00:17:08,080 --> 00:17:17,511 If we view this through the lens of abundance, where we can do a lot more legal work and a lot better legal work and more of the work that we went to law school to do in the first 205 00:17:17,511 --> 00:17:21,647 place, this is an unprecedented opportunity. 206 00:17:21,647 --> 00:17:25,673 Yeah, you know, so I have a little bit of a difficult time. 207 00:17:25,673 --> 00:17:29,276 envisioning what law firms are going to look like in five years. 208 00:17:29,276 --> 00:17:38,584 But I have a pretty clear vision of how I see lawyers working in a corporate legal environment. 209 00:17:38,584 --> 00:17:45,009 And that's based on having spent 10 years in a risk management role at Bank of America. 210 00:17:45,009 --> 00:17:47,351 So I started off in consumer risk. 211 00:17:47,351 --> 00:17:49,453 I went all over the place, global treasury. 212 00:17:49,453 --> 00:17:52,014 I was then in anti-money laundering. 213 00:17:52,014 --> 00:17:53,636 I went to corporate audit. 214 00:17:53,636 --> 00:17:55,687 I was in regulatory relations. 215 00:17:55,889 --> 00:17:57,341 Almost in. 216 00:17:57,815 --> 00:17:59,825 had 5,000 lawyers report to you over that time. 217 00:17:59,825 --> 00:18:00,946 No, didn't. 218 00:18:00,946 --> 00:18:06,192 no, this is what's interesting is how infrequently we engaged with legal. 219 00:18:06,192 --> 00:18:09,886 Legal was almost a separate business. 220 00:18:09,886 --> 00:18:12,446 was so incredibly siloed. 221 00:18:12,446 --> 00:18:14,430 And we did a little bit of legal work. 222 00:18:14,430 --> 00:18:16,965 I've talked about it on here before. 223 00:18:16,965 --> 00:18:21,927 I filed a patent for something I developed, a regulatory measure tool. 224 00:18:21,927 --> 00:18:24,469 Basically, I built a tool that 225 00:18:24,473 --> 00:18:37,797 compiled all of the regulatory examinations from all of the alphabet soup, FINRA, the Fed, the OCC, FinCEN, and then local, you know, the Connecticut State Bank Examiner and 226 00:18:37,797 --> 00:18:45,359 compiled all this data and put it on a graph, a numeric value, and we called it the regulatory index. 227 00:18:45,359 --> 00:18:46,839 As part of it, it was really cool. 228 00:18:46,839 --> 00:18:48,360 And I'm not sure if it's still in use. 229 00:18:48,360 --> 00:18:52,121 This has gone back 20 years, a little over that. 230 00:18:52,138 --> 00:19:01,103 As part of that, I had to engage with legal to kind of get them up to speed on what, and it was done at such an arms length type relationship. 231 00:19:01,103 --> 00:19:13,590 They had a ticketing system that I had to create a ticket that said what I wanted to do, upload the documents, schedule time with someone fairly lower level and get everything in 232 00:19:13,590 --> 00:19:13,990 order. 233 00:19:13,990 --> 00:19:16,331 And then spoke with a more senior attorney. 234 00:19:16,331 --> 00:19:19,354 It was very much an arms length, transaction. 235 00:19:19,374 --> 00:19:21,405 And when I was out there doing 236 00:19:21,427 --> 00:19:23,188 very, very important. 237 00:19:23,188 --> 00:19:29,991 So AML, anti-money laundering, money laundering was one of the top three risks in financial services in my era. 238 00:19:29,991 --> 00:19:34,472 I'm not sure if that's still the case, but very important work. 239 00:19:34,492 --> 00:19:40,805 And the only time legal got involved is when things went sideways, right? 240 00:19:40,805 --> 00:19:42,596 So they weren't, they weren't involved. 241 00:19:42,596 --> 00:19:50,559 Now we had a few lawyers like Bill Fox, who it was the former head of Finson, the bank hired him away and he ran 242 00:19:50,577 --> 00:19:52,027 anti-money laundering at B of A. 243 00:19:52,027 --> 00:19:52,849 He was a lawyer. 244 00:19:52,849 --> 00:20:07,017 But the people who were crafting some of the detection mechanisms for money laundering or interpreting even the USA Patriot Act or the Bank Secrecy Act, we were doing that as 245 00:20:07,017 --> 00:20:10,428 non-lawyers in compliance and risk. 246 00:20:10,680 --> 00:20:19,904 And, we could request help from legal, but I see a world where legal is deeply embedded in the lines of business themselves. 247 00:20:19,904 --> 00:20:26,551 So today in risk management, you have the three lines of defense really for, I've talked about it before. 248 00:20:26,551 --> 00:20:36,745 have the line of business that those are the people who are trans transacting the consumer bank, the commercial bank, the wealth bank, and then you have risk management partners 249 00:20:36,745 --> 00:20:38,296 that are aligned to. 250 00:20:38,456 --> 00:20:39,627 specific lines of business. 251 00:20:39,627 --> 00:20:40,708 Then you have corporate audit. 252 00:20:40,708 --> 00:20:42,479 That's your third line of defense. 253 00:20:42,479 --> 00:20:49,665 And then we used to jokingly say the fourth line of defense is the Wall Street Journal because that's where you end up if the first three fail. 254 00:20:49,725 --> 00:20:54,210 But legal is not in any of those lines of defense. 255 00:20:54,210 --> 00:21:07,767 I see a world where as we get away from the, all of the mechanics, all the blocking and tackling and lawyers become more in advisory capacity and get embedded 256 00:21:07,767 --> 00:21:11,698 You'll get embedded with the consumer bank and actually look at their process. 257 00:21:11,698 --> 00:21:23,982 Don't have a, you know, a non-lawyer like myself, map the process and try to assess risk, not fully knowing the statutes and the interpretation and the case law around them. 258 00:21:23,982 --> 00:21:32,024 So I really see a more, of a, lawyers being more tightly coupled to the business that doesn't exist today in the enterprise. 259 00:21:32,024 --> 00:21:33,945 That's not how risk management works. 260 00:21:33,945 --> 00:21:35,445 At least when I left. 261 00:21:35,697 --> 00:21:44,517 So I don't know how that translates to the legal world, but that seems to be a very logical path inside the enterprise. 262 00:21:44,557 --> 00:21:46,808 Does that make sense to you or do you have a different vision? 263 00:21:46,808 --> 00:21:47,856 No, I think that's right. 264 00:21:47,856 --> 00:21:48,379 mean, we... 265 00:21:48,379 --> 00:21:51,400 Law has erected such a large wall. 266 00:21:51,761 --> 00:22:00,345 It's so complex and maybe intentionally inscrutable that it's very hard to integrate it into business processes. 267 00:22:00,726 --> 00:22:15,256 But I think if you were able to lower the wall using software or processes to popularize understanding of the law, to manage complexity in a more 268 00:22:15,256 --> 00:22:22,020 systematic way, I don't know what the right metaphor is, like piling dirt around the wall so that you can walk right over it. 269 00:22:22,020 --> 00:22:28,362 But I think the idea is we wouldn't need lawyers to help us catapult over the wall. 270 00:22:28,362 --> 00:22:35,084 We would need them to engineer turf so that it's not such a barrier to us. 271 00:22:35,104 --> 00:22:39,096 And then we can integrate the law more directly into the business. 272 00:22:39,096 --> 00:22:43,820 And this is, mean, I think for lawyers in-house, what a blessing, right? 273 00:22:43,820 --> 00:22:54,370 If you can be more involved with the business, if you could be like a value center and not a cost center, if you can help aid with internal compliance instead of being the last 274 00:22:54,370 --> 00:23:00,115 resort after the rails come off everything, like you'd said before, I think that would be a great role for lawyers. 275 00:23:00,115 --> 00:23:01,927 think lawyers would be really excited about that. 276 00:23:01,927 --> 00:23:06,567 Yeah, it seems like a, I think it's a win across the board, right? 277 00:23:06,567 --> 00:23:18,707 The business is going to win because they're getting that legal lens much closer to where it needs to be instead of, again, when things go sideways. 278 00:23:18,847 --> 00:23:28,367 And, you know, the way that, the way that many businesses engage with legal today is when something's on fire, it's very reactive. 279 00:23:28,367 --> 00:23:31,487 There's not, you know, it's not terribly proactive. 280 00:23:31,695 --> 00:23:42,610 So I think moving towards the proactive end of the spectrum seems to make a lot of sense and a place where lawyers could add a lot more value to the business. 281 00:23:42,610 --> 00:23:50,835 know, and something else, there's a, there's a friction today between, mean, I see it when I sell to law firms, you know, uh procurement, right? 282 00:23:50,835 --> 00:23:56,808 Procurement comes in marks up the, the, you know, our software license subscription agreement. 283 00:23:56,808 --> 00:23:59,319 And we have to go to the business and go, guys, this doesn't make sense. 284 00:23:59,319 --> 00:24:00,580 And here's why. 285 00:24:00,580 --> 00:24:04,622 And then they got to go talk to the lawyers and go, Hey, look, here's why we have that provision. 286 00:24:04,622 --> 00:24:06,764 And they're so far removed. 287 00:24:06,764 --> 00:24:11,757 It's, if they were more embedded in the process, they would understand. 288 00:24:11,818 --> 00:24:23,624 And, know, something else as a consumer of legal services that I have recognized is that lawyers are really good at identifying risk, but as a business person, it's not, that's 289 00:24:23,624 --> 00:24:25,605 only one half of the equation. 290 00:24:25,807 --> 00:24:31,821 In what business scenario do you not look at something in a risk reward on a risk reward basis? 291 00:24:31,821 --> 00:24:33,482 That's the nature of business, right? 292 00:24:33,482 --> 00:24:36,374 What do I have to put at risk and what's the potential outcome? 293 00:24:36,374 --> 00:24:47,511 but having a understanding of what the rewards are as part of whatever it is you're trying to do, get a contract across the goal line, um, sign a commercial lease. 294 00:24:47,511 --> 00:24:53,226 They're so risk focused having both sides of that risk reward scale. 295 00:24:53,226 --> 00:24:56,266 Having perspective on that, I think would add a lot of value to the business. 296 00:24:56,266 --> 00:24:57,226 For sure. 297 00:24:57,226 --> 00:25:00,726 And this is another place where we just don't train lawyers. 298 00:25:00,726 --> 00:25:02,906 It's not like lawyers couldn't see that. 299 00:25:02,906 --> 00:25:05,746 People go to law school and they become blind to the rewards. 300 00:25:05,746 --> 00:25:07,506 It's just not part of the training. 301 00:25:07,766 --> 00:25:16,057 You know, the training is really about risk and identifying it and wringing the last drop of risk out of every transaction, kind of regardless of the value, right? 302 00:25:16,057 --> 00:25:23,237 But when businesses do these deals, they're saying, look, this is a high value transaction. 303 00:25:23,237 --> 00:25:24,697 I'm willing to take some risk. 304 00:25:24,847 --> 00:25:34,823 And there are times when the cost of wringing the risk out of the business exceeds the cost of the risk times the likelihood it's going to occur. 305 00:25:34,823 --> 00:25:37,344 you know, this drives businesses crazy. 306 00:25:37,344 --> 00:25:38,255 I'm one of them, right? 307 00:25:38,255 --> 00:25:51,333 So I serve lawyers in my software capacity, but in the business capacity, I also employ a lot of law firms, you know, and in these transactions, I will see them, you know, arguing 308 00:25:51,333 --> 00:25:53,094 over like these very 309 00:25:53,490 --> 00:26:06,790 long tail risks and investing weeks or months trying to like extract the last little bit of risk out of a transaction at great expense, right? 310 00:26:06,790 --> 00:26:07,990 It drives me crazy. 311 00:26:07,990 --> 00:26:19,110 I mean, I would love to have a different kind of conversation saying, is this a risk we care enough about to try and remove it from the transaction or, you know, it's just not 312 00:26:19,110 --> 00:26:23,754 worth it to us to spend $19,000 to try to 313 00:26:23,762 --> 00:26:29,582 remove a one in a hundred risk of $19,000 occurring, right? 314 00:26:29,582 --> 00:26:31,373 $19,000 worth of risk occurring. 315 00:26:31,373 --> 00:26:31,903 Exactly. 316 00:26:31,903 --> 00:26:32,554 Yeah. 317 00:26:32,554 --> 00:26:43,881 It's, um, so I think, I think there would be great value to having a more integrated, relationship that again, today in the enterprise, it's very siloed as a small business 318 00:26:43,881 --> 00:26:44,282 owner. 319 00:26:44,282 --> 00:26:47,654 we engage law firms very regularly as well. 320 00:26:47,654 --> 00:26:56,009 And again, it's, it's also very arm's length, very limited view of what the reward side of the equation is. 321 00:26:56,113 --> 00:27:06,879 and a lot of conversation necessary to really help strike the right balance where if the lawyers were embedded more in the business, they would understand the reward side. 322 00:27:06,879 --> 00:27:17,465 What do you think about, you one thing you and I talked about the last time was like R &D and like what law firms should expect in terms of what sort of R &D investments are going 323 00:27:17,465 --> 00:27:20,236 to be required in this next iteration, right? 324 00:27:20,236 --> 00:27:20,956 Like 325 00:27:21,194 --> 00:27:31,484 Buying, I talk about it all the time, buying off the shelf tools, lawyers aren't going to be able to differentiate themselves and even risk having kind of a powered by, I call it 326 00:27:31,484 --> 00:27:32,785 the powered by problem, right? 327 00:27:32,785 --> 00:27:39,340 Like this is Kirkland and Ellis powered by Harvey or is this Harvey powered by Kirkland and Ellis? 328 00:27:39,340 --> 00:27:40,191 You know what I mean? 329 00:27:40,191 --> 00:27:43,254 The law firms need to be in the driver's seat and how do they do that? 330 00:27:43,254 --> 00:27:45,906 I think that some, some R and D it's going to 331 00:27:46,226 --> 00:27:48,918 a little bit of investment and a change in mindset. 332 00:27:48,918 --> 00:27:50,485 How do you see that picture? 333 00:27:50,485 --> 00:27:55,869 Well, I would say R &D is one of the key quirks of the law firm business model. 334 00:27:56,030 --> 00:28:00,665 Law firms are some of the biggest organizations in the world that just don't have R &D departments. 335 00:28:00,665 --> 00:28:02,887 There's not a good reason for them not to, they should. 336 00:28:02,887 --> 00:28:07,321 So I think that the best law firms are going to have to do R &D. 337 00:28:07,321 --> 00:28:12,295 The other quirk I'll say is that law firms are some of the biggest organizations in the world that 338 00:28:12,295 --> 00:28:13,817 don't have assets. 339 00:28:13,817 --> 00:28:17,610 I mean, they're consulting service delivery model businesses. 340 00:28:17,610 --> 00:28:18,942 They do have assets. 341 00:28:18,942 --> 00:28:21,243 And some of the biggest assets are data assets. 342 00:28:21,243 --> 00:28:30,847 They're sitting on this network drive full of templates, expertise, data that has real value, right? 343 00:28:30,847 --> 00:28:32,629 But it doesn't appear on the balance sheet. 344 00:28:32,629 --> 00:28:34,721 There's no way to commercialize it. 345 00:28:34,721 --> 00:28:44,628 So I would just say, like, I would love to see law firms doing some research and development into how to make those assets useful and how to deploy them in a way that's 346 00:28:44,628 --> 00:28:45,388 differentiated. 347 00:28:45,388 --> 00:28:49,041 I'll put my company hat on for a second. 348 00:28:49,041 --> 00:28:54,504 Like, we're actually making a pretty big bet on this at Villex in Vincent. 349 00:28:54,504 --> 00:29:02,675 We've created a tool called Vincent Studio that allows law firms to build their own AI tools using, you know, all of the 350 00:29:02,675 --> 00:29:10,482 kind of AI tools we've built into Vincent using our data and their data together to build these AI tools. 351 00:29:10,543 --> 00:29:21,392 So if you just buy any of the AI tools off the shelf, every law firm and every corporate legal department is going to have the same answers that come out of them. 352 00:29:21,713 --> 00:29:28,760 But if you're able to use them to unlock the proprietary advantage that is held by your data, 353 00:29:28,760 --> 00:29:36,704 Then you have something that's differentiated, that is marketable, that is highly valuable and not commoditized. 354 00:29:36,765 --> 00:29:39,016 But that requires R &D to your original point. 355 00:29:39,016 --> 00:29:42,268 It requires doing a little bit of experimentation. 356 00:29:42,508 --> 00:29:47,174 It will not be, you probably won't get a rabbit the first time you stick your hand into the hat. 357 00:29:47,174 --> 00:29:52,187 It might require a couple of tries and, you know. 358 00:29:52,355 --> 00:29:54,116 repeat attempts and iterations. 359 00:29:54,116 --> 00:29:57,518 But I mean, that's the whole point of research and development, right? 360 00:29:57,839 --> 00:30:03,823 It wouldn't be researched in development if it worked the first time you did everything. 361 00:30:04,023 --> 00:30:07,465 So I think this should be like a new mindset of law firms. 362 00:30:07,465 --> 00:30:14,922 It should be what kind of research can we do to create a differentiated product for legal services? 363 00:30:15,102 --> 00:30:19,961 Maybe it's in the content, maybe it's in the distribution, maybe it's in 364 00:30:19,961 --> 00:30:21,853 the services that you're able to offer. 365 00:30:21,853 --> 00:30:26,847 Maybe it's because of insights in one piece of work that you're able to apply to a different piece of work. 366 00:30:26,847 --> 00:30:30,870 But this all requires experimentation and R &D. 367 00:30:30,870 --> 00:30:33,692 Now I'll go back to the thing we talked about in the very top of this. 368 00:30:33,692 --> 00:30:37,276 Law firms are weird businesses because you pay out all the profits every year. 369 00:30:37,276 --> 00:30:44,552 And because of that, it doesn't really reward experimentation that pays off over years. 370 00:30:44,552 --> 00:30:52,543 I take a hit on profits per partner in 2025 to do R &D that's going to pay off in 2027. 371 00:30:52,543 --> 00:31:03,483 mean, 2027 is rooting for you to do that in 2025, but the partners of 2025 want their profits in 2025. 372 00:31:03,583 --> 00:31:11,674 So we need to find a way to balance this long-term sustainability of business, the research and development requirement. 373 00:31:11,674 --> 00:31:17,250 with the separate requirement that would pay out all the profits of the law firm in this year. 374 00:31:17,250 --> 00:31:27,066 And that if we don't have very high profits per partner, we're at risk of losing whole partnerships and whole groups from the firm to more profitable law firms. 375 00:31:27,398 --> 00:31:31,345 Exactly and god there's so many points I want to touch on there. 376 00:31:31,345 --> 00:31:32,840 First, I complete... 377 00:31:32,840 --> 00:31:34,082 like four hours to talk. 378 00:31:34,082 --> 00:31:38,169 It's gonna be like an amazing four hour conversation we have together today. 379 00:31:38,169 --> 00:31:42,802 You know, like, like Huberman and Rogan, they do a marathon podcast. 380 00:31:42,802 --> 00:31:47,275 Like I, I'm assuming they hit pause to take bathroom breaks because it goes on for hours. 381 00:31:47,275 --> 00:32:00,395 Um, but, so law firms have all of this knowledge and wisdom in, in many, much of that is memorialized in artifacts, i.e. 382 00:32:00,395 --> 00:32:03,848 documents that created winning outcomes for their clients. 383 00:32:03,848 --> 00:32:05,723 And that has to be leveraged. 384 00:32:05,723 --> 00:32:08,455 But there's a monumental challenge that we have right now. 385 00:32:08,455 --> 00:32:19,940 Having been in this space for almost 20 years, I have seen the lack of data hygiene that exists in the law firm infrastructure. 386 00:32:19,940 --> 00:32:23,494 Lawyers, many refuse to even profile a document. 387 00:32:23,494 --> 00:32:27,935 what type of document it is, what matter it relates to is typically 388 00:32:27,935 --> 00:32:33,229 table stakes, you know, a matter centric DMS takes care of that piece for you. 389 00:32:33,229 --> 00:32:37,712 But even just the most basic attributes about the document aren't there. 390 00:32:37,712 --> 00:32:53,644 Ask a lawyer to go back one year in a matter workspace and find the final document, the true final document, you know, final, final, final, final, final, initials date final. 391 00:32:53,644 --> 00:32:56,917 It's really difficult even for the lawyer who 392 00:32:56,917 --> 00:32:57,909 ran the matter. 393 00:32:57,909 --> 00:33:01,594 How is technology going to bridge that gap? 394 00:33:01,594 --> 00:33:06,422 I don't know, but I see a big problem and challenge that we got to get over with data hygiene. 395 00:33:06,422 --> 00:33:07,753 Do you see it as well? 396 00:33:08,171 --> 00:33:12,655 Yes, I tried to build one of these systems when I was in my law firm at Covington and Burling. 397 00:33:12,655 --> 00:33:17,320 I was part of a pilot group that created an early knowledge management system. 398 00:33:17,320 --> 00:33:26,639 It was kind of a network drive and every firm had like a metadata screen that you would add like who the author was and what kind of thing it was and who the client was and what 399 00:33:26,639 --> 00:33:29,191 the matter was, dot, dot, dot, dot, dot. 400 00:33:29,191 --> 00:33:32,526 It was required every time that you saved a document. 401 00:33:32,526 --> 00:33:35,047 The firm rejected it in every way. 402 00:33:35,047 --> 00:33:36,647 You can reject technology. 403 00:33:36,647 --> 00:33:39,659 People would not enter the data for these things. 404 00:33:39,659 --> 00:33:40,830 There are multiple drafts. 405 00:33:40,830 --> 00:33:43,471 Every time you save something, it would create a new version of it. 406 00:33:43,471 --> 00:33:44,522 It was a disaster. 407 00:33:44,522 --> 00:33:48,907 I don't think that lawyers will ever voluntarily create that metadata. 408 00:33:48,907 --> 00:33:54,288 I think any system that requires them to do that extra overhead. 409 00:33:54,310 --> 00:33:56,922 even for the purposes of data hygiene, is doomed to fail. 410 00:33:56,922 --> 00:34:01,085 And the good news is software is probably better at that than it ever has been. 411 00:34:01,085 --> 00:34:04,709 Good software can extract what the thing is, what draft it is. 412 00:34:04,709 --> 00:34:09,471 There are things that you can do in the architecture to make this easier as well. 413 00:34:09,471 --> 00:34:17,356 So again, I'm not trying to sell Clio right now, but so the idea of Clio work 414 00:34:17,398 --> 00:34:20,130 is that you will be doing that work in context. 415 00:34:20,130 --> 00:34:28,064 You do that within the context of a client and matter inside of Clio, which will be aware of where you are in the process. 416 00:34:28,064 --> 00:34:38,540 Everything that's happened up until that point, what your law firm does as a playbook for these things, what the bill says, what the client pays for and doesn't pay for. 417 00:34:38,700 --> 00:34:42,801 All of that context exists at the point where you're doing the work. 418 00:34:42,842 --> 00:34:43,902 And so, 419 00:34:44,138 --> 00:34:48,058 When you save that document, a lot of that already exists. 420 00:34:48,058 --> 00:34:50,418 We know that this is a motion to dismiss. 421 00:34:50,418 --> 00:34:52,118 We know what the client matter is. 422 00:34:52,118 --> 00:34:54,038 We know what stage it's at. 423 00:34:54,098 --> 00:34:56,218 We know everything about it. 424 00:34:56,218 --> 00:35:01,138 You know, who the lawyer is and what year she is in the firm. 425 00:35:01,138 --> 00:35:04,818 Like every single bit of this context we already have. 426 00:35:04,818 --> 00:35:10,338 And so I could just sort of save the metadata in the background, but then you have all the structured data. 427 00:35:10,338 --> 00:35:14,050 I'll just add to like one of the most important sources of 428 00:35:14,068 --> 00:35:18,021 This proprietary information is not in the documents, but in the bills. 429 00:35:18,021 --> 00:35:23,204 And most lawyers and law firms don't really have access to the billing system. 430 00:35:23,504 --> 00:35:25,045 But I think this will be different in Clio. 431 00:35:25,045 --> 00:35:26,969 You'll have access to your bills. 432 00:35:26,969 --> 00:35:32,352 And I think we could be creating a lot of interesting insights out of the bills. 433 00:35:32,492 --> 00:35:34,113 How long do matters take? 434 00:35:34,113 --> 00:35:35,214 The bill tells you that. 435 00:35:35,214 --> 00:35:37,565 How much does it cost to this stage? 436 00:35:37,961 --> 00:35:40,092 for this kind of matter. 437 00:35:40,413 --> 00:35:41,404 Bill tells you that too. 438 00:35:41,404 --> 00:35:44,636 This is different in this office versus this other office. 439 00:35:44,737 --> 00:35:47,490 Yeah, we knew all these things. 440 00:35:47,490 --> 00:35:53,135 this is one of the promises of uniting the business of law and the practice of law in Clio. 441 00:35:53,135 --> 00:36:00,661 It's one of the things we're going to be pushing on when the transaction closes sometime in the fourth quarter, which is to say, 442 00:36:00,795 --> 00:36:05,859 Yes, all these insights are in documents, but a whole separate class of insights are in the bills. 443 00:36:05,859 --> 00:36:14,773 Let's bring them all together and we'll make a very rich context that helps us draft more effectively, that saves the metadata in a more clueful way. 444 00:36:14,773 --> 00:36:27,290 And then like kind of automatically creates the metadata in a way that allows us to do better R &D and create new products and pull all these insights out. 445 00:36:27,290 --> 00:36:29,303 It doesn't require like 446 00:36:29,303 --> 00:36:32,486 manual scrubbing to clean the pan. 447 00:36:32,486 --> 00:36:34,118 We're starting with a nonstick pan. 448 00:36:34,118 --> 00:36:40,496 Because I don't think lawyers will ever do that kind of data hygiene, data governance. 449 00:36:40,496 --> 00:36:42,858 I think it's highly unlikely to ever happen. 450 00:36:42,858 --> 00:36:47,913 So we should build systems that are very resilient and do a lot of it for them for their benefit. 451 00:36:48,397 --> 00:36:59,471 You know, I think uh legal is really at the same place the auto industry was in 1913, which is the year that Ford deployed the assembly line. 452 00:36:59,471 --> 00:37:06,144 And that's not to say that we're going to churn out legal work like a factory churns out cars. 453 00:37:06,144 --> 00:37:07,354 That's not what I'm saying. 454 00:37:07,354 --> 00:37:14,260 But pre 1913, like automobile manufacturing was very much an artisan, bespoke process. 455 00:37:14,260 --> 00:37:14,894 And 456 00:37:14,894 --> 00:37:25,732 like supply chain and logistics and having, being able to repair a vehicle that required some specialty part, like Ford standardized all that. 457 00:37:25,732 --> 00:37:31,416 And I think we can learn some things by looking at how the auto industry transformed. 458 00:37:31,416 --> 00:37:37,011 First of all, the, the production is, was a, a very, of lessons there. 459 00:37:37,011 --> 00:37:41,736 They went from about 600,000 in 460 00:37:41,736 --> 00:37:46,040 1913 to over 6 million five years later ish. 461 00:37:46,040 --> 00:38:01,178 We saw a increase in capital expense and capital projects that improved quality and output that didn't really exist. 462 00:38:01,178 --> 00:38:05,999 quality control was also a very bespoke non-standardized process. 463 00:38:05,999 --> 00:38:08,961 So I think we can learn some things by looking at the auto industry. 464 00:38:08,961 --> 00:38:14,842 And I know lawyers are very, have a very visceral reaction. 465 00:38:14,842 --> 00:38:21,064 You know, it's like, okay, Ford factory iron ore goes in one end, cars come out the other. 466 00:38:21,064 --> 00:38:24,265 That's not how legal works today. 467 00:38:24,265 --> 00:38:24,845 Right. 468 00:38:24,845 --> 00:38:30,046 Um, I think there will, there are several areas of law where that model will apply. 469 00:38:30,199 --> 00:38:33,760 but it, it changed, it changed everything. 470 00:38:33,760 --> 00:38:43,917 What, mean, do you have any kind of, are there any mental models that we can look at from past experience that tell us how things may play out here in the legal world? 471 00:38:43,917 --> 00:38:45,747 Yeah, let's stick with cars for a second. 472 00:38:45,747 --> 00:38:52,941 I mean, I think you don't know this, but I actually wrote an article about this, about this exact moment in law on that same thesis. 473 00:38:52,941 --> 00:38:54,861 ah yes. 474 00:38:54,881 --> 00:38:55,271 Yeah. 475 00:38:55,271 --> 00:39:07,695 So if you've heard the term fit and finish, this was a stage in auto manufacturing at the end, one of the most expensive parts, where a craftsperson would make sure that all the 476 00:39:07,695 --> 00:39:10,003 panels fit together just right. 477 00:39:10,003 --> 00:39:11,904 because the parts weren't standard. 478 00:39:12,104 --> 00:39:17,387 So standard parts were an incredibly important part of the assembly line you were talking about. 479 00:39:17,387 --> 00:39:19,907 The idea of specialization. 480 00:39:19,968 --> 00:39:28,702 So it used to be the reason that there were so few cars that were creative was like one person was doing the wheels and the windshields and the paint. 481 00:39:28,702 --> 00:39:35,705 You you would have like one craftsperson building the entire car or like four, right? 482 00:39:35,737 --> 00:39:39,588 And so part of the assembly line was, look, we're going to have someone who specializes in windshields. 483 00:39:39,588 --> 00:39:40,298 That's all they do. 484 00:39:40,298 --> 00:39:42,139 They're going to become experts at it. 485 00:39:42,139 --> 00:39:45,081 And they're going to drop in 600 windshields a day. 486 00:39:45,081 --> 00:39:47,233 There was a change in the product. 487 00:39:47,233 --> 00:39:52,216 Maybe you've heard the expression, you can have any color model T you want as long as it's black. 488 00:39:52,216 --> 00:39:53,896 There's a reason for that. 489 00:39:54,076 --> 00:39:59,759 So one of the problems they found in production was the slowest part of the production of a car was paint. 490 00:39:59,759 --> 00:40:10,093 But Henry Ford himself found a paint that dried faster than any other automobile paint in the world, but it was only available in India black. 491 00:40:10,093 --> 00:40:22,924 And he said, look, we are going to reduce the number of options for the Model T for the purpose of making them more available and faster and less expensively for more people. 492 00:40:22,924 --> 00:40:25,375 And so look, this is where it hits home for me, all right? 493 00:40:25,601 --> 00:40:33,777 We are building the 1910 Model A in legal services, right? 494 00:40:33,777 --> 00:40:39,832 We are building highly bespoke, very expensive and slow legal services. 495 00:40:39,832 --> 00:40:48,279 And like the Model A, it's only affordable to the wealthiest people in the world or the most risk averse people in the world, I suppose. 496 00:40:48,279 --> 00:40:52,331 But the market for automobiles was vastly greater. 497 00:40:52,547 --> 00:40:59,079 Just like the market for legal services is vastly greater, there's so many people who need legal help and who can't get it. 498 00:40:59,240 --> 00:41:07,883 But one of the reasons they can't get it is because we insist on hand crafting every bit of legal services ourselves. 499 00:41:07,883 --> 00:41:15,337 We insist on the one-to-one hourly basis consulting model for each legal matter. 500 00:41:15,337 --> 00:41:19,009 When we could make a few adjustments to the process. 501 00:41:19,009 --> 00:41:19,809 Look. 502 00:41:19,941 --> 00:41:26,675 For the highly bespoke Bethic company litigation, one-to-one consulting is probably the way to go, right? 503 00:41:26,675 --> 00:41:38,130 But if we want to make the Model T and make it available for any American, anyone who has legal problems, we might have to make some changes to that production. 504 00:41:38,130 --> 00:41:44,603 It might be a slightly different product, and it might not be like a highly bespoke, highly customized thing. 505 00:41:44,923 --> 00:41:47,045 It might be India Black. 506 00:41:47,045 --> 00:41:54,536 You know, it might be a fast drying paint that we do for everybody to improve legal services for everybody. 507 00:41:54,536 --> 00:42:00,127 And look, it might not be the red car that you want, but it's better than walking. 508 00:42:00,127 --> 00:42:04,638 And we've created a legal services model where 80 % of people walk. 509 00:42:04,638 --> 00:42:13,282 So if there's ways of tweaking that business model, and maybe especially with software, you know, where we say there are highly routine legal matters. 510 00:42:13,282 --> 00:42:17,602 where everyone's doing these things in the exact same way. 511 00:42:17,602 --> 00:42:20,122 Non-disclosure agreement, all right? 512 00:42:20,122 --> 00:42:21,522 Who cares? 513 00:42:21,782 --> 00:42:24,202 Every NDA says the same thing. 514 00:42:24,322 --> 00:42:29,822 There is never a good reason for a client to pay for a customized NDA. 515 00:42:30,302 --> 00:42:42,232 We should take the NDA form that everyone in the world uses and add the names of the parties, unless it is like a highly sophisticated bespoke transaction or a special... 516 00:42:42,400 --> 00:42:44,611 non-disclosure requirement. 517 00:42:44,612 --> 00:42:50,576 And for 99 % of the NDA having world, we should have a standard NDA. 518 00:42:50,857 --> 00:42:53,530 And that's not controversial. 519 00:42:53,530 --> 00:42:56,756 And there's a bunch of contracts like this, a commercial lease. 520 00:42:56,756 --> 00:42:59,620 yeah, a simple agreement for future equity. 521 00:42:59,620 --> 00:43:03,826 all, the startup world uses the Y Combinator templates. 522 00:43:03,826 --> 00:43:07,411 We have templates for side letters as part of that. 523 00:43:07,411 --> 00:43:12,849 there are universally agreed upon templates in many areas of law. 524 00:43:12,849 --> 00:43:17,915 Yes, a term sheet for a series A investment, a safe transaction. 525 00:43:17,915 --> 00:43:20,067 It's not just litigation stuff. 526 00:43:20,067 --> 00:43:29,685 There's a lot of things that are very highly commoditized that we could use software to reduce the friction from and make them available to more people at better prices. 527 00:43:29,965 --> 00:43:36,851 Every time we do that, Jevon's paradox tells us if we reduce the cost of a service, more people will consume it. 528 00:43:36,911 --> 00:43:38,954 We will expand the size of the pie. 529 00:43:38,954 --> 00:43:49,101 mean, the US legal services market valued by the Thomson Reuters Executive Institute at $573 billion per year, that's just the 20 % that we serve. 530 00:43:49,101 --> 00:43:58,617 I if we find ways to lower the cost of the standard legal services, like standard parts in a car, more people will consume them. 531 00:43:58,617 --> 00:44:04,310 And like the Model T, we can make legal services that could be purchased by anybody. 532 00:44:04,310 --> 00:44:06,542 not just the wealthiest Americans. 533 00:44:06,542 --> 00:44:15,998 if 20 % of X is 500 billion that means X is 2.5 trillion, right? 534 00:44:15,998 --> 00:44:17,439 maybe. 535 00:44:17,439 --> 00:44:25,853 I'll be the first to say, I don't know that the 80 % that's unserved is dollar for dollar the same as the 20 % that's served to the wealthiest companies in the world. 536 00:44:25,853 --> 00:44:33,843 It might not be four times the size, but I would really doubt it if the 80 % isn't every bit as big as the 20%. 537 00:44:33,843 --> 00:44:41,230 So there's probably $500 billion a year of unmet demand for legal services. 538 00:44:41,230 --> 00:44:44,362 And if we as a profession don't go serve it, 539 00:44:44,362 --> 00:44:52,804 venture capital funds and software companies and maybe less scrupulous businesses are going to go try to meet that demand. 540 00:44:52,804 --> 00:45:06,449 So I think there's an urgency in this moment for law firms to figure out how to meet that service demand in an ethical, responsible, educated way, but maybe augmented by software. 541 00:45:06,449 --> 00:45:08,069 Look, I have a dog in this fight. 542 00:45:08,069 --> 00:45:10,390 I want law firms to be the ones who meet that need. 543 00:45:10,390 --> 00:45:12,150 I want them to serve people. 544 00:45:12,556 --> 00:45:17,141 with qualified legal services and not tech bros in Silicon Valley or something. 545 00:45:17,141 --> 00:45:23,426 Yeah, well we're almost out of time, I do want to like touch on one final point. 546 00:45:23,426 --> 00:45:24,877 have so much. 547 00:45:24,877 --> 00:45:29,771 We got through one section of a three-part agenda, um but... 548 00:45:29,771 --> 00:45:30,451 typical, right? 549 00:45:30,451 --> 00:45:36,491 I mean, just for your listeners, Ted has prepared like a very thorough agenda for this call. 550 00:45:36,871 --> 00:45:46,747 We have just answered like the third question out of 20 on the agenda with my apologies for waxing grand eloquent once again. 551 00:45:47,031 --> 00:45:48,552 No, this is great. 552 00:45:48,552 --> 00:45:51,055 And this actually falls in your camp. 553 00:45:51,055 --> 00:46:00,785 I'm curious in my experience, Big Law and practice management, excuse me, matter management, I haven't seen broad adoption. 554 00:46:00,785 --> 00:46:10,874 I've seen it within narrow practice areas within Big Law, but not is the Clio, I know Clio appears to be kind of moving up market and your. 555 00:46:11,298 --> 00:46:21,778 Um, your transaction seems like a stepping a step in that direction, but are, are tell us kind of what, what that picture looks like in a couple of minutes, if you can, where, 556 00:46:21,778 --> 00:46:23,701 Cleo's headed. 557 00:46:23,701 --> 00:46:24,031 sure. 558 00:46:24,031 --> 00:46:32,765 So at a ClioCon 2025, just two weeks ago, Jack Newton, the CEO of Clio, announced Clio for Enterprise. 559 00:46:32,765 --> 00:46:42,448 And I think there were some skeptics who said, look, the kind of matter management software that Clio built for mid-market and small firms won't scale to large firms. 560 00:46:42,688 --> 00:46:45,689 And Jack and the Clio team said, no, of course it won't. 561 00:46:45,762 --> 00:46:50,622 I think the big headline for Clio for 2025 was the acquisition of Vlex. 562 00:46:51,062 --> 00:46:58,702 But maybe just as importantly in 2025, Clio acquired a company in the UK called Sharedo. 563 00:46:58,922 --> 00:47:05,642 And Sharedo is now going to be the cornerstone for Clio for Enterprise, what they call Clio Operate. 564 00:47:05,642 --> 00:47:09,582 But it is the operating system for large law firms. 565 00:47:10,042 --> 00:47:14,162 And there are scores of large law firms, like 2,000 lawyers. 566 00:47:14,210 --> 00:47:19,071 who are using ShareDue as the operating system for a large law firm. 567 00:47:19,071 --> 00:47:23,172 And it's not trying to be the one piece that does everything. 568 00:47:23,212 --> 00:47:32,515 It connects like the document management system and the billing system and the complex checking system and the CRM for the law firm. 569 00:47:32,515 --> 00:47:42,490 whichever of those law firms don't have, ShareDue has like modules that you can use for billing or for matter management or for DMS. 570 00:47:42,490 --> 00:47:47,023 It is very intelligent software that helps all of those systems speak to each other. 571 00:47:47,023 --> 00:47:52,036 And I just want to say, like, Clio is not like a naive company. 572 00:47:52,036 --> 00:47:57,849 They don't imagine that small firm matter management software is going to work in the biggest law firms in the world. 573 00:47:57,849 --> 00:48:00,591 The Clio enterprise model is super sophisticated. 574 00:48:00,591 --> 00:48:08,023 The other thing I want to say is that it's not like Clio is starting from scratch, like knocking on the doors of the biggest law firms in the world, right? 575 00:48:08,023 --> 00:48:12,723 The biggest law firms in the world already use Clio for enterprise. 576 00:48:13,003 --> 00:48:16,434 They have subscriptions already to Vincent AI from Vlex. 577 00:48:16,434 --> 00:48:20,014 It's a large number of the biggest 100 firms in the world. 578 00:48:20,014 --> 00:48:23,214 Eight of the 10 biggest firms in the world use Vincent. 579 00:48:23,314 --> 00:48:26,885 I think it's 50 of the biggest 100 now who use Vincent. 580 00:48:26,885 --> 00:48:32,065 Many of the shared-you firms in Europe use Vincent today. 581 00:48:32,425 --> 00:48:35,321 Docket alarm for tracking dockets. 582 00:48:35,321 --> 00:48:42,801 and for docket research and docket analytics is used by a large number of the biggest 250 firms in the world. 583 00:48:42,801 --> 00:48:45,612 That's going to be Clio Docket and Clio Enterprise. 584 00:48:45,612 --> 00:48:52,063 And so all of these firms who are already using these systems will be under the Clio Enterprise umbrella. 585 00:48:52,063 --> 00:48:53,663 So we're not starting from scratch. 586 00:48:53,663 --> 00:49:02,414 We're going to start off with, I don't know, 400 firms who are already using Clio Enterprise or some part of the Clio Enterprise suite. 587 00:49:02,414 --> 00:49:05,738 All right, last thing about Clio Enterprise. 588 00:49:05,738 --> 00:49:08,723 I want to say this with the right level of humility. 589 00:49:08,723 --> 00:49:13,257 Do large law firms deserve awesome software? 590 00:49:13,257 --> 00:49:13,825 think they do. 591 00:49:13,825 --> 00:49:15,629 I mean, I think they do too. 592 00:49:15,629 --> 00:49:20,612 They have never asserted that in the market. 593 00:49:20,752 --> 00:49:34,027 Like large law firms have stitched together like some really crappy software, know, really crappy stuff from companies who abuse them for their legal research, for their CRM, for 594 00:49:34,027 --> 00:49:34,748 their billing. 595 00:49:34,748 --> 00:49:40,535 I think large law firms deserve awesome software that makes them better businesses. 596 00:49:40,535 --> 00:49:47,822 Clio is like, Clio has probably helped more law firms become great businesses than any company in the history of the world. 597 00:49:47,822 --> 00:49:56,731 Okay, like they pioneered this with small law firms by understanding the business of law firms, finding what the KPIs are for great law firms. 598 00:49:56,731 --> 00:50:02,505 sampling the DNA of the best law firms and then helping to democratize that. 599 00:50:02,505 --> 00:50:06,890 So people who run law firms can make those law firms great businesses. 600 00:50:06,890 --> 00:50:09,951 Are large law firms exempt from that? 601 00:50:10,072 --> 00:50:14,526 Do large law firms not deserve to run like great businesses? 602 00:50:14,526 --> 00:50:20,881 Or should they just be like this Frankenstein monster of stitched together crappy software? 603 00:50:20,881 --> 00:50:21,751 Look, I... 604 00:50:21,751 --> 00:50:25,123 This is so simple to me, like it is inevitable. 605 00:50:25,344 --> 00:50:31,467 What we're creating with Clio Work and with Clio Enterprise is going to be gorgeous. 606 00:50:31,468 --> 00:50:37,143 It's going to help the firms that use it be way more successful and way more profitable. 607 00:50:37,143 --> 00:50:39,544 The software is going to work better together. 608 00:50:39,544 --> 00:50:49,571 And even if they don't trade out their billing system or their conflict system or their CRM system, they all work together better in Clio Enterprise. 609 00:50:49,641 --> 00:50:57,336 formerly ShareDue, now Clio Operate, than they ever did with whatever APIs were pulling together inside the law firm. 610 00:50:57,477 --> 00:51:06,104 I think large law firms deserve great software, beautiful software that helps them to run great businesses. 611 00:51:06,104 --> 00:51:07,275 I think you think the same thing. 612 00:51:07,275 --> 00:51:09,566 You're helping them do that as well, right? 613 00:51:10,127 --> 00:51:17,982 So this is not Clio trying to sell small law firm software into large law firms. 614 00:51:18,356 --> 00:51:28,984 This is Clio saying we already have like lots of law firms who use pieces of the Clio world in dockets, in Vincent, in Cheridoo. 615 00:51:28,984 --> 00:51:30,906 We're going to bring all these things together. 616 00:51:30,906 --> 00:51:38,764 We're going to create a successful platform for large law firms to manage their various systems and replace the worst of them over time. 617 00:51:38,764 --> 00:51:42,318 And I think they deserve to have software that works exquisitely. 618 00:51:42,318 --> 00:51:45,146 just like small firms do, just like medium-sized firms do. 619 00:51:45,146 --> 00:51:46,847 I think it has to be clear. 620 00:51:47,186 --> 00:51:55,331 I think large law firms are going to insist that their operating system have access to the business of law and the practice of law. 621 00:51:55,332 --> 00:52:02,997 The best research and drafting and matter management and transactional software that exists in the world. 622 00:52:02,997 --> 00:52:05,289 We're gonna build it and people are gonna love it. 623 00:52:05,289 --> 00:52:06,230 Well, it's exciting. 624 00:52:06,230 --> 00:52:08,571 I'm excited to see the journey. 625 00:52:08,571 --> 00:52:15,696 I remember early days at ABA tech show and Cleo and I think Jack was still in the booth. 626 00:52:15,696 --> 00:52:20,219 You know, back in those early days and it's fun to see all the success. 627 00:52:20,219 --> 00:52:24,881 Congratulations to you guys on, you know, your merger. 628 00:52:24,881 --> 00:52:33,096 It's, it's a lot of fun to watch and I'd love to have you back on a future date and talk about all this other great stuff that we planned on talking about. 629 00:52:33,096 --> 00:52:34,119 but didn't get to. 630 00:52:34,119 --> 00:52:35,139 Awesome. 631 00:52:35,619 --> 00:52:37,939 Let's book it every hundred podcasts. 632 00:52:37,939 --> 00:52:39,679 I'll be there for 200. 633 00:52:40,039 --> 00:52:42,008 We can reflect back. 634 00:52:42,008 --> 00:52:42,639 Perfect. 635 00:52:42,639 --> 00:52:43,140 All right, Ed. 636 00:52:43,140 --> 00:52:45,403 Well, listen, thanks so much for being a part of this. 637 00:52:45,403 --> 00:52:53,763 It's been super fun, super special, and I'm sure I'm going to run into you probably at TLTF Summit in just a few weeks. 638 00:52:54,087 --> 00:52:56,776 Ted, congratulations on 100 podcast episodes. 639 00:52:56,776 --> 00:52:58,442 That's an amazing milestone. 640 00:52:58,442 --> 00:53:00,428 I think it's just terrific. 641 00:53:00,428 --> 00:53:01,404 Congratulations. 642 00:53:01,404 --> 00:53:02,324 Thank you. 643 00:53:02,324 --> 00:53:03,724 I appreciate it. 644 00:53:03,724 --> 00:53:05,784 All right Ed, have a good rest of your day. 645 00:53:06,924 --> 00:53:07,835 All right, take care. -->