[00:00:00] Reena, how are you this afternoon or this evening your time? I'm really great. Thank you, Ted, and thanks for inviting me on your show. Yes. This is many months in the making. Uh, I mean, we started talking probably last October or so, and, uh, we have a really interesting agenda for this conversation, so I'm really looking forward to getting your perspective. Um, before we jump in, why don't you tell us, uh, a, a little bit about yourself, who you are, what you do, and where you do it? Great. So I'm Reena Sengupta. I'm the executive director of RSGI Limited. Uh, I started off my career in the legal sector in the mid-'90s. I created the Chambers and Partners guides, the research approach to the Chambers and Partners guides, uh, and which they still use to this day. And then I set my own company up in 2001, which was RSG Consulting, and probably what a lot of your viewers may know me for is for the Financial [00:01:00] Times Innovative Lawyers program, which I created about, in about 2005. It's been going for about 20 years. It sort of transformed my company. We reorganized as RSGI in 2021, and so we're more of a think tank and advisory firm now. But we have been researching innovation for the last 20 years in a very kind of granular way. We also do a lot of advisory, and we do a lot of thought leadership in the sector. And I suppose what you could call me, because I'm not a lawyer, is perhaps an anthropologist of lawyers. So it's a little different viewpoint. So 20 years ago, when I think about the words legal innovation 20 years ago, that was an oxymoron, uh, like jumbo shrimp or military intelligence. I use that joke frequently. Um, I do think it is changing, and there is real innovation work happening in legal, and maybe it's the market is different in the EU. But here [00:02:00] in the US, um, I would say that the market has-- the industry has been driven largely by tradition, um, as opposed to innovation. And I would say just really in the last three years has the innovate- innovation function in law firms really been funded, empowered, um, focused on. Is that true in the UK market, or has there been traction in legal innovation longer? So I think you're absolutely right. Innovative Lawyers, when I started in 2006, we launched the first one, everybody said to me, "Rina, it's an oxymoron. It'll never fly. Lawyers aren't innovative. What are you doing?" And I said, "It's precisely because lawyers aren't innovative, which is why it'll fly." Um, you know, we started looking at innovation in the sector before the smartphone. People were still using BlackBerries. We had a, a, a [00:03:00] submission from Slaughter and May in 2006, and it, in use of IT, it was every partner had been issued a BlackBerry. Didn't get ranked, but, you know, but that's where we were at. You know, peop- uh, partners would send me their, their libraries, their law libraries on CD-ROMs, and we'd lug them around with us from office to office. So, yes, I would definitely agree with you that in the last three years since the onset of generative AI and also post-COVID and the lockdowns, uh, that we have seen a massive kind of exponential uptick in people's appetite for innovation. And but I think we were innovating before. You know, the, the profession has been evolving gradually over the years. You know, the in-house branch of the profession has been really developing in the last 20 years, and so have law firms, and we'll be getting sort of more into that. But it's un- undeniable to say, I mean, you know, Satya Nadella said, you know, in 2020, [00:04:00] March 2020, that nearly two billion people became digital overnight, and that's effectively also one of the things, combined with generative AI, that has propelled the legal profession forwards. One of the things I should say, though, we don't think of innovation necessarily just being about the use of technology. Obviously, that is a massive strand in how businesses innovate, but it's also about other things like talent development, strategy, you know, leadership. We're looking at, we're looking at the whole kind of waterfront of how the profession changes and develops and becomes more relevant and more sustainable, um, to both its clients and society. So it's, it's a broad sweep of, of what we look at. But obviously, the last three years have been characterized by legal AI, which I know we're going to dive into, but it's not just about that. And I think sometimes my viewpoint is probably maybe different to maybe a lot of others in the market because it's grounded in this long sweep of the last 20 years, and it's [00:05:00] very, very sort of granular, and it's not just about technology Yeah, and, um, this is not to say that there are no innovative lawyers or there were no innovative lawyers pre-AI. There were, you know, there were, there were many, you know, like Marty Lipton inventing the poison pill concept, you know, in the 1980s. Um, if, if you map out a bell-shaped curve, uh, obviously there are long tails, um, of You know, individuals and, and firms who have been innovative. But if you look at, you know, the, the, the, the 80% in-- under the curve, uh, uh, Dr. Larry Richard has a book called "Lawyer Brain" th- where he studied 30,000 lawyers and you're probably familiar. And if you-- I, I did an exercise, God, this is almost a year ago, where I took [00:06:00] a look at the personality traits as, uh, Dr. Larry Richard had studied them and identified key traits, and then Marc Andreessen, uh, who is the principal of Andreessen Horowitz, a16z, one of the most prolific Silicon Valley VCs, the inventor of the web browser, very innovative guy, and he knows what to look for in terms of founders who exhibit traits towards innovation. And, um, he mapped out five traits that I thought were interesting to evaluate against H- Dr. Richard's traits. Um, the first one is open to many different kinds of new ideas, not lawyers. Um, high level of conscientiousness, that is lawyers. Um, high in disagreeableness, definitely lawyers. High IQ, definitely lawyers. And high in resilience, not lawyers. Um, that is one of [00:07:00] the three personality traits that Dr. Richard found below the mean. Uh, sociability, resilience, and empathy were all below the mean. Um, so yeah, it's not to say, and it's not to be critical, it's just that the industry itself has been very much, uh, based on tradition. And I think what we're seeing now, and I'm curious if you would agree with this, that that tradition, that, that mindset that's focused on tradition and maybe a resistance to change has created a dy- a dynamic where, you know, we're, we're now dealing with a transformative technology that's going to disrupt the industry. I think that's a check the box, not really up for debate anymore. Um, but the foundational elements of how a law firm work, there's a lot to do there. You know, pricing models, client engagement [00:08:00] models, internal firm compensation models, um, you know, how leaders h- uh, rise up the ranks within a law firm, which is generally by being the best at lawyering, under-empowered business professionals, i.e. the non-lawyers. Um, so yeah, it, it seems to me that, um, people le- law firm leadership recognizes the need, but we still have these cornerstones of the legal industry that haven't moved a whole lot Is that your perspective as well? Yes is the short answer, um, but I think there's a more nuanced, a movement that's going on underneath, underneath that. Um, the one thing I would say is when gen AI broke, one of the things that I did notice, and I talked to, uh, you know, 2, 300 law firm leaders every single year, and I'm very close to, you know, a good 50 [00:09:00] of them and, and talk to them regularly, and I really noticed a mindset changed. So to link it back to what you said about Dr Larry Richards, his work I'm very familiar with, um, and I think he's absolutely right. I think what's extraordinary is that mindset change, and it wasn't just in the senior partners and the global CEOs and the chairs of these firms, it was also at the senior partner level, the heads of practice areas. And I was absolutely stunned by the way the language and the perceptions, all of that sort of changed amongst that very senior leadership group within law firms. And also with a lot of general counsel, but a lot of law firm leaders. Now, the market though is quite fragmented and, you know, equally, I'm amazed that there are still law firms today in, what are we? March 2026, that are announcing, [00:10:00] "Hey, we've just bought Harvey. We've just bought Legora," as though this is a thing to announce nearly three years after it has come out. And I feel a bit embarrassed when I see some actually quite good friends of mine doing that, and I wanna say, "Don't say that," because that's, that, that's just like really old news. So, so it's not everybody's mindset changing, and people were kind of resistant, but there are a significant number of major, major law firms who, um, moved forward and moved forward very quickly. And then the second thing I'd say on that is what amazes me, is how many law firm leaders are actually power users within their firms of legal AI. They're actually doing the experimentation themselves. You just wouldn't expect it. Um, I mean, I know we'll come onto it later, but we did that report for Harvey last year, looking at their, you know, 40 of their customers and how they were using AI. What is extraordinary is the proportion of power users within those organizations. It was like 30% of users kind of could be [00:11:00] classified as power users, and within that power user group, there were many partners. It wasn't just your, you know, younger lawyers or your tech, you know, savvy guys. It was also people that were heading up the real estate group or, you know, heading up corporate. So it's, it's a very, um, complex picture. You know, it's, it actually is quite a segmented market. And, and I think, you know, you can't actually brush it all with one glove. What is quite interesting is that there is, um, there are very different levels within the law firm world Within Big Law, like if you segment the firms, so you do the one to 50 of the largest law firms in the world, um, you'll have your laggards within that, you know? And then you'll have really, really advanced users, and that will kind of segment going down. And of course, you're gonna have a swathe of firms, um, maybe often in the mid-tier who are thinking, "What the hell am I, what the hell am I doing and I'm not moving?" But some of the most Some of the [00:12:00] largest firms in the world are pretty advanced in what they're doing. A&O Sherman, for example, Latham. You know, there are lots and lots of very big incumbent law firms that, um, that are first movers and are investing massively into what they're doing. Like I was with my, you know, McDermott Will & Shulton now, isn't it? Um- Mm-hmm ... you know, big investor into the legal tech fund. Um, $20 million. You know, you've gotta go from the mindset, going back to your Larry Richards diagnosis of, of the lawyer brain, um, law firms never used to spend any money in R&D. None whatsoever three years ago. Suddenly you've got loads of firms investing in the legal tech fund. So there are lots of little signals around how the mindset has changed. Now, that's, that's one thing. You've got it from the leadership level, and you are beginning to see it translate into innovation and, you know, obviously saying that you use technology does not mean that you're innovating with it. Um, that's- it's not, what do, what do they call it? Innovation by press release. Can't stand it. But [00:13:00] that- but we're beginning to see firms and in-house counsel do interesting things with their legal AI tools now, and with their workflows, and with products, and various other things. So, uh, so yes, I agree that those, the, the rate of innovation, the pace at which everything has moved in the last three years is, is unbelievable. It's breathtaking. And I sh- and actually, one of the things I should say, Ted, but, you know, so Innovative Lawyers been running this program for 20 years. 20 years I've been running roundtables with law firm leaders, general counsel globally in Asia Pacific, North America, Europe, and the chat has always been a, a lot the same. I remember I sat at, um, a managing partner's roundtable back in 2012 in London, and one of the sort of magic circle CIOs sort of said, "Well..." No, no, the managing partner said, um, "Well, we'd be innovative, Rina, if we ever let our CIO out of the basement," quote, [00:14:00] unquote. That was in 2012. Now, you look now, obviously your CIO is virtually your most important person within the leadership team in most firms. In fact, you know, they are, they can command top dollar and choose what they earn, and they're in huge demand. And I remember also another managing partner said around, around a similar sort of time in New York, and one of the managing partners said to me, we were talking about, you know, what was coming down the line, and I was trying to say, "Look, you know, these, these things are coming." And there was a lot of kind of pushback. And this managing partner said to me, "But the thing is, Rina, we're really smart people. We're gonna have the time to adapt." And I remember thinking, now I have been thinking about writing my book for the last, whatever it is, gazillion years, but calling it Time to Adapt? And I always had it at the back of my mind, would the law firms, would lawyers have the time to adapt when, you know, basically the moment came? Well, the moment has come- And I would say on balance, my answer to that question is I think, I [00:15:00] think they do. I think the, the smart ones are moving very fast. Um, and they are changing, and they are very open to changing in ways that I think are pretty radical. I was talking to the, um, head of real estate for a global law firm who said to me very seriously about 18 months ago, "Right, I'm rethinking my entire business. Um, do you think I should buy the Land Registry in the UK? Is that what I should be doing?" Raising-- I mean, this is a, you know, this is a partner talking about their practice area in a totally different way to anything I've done. And I've got sort of countless little stories and anecdotes that, that kind of reinforce that You know, it, it seems to me here in the US we are on a bit of a K-shaped trajectory. So- Yeah ... there's b- there's a divergence. Uh, we have-- Here we have firms who are all in and doubling down and really taking this [00:16:00] seriously, building out an org structure to support the change management needs necessary, and thinking very hard and deeply about this. And they're the ones who are gonna be on the upper end of that trajectory. And then there are still many, many firms. In fact, uh, God, it's been six, eight months ago, a dear friend of mine is the chief innovation officer at a, mm, Am Law firm near the, near the bottom in the 200, 150, 200 range. And, um, we were doing a presentation together, and I couldn't get ahold of her for a month, and I was, sent her a text. I was like, "Where the hell are you?" And she goes, "I'm doing a DM. We're in the middle of a DMS migration." And I'm like, "You're the head of innovation. What are you doing? Don't you have IT for that?" And she said, "I am innovation, and I am IT, and I am KM." And you know, it-- my [00:17:00] first thought was, this firm is not going to-- They are not investing and committing to change. That, that CINO role, that chief innovation officer role, still is, um, largely a, a, a marketing function. Yeah. And because if you have, if you have your chief innovation officer managing infrastructure upgrades, that's not innovation. Um- No ... that's improvement, and there's a, a very big difference. Uh- Yeah ... so yeah, it's a bit of a, a divergence it seems here in the US. Does that feel true in the, in the EU as well? Yes. Yeah, it is. I mean, it's, it, it's interesting 'cause, uh, that's what I mean about the segmented market. Like, in every sort of EU jurisdiction, you know, you've got a top sort of five or six law firms, and all of those firms will tend to be more advanced. Then you've got a sort of middle tier, and then there's a sort of long tail. And then within that long tail, you might [00:18:00] have smaller firms that are very, very advanced and, you know, very funky in terms of what they're, they're doing, but you've got an awful lot of pedestrian law firms. And I think with the US you've just got a l- you've got a massive tail of those kind of pedestrian law firms that are, that are somehow without identity really, and they do okay. And in fact, they do very well, a lot of them, and there isn't that much reason to change. Mary Shenouda Carroll, actually, I read, read this morning, um, wrote a, an, a piece in, on LinkedIn, and she's just obviously coming out of Goodwin Procter, and it was some observation. She's been in the house most of her career, and she was observing that the, you know, nothing would change unless you got rid of the billable hour. I wrote a massive big read for the Financial Times back in 2002 saying exactly the same thing. And she's writing this piece now, and so you might kind of bookmark the last two decades with our two pieces and go, "Yeah. Well, not that much has changed." But I think that would be, um... [00:19:00] But I think that would be an incorrect way of looking at it because there is a lot of change happening, and I think the firms, you know, you know, you're talking about, you know, what are the obstacles to innovation? There are so many obstacles to innovation within a law firm, the hierarchical structure, the billable hour, you know, the, the, the value on inputs rather than outputs. Uh, I've spent years thinking about why are clients and lawyers so disconnected even when they're supposed to be really, really together? One of the big findings we constantly get out of our FT research is what we call the client-lawyer disconnect. And it's, it's because clients are focused on commercial outcomes, and lawyers define their value by their legal knowledge, their legal expertise, their inputs, and that's what they, they bill for and they price for. And it's very, very difficult to get rid of that, as, as Mary was saying, psychologically, you know, you have to really upturn the model. So it doesn't matter maybe that you've got all of these leaders with these great mindset [00:20:00] shifts saying, "Come on, let's get going on the AI wagon," if your rank and file partner is still hung by the noose of a pricing model that should've disappeared years ago. Um, but I think the pressures that are coming now and are so many and so varied, both from the client space, from tech disruptors, from internally, from leaders, from external events. You know, lots of presentations. I've used it many times, this idea of the perfect storm. We are in that for the law firm business model. So the notion of pricing being an obstacle for much longer, I think is going to disappear. It has to, you know, has to disappear. Already is disappearing. Um- It's just- Yeah ... you know, it's, everything's about timescales, I think. It takes time and it's cultural inertia that, I mean, uh, the billable hour and, and, and billable quotas [00:21:00] is, is one of the hardest things to change. It is so deeply embedded in law firm culture that it's gonna take some time. Um, well, I wanted to touch on these AI platforms and the-- W- we're seeing eye-watering valuations every two or three months. At least once a quarter, we hear about a new round with a new incredible valuation. And if you do the math, there's only one way that these valuations pay off for the investors that are funding these rounds i- in my mind, and that is if these platforms ultimately end up displacing service revenue that law firms are delivering today, whether that be through Enabling in-house or standing up an [00:22:00] ALSP type offering themselves or joining forces with, you know, a, a, an ABS and, um, but, you know, I'm wondering how s- because I know you're, you're really dialed in in law firm leadership, is there a recognition that the only way the, the valuations work for investors is if the, these platforms ultimately impact law firm revenue or is that not part of the conversation? Again, some of your law firm leaders will say yes, they can see that kind of scenario playing out. And, and actually one of the reasons that we, we, we became friendly was because I, reading your post and I thought it was very, very good at the time about a valuation hype and the fact that, you know, you've got, you've got companies that are turning over, you know, a couple of hundred million dollars and are [00:23:00] valued at billions and, you know, just in normal kind of e- business economics it just doesn't make sense and what are they gonna have to do to do that? Um, so in terms of law firm leaders, there are some that recognize it and others that, uh, that don't and that, that, that don't see how a legal AI company like Gora or Harvey or whoever could go into delivering legal services the way that they do. And I, and I've, I've been thinking about this, this question a little bit as well and thinking about how would these companies, how are these companies going to justify this investment and what are they going to have to do over the next few years to justify their... And I actually think, um, I've been thinking about, I've been having-- So we have a lot of closed door meetings. We had a phenomenal one in San Francisco, uh, back in November under Chatham House and I had probably the CEOs of about 10 or 12 of the top legal tech [00:24:00] companies, some of the bigger ones as well, some clients in the room, and we were talking about this conversation. And one of the things that came up, and I have done some work sort of looking into, i- is thinking about what is the total addressable market in over time for legal services and actually thinking that actually The, the world, the business world is, is chronically actually underserved in terms of legal services. So when you look at the SME market, and I was r- I was just running some figures, right? Um, like the, the SME market in the United States is worth something like $14.6 trillion. In, um, the United Kingdom, um, it's worth about $2.8 trillion. This is the SMEs, and the-- and so in the States, that's with, that's for companies with less than 500 employees. In the US it's, in the UK it's slightly smaller. It's like naught to nine employees. But actually, I was discovering that a lot of companies, 90% [00:25:00] of companies in the UK are classified as SMEs. Now, these companies often will not have an in-house lawyer. Um, they, they'll, they'll go to sort of high street practitioners or, you know... I mean, I have a small company. I have 13 employees in my company. I classify as an SME, and, and we don't have an in-house lawyer. We are chronically underserved. I mean, I don't want to be bombarded with law firms, but we are chronically underserviced when it comes to legal services, and it's very expensive for us and, you know, and it's very difficult. Now, a hybrid AI and a person together, you know, like a Harvey with a person, would be phenomenally interesting to us, and suddenly we would be able to have access to legal services that we need. So I think some of these companies will be looking at those segments of the market. It's not all gonna be, you know, the Fortune 1000 companies. It's gonna be that whole long [00:26:00] tail. So to justify their valuations, I suspect you'll see a lot of them kind of moving into, the AI companies, moving into different segments of the, of the market and developing different ways of, of addressing that market. Um, whether they're, you know, whether they go head to head with a Latham is, is unlikely. You know, and I don't, you know, don't think Latham remotely concerned about, about that, that eventually happening. And you could, you could write that through the top 50 law firms. But when you get a bit smaller, then you might start saying, "Actually You know, there, there is more of a threat. But depends on how you look at it, because I think also the legal services world is gonna completely change. How we-- how legal services get delivered and how they get consumed is going to be completely different, and I think we're just at the foothills of beginning to imagine what that looks like. And, and we spend quite a lot of time trying to envision that. You know, like Ethan Mollick sort of says, you know, [00:27:00] it's really difficult to imagine the future if you just think, "Oh, what is the future of legal services tomorrow?" and you think about it in this great big canvas, it's very hard to see it. But if you look at it in through little apertures, you know, little pin pricks, you can sort of see what's going on. And the FT Innovative Lawyers program gives us lots of these little apertures to see. So, you know, you can see law firms turning into becoming more like product businesses. You know, they're becoming closer to technology businesses themselves. And so the number of digital tools that they're developing right now is extraordinary. My team have just finished doing their APAC research and, you know, m-my guy that heads up our FTIL research in Asia was saying, you know, we've got a digital tools section in Asia where there are 11 entries, and he's saying, you know, every single one of them are winning entries. Phenomenal energy, and this is in APAC, um, which is slightly behind Europe and North America in terms of its development. But you've just got this dynamism and you've got this appetite to create these tools [00:28:00] internally. Um, and so if you start looking through these little apertures, you can be- you can sort of begin to see that there are actually lots of different models in how you deliver legal services. You know, we've already seen the birth of the native AI law firm. We, you know, and that's really exciting to think about what that looks like. I was just, you know, reading about Norm AI and what Blackstone is doing, which is phenomenal, you know, really interested in what's happening there. And Blackstone have invested $50 million into Norm AI, and Norm has now, AI's created this Norm law firm, you know, sponsored at a very high level by very senior sort of ex-ex, um, law firm chairs and whatnot. And, um- And what are they doing? They are actually being sponsored by an in-house legal team to try and reimagine legal services and how they're delivered. That's just one model. Then you've got, you know, Covenant, you've got so many others that are, that are coming up, as well as the law firms themselves, as well as [00:29:00] obviously what the Harveys and Lagoras and what have do with their, with their business models going, going forward. So I think, you know, as a consumer, you're gonna have a lot of, um, a lot of different ways in which to kind of consume legal services and depending, you know, on what level that you want to consume them. Um, I'm a, I'm an optimist, Ted. I do think it's going to be fundamentally better for the profession, right? Yeah. I mean, it's, uh, I, and, and I actually don't disagree with you. I heard, uh, David Sacks on the All-In podcast talk about coding, and if you listen to Dario Amodei, the CEO of Anthropic- Sure ... a- and many, many others, um, they have very clearly stated, Sa- Satya Nadella from Microsoft, they have very, very clearly stated, "Coding is solved. Check the box." Mm-hmm. "It's solved." In fact- [00:30:00] Oh ... the creator, uh, Boris Cesky of Claude Cowork, I saw on Lenny's podcast, uh, recently, and he said he has not written or edited a line of code since November Um, and this is the guy operating at the apex. But here's what David Sacks pointed out that I thought was very interesting, and I think there are some parallels in the legal world, and I talked a little bit about this on my last episode, is today you can go to Anthropic's website and see a senior developer role that pays almost half a million US dollars. So if coding is solved, why is Anthropic still hiring half a million dollar a year developers? And, um, coding may be solved, but software development is not solved. Yeah. It is a much bigger picture than just- Yeah ... implementing the code. There's product- Yeah ... management, there's QA, there's, you know, and project management can be split into a number of [00:31:00] sub-disciplines, understanding the market, the competitive landscape, defining the value proposition. Yeah. All of these things still need to happen. And think about the, all of the software that's going to be needed in the world. If what Elon Musk says is true about robotics that's a year away, those and, and all the agentic, um, workflows- Yeah ... that are going to be imple- all of that requires software. It's not just an LLM. So the need- Yeah ... the demand for software is going to absolutely explode. Yeah. That is a really-- I think there are parallels to that in the legal world. You know- Yeah ... as we get into self-driving vehicles and, um, you know, there's all gonna be all sorts of new regulation, litigation around. So the demand for legal services, software development are going to increase, and I think w- uh, it's really hard for anybody to figure out how we're gonna balance [00:32:00] out. So we're gonna have an increase in demand, um, and we're gonna-- but we're also gonna have a massive increase in supply. So how these things shake out exactly, no one can, can say with confidence. But I do think that there, the doom and gloom, I don't subscribe to it. I do think that there is going to be a ton of opportunity. The lower end of the market Which is the majority. Only about-- I've, I've heard various estimates on that, and it's not scientific, but I've heard very informed people say that bet-the-company work represents about 10% to 15% of legal services delivered in the corporate world. So that's 85% to 90% that's operate the company, not bet-the-company work. And a good chunk of that is going to be subject to automation, but that- Yeah ... slice of the pie is also going to increase. So it, yeah, it's anybody's guess as to how this thing shakes out, but it's not all doom and gloom. We look at, we look at the supply side of the equation and freak out, and we're really not [00:33:00] focused enough on the demand side, if you ask me. Yeah. I have to say, I violently agree with you because-- and this is what I said, because we, the world is completely changing, and the world for white collar work is completely changing, which requires, as you say, uh, I think a Cambrian explosion in the need for new law, new legal services, new, new legal concepts to think about things like ownership, copyright. All of that is completely changing, and that's just, you know, the tip of the iceberg. Um, you know, accountability, insurance, tax, just the, the-- every single area of law, um, will be changing. I mean, sometimes what I think when, when generative AI, and maybe 'cause, you know, obviously I'm in-- I've spent 20 years in the game of trying to predict the future and look forward and think about where, where it is it all going. And, um, you know, uh, in 2018, my hero at the time was a guy called Erik Brynjolfsson, who wrote Machines, Platforms, and Crowds, and I did a big global [00:34:00] summit with the Financial Times, and I based it all around machines, platforms, and crowds, and I said, "This is gonna be the future of legal services." And obviously, the machine learning was one part of it. But I was thinking about the platform law firm and the way that people are gonna want to work differently. And actually, you know, we've talked about the native AI law firm, we've talked about the normal law firm, but if you think about the platform model, you know, a lawyer that's enabled by AI can be a sole practitioner much more easily, maybe working on a platform, you know. And then so there's so many different s- sorts of businesses. But one of the things I, I found quite useful when gen AI was breaking was thinking about it in terms of electricity. And, you know, we were talking about earlier about having younger children. I took my son to the science museum, and there's this-- in, in London, and there's this wonderful kind of bit which shows you all the kind of utilities that people would use prior to electricity happening, and then just when electricity was happening. And [00:35:00] if you think about it, you know, we used to wash our clothes by hand, you know, cook on an open fire. We'd have open candles. We'd have to shut down pretty much by nine o'clock 'cause the candles burned down. And there were lots of jobs that went, and I was reading about how people were actually quite resistant to the idea of electrification And, you know, they said it's dangerous. Our, our houses are gonna burn down because the wires were open. You know, so it was that idea. And you think about that, that's like hallucinations. Oh, no, we're gonna lose our reputations as lawyers because it's gonna hallucinate and it's gonna do X, Y, and Z. But, you know, there's never this thing of like, it may well figure it out, you know? Um, and, and I was thinking, but actually lots and lots and lots of jobs were lost. Um, lots of hand j- ... And do we bemoan the fact that we don't wash our clothes by hand or cook open, over an open fire, unless it's outside on a barbie? But, you know, it's, we don't bemoan those tasks. Instead, though, we have countless other jobs that have been created. Like [00:36:00] my father, um, and he passed away a couple of years ago at the age of 94, had no idea what I did for a living and couldn't understand it because it didn't fit into the box that he neatly knew. And I think it's the same with us, with our children. We just can't possibly imagine what jobs they're gonna be doing, and there are gonna be so many other jobs. I mean, we started charting the rise of the legal engineer almost 10 years ago, and now, you know, everybody wants their legal engineers. And we kept saying, "Oh, it's gonna be a thing, you know, legal engineers." There are gonna be so many other jobs within a law firm Other than a lawyer. But all we think about is like, let's think about our associate intakes. Oh my God, they're dwindling. But how about taking the associates on board and turning them into legal engineers or giving them other kind of career tracks, or actually thinking about the fact that the partner of the future is not necessarily gonna need to be trained in the same way as the partner of today. Because that partner of the future and, you know, maybe earning that $10,000 an [00:37:00] hour will be doing very, very different things and will need a very different skill set and will need different training. And then you'll need to hire people that will be able to train them differently. You know, or you might need to learn people that have products that can train them differently. There are so many other things that go on and I, and I think we have a very linear view in the profession. You know, we see the world as it is and, you know, when you think about, um, back to your sort of original question of, well, what surely, you know, the Harveys and the Goras will have to go into legal services. But maybe, you know, there'll be other things that they'll be able to do that either that addressable market or there'll be other models or there'll be other ways of consuming. You know, I think we just, we've, yeah, we're at the beginning. Yeah. It, you know, and it, and it's hard to, uh, it's really hard to predict exactly what the future will look like. Um, I have a prediction that I'm, I'm pretty sure about. Uh, I'd love to get your take on this. Um, I bet a large sum of money. If there was a [00:38:00] Polymarket bet, I, I would throw easily five, maybe six figures on, on this wager and that is that the future of law firms, what, what, what they are gonna structurally look like, they are gonna be a C corp ABS and they are gonna have four, five, six to one ratio of project managers, legal quants or legal engineers to every lawyer. Um, the timeline, who knows? And that technology is going to be a key part of the differentiation equation which doesn't actually exist today. You can go to all-- And, and I haven't done this. I, I say this like I have, but I, my, this is anecdotal. You can go to any Am Law 200 webs- public facing website and I would challenge you to find one where they talk about their technology It's not part of how they differentiate. They differentiate- Right ... through their people, through their brand, through their footprint, through their capabilities, their practice [00:39:00] areas, uh, their breadth of experience. Um, that is going to change, and technology will be a part of that equation. I think that the law firm partnership model is a dead man walking. Uh, I think it's, you know, especially those that operate on a cash basis, which is 95% of them, um, I think that it's gonna be an ABS C corp for-- Because they're gonna need capital, and investors highly prefer the governance models of a C corporation. I'm not sure what the parallel is in the UK. Um- Yeah ... how do you-- Would you agree, or do you see a different future? No, I would agree with that. I mean, I think the structure, whether the partnership model, um, lasts, I don't know. I mean, you know, th- the fact is people like working in partnerships. It's a very human thing to want to do, to be in that team and work with like-minded peers, um, [00:40:00] sharing your, your income. That is, you know, it's like, you know, they're all shareholders together. That's been a very appealing model. Will it go with something else or will it be housed differently? You can still do that. You don't have to be a partnership to do that, you know. But it's the essence of what, what they like. Um, I would-- Yeah, I would, I would agree with that. I mean, I would say, um, technology is a differentiator. I think knowledge and tech, you know, tech enables knowledge to be retrieved. Knowledge is the, the key thing, you know. And we were talking about this transition from human capital leverage to knowledge capital leverage, and we're already seeing that begin now. It's, it's happening on the ground. And I think firms will run-- or firms, legal services businesses, C corps, will run two kind of business models. One will be a subscription engine, a knowledge engine that will have people in it, technology, you know, proprietorial knowledge plus third-party knowledge, alongside the human partner that goes out at this human premium. Like there [00:41:00] will be-- But I don't think the human partner will, will disappear. The human lawyer, that very, very senior lawyer that, that when you're, um, you're in a hole or you're doing something very big that you wanna have beside you. And that's never changed. You know, that, that's been the same for years. People are always going to want to have an, a, you know, an advisor by them. And they, and they, um-- but they may not be selling legal advice. What I think they'll probably be selling is things like comfort and, you know, trust and all those types of things. And, you know, the law maybe. It's- it'll be more sort of laws at the core, but surrounded by other elements. And, you know, one of the things that we're doing at the moment, Ted, is we've just created a whole new rating system for lawyers. You're gonna recognize spent first part of my life creating the Chambers and Partners ranking methodology. Um, created this ranking methodology on, on innovation for the FT, and now we're doing something for ourself, and we're calling it RISE. And one of the things that we're trying to [00:42:00] do is say, actually, the human partner will continue to exist, but how are they rated? And so, and RISE is an acronym, and one, one part of it stands for their sophistication of business. That's what the S is. So how do they use data and technology? How are they- You know, how do they price? How do they bill? What are they like as team leaders? All of the kind of, um, business skills that they have. And then R is like their reputation, but it's, you know, Chambers is a measure of reputation, but ours is more, it's like, it's also to what degree are they a thought leader? You know, to what degree do they move industries? Do they kind of, um, you know, lobby? Are they policymakers? All of those things. You're gonna want those thought leaders with you. So we're rating lawyers on different things. Very little is on, I mean, the I is kind of legal, the legal market share, you know. It's just how much they can shift industry sectors. I mean, we spend a lot of time trying to unpick why Kirkland & Latham have got so big so [00:43:00] fast, and why there's a $2 billion mar- uh, gap between them, between Latham and its nearest competitor. You know, those are extraordinary legal service stories. And actually, when you look at it, it's because they have anticipated industries, and they've managed to kind of anticipate products, and they're, they're very highly, um They're very highly tech-enabled. You know, Kirkland, years and years ago, one of the first people to break down all of their, um, transactions into data points and create a database of their transactions. And then you, you talk to other law firms, they go, "I got beat by the Kirkland database," because it accelerated the younger partners who could look back and just quickly just go, "Oh, yeah, no, no, that clause has never been," you know, "We, we've never used that clause," or whatever it happened to be. Um, you know, and people don't know that. They had a data strategy pr- way before, uh, a lot of other... before we were even properly talking about data, you know, those sorts of things. And so they run themselves [00:44:00] as businesses, both Kirkland and Latham, um, it-- when a lot of the other firms were running themselves as, as partnerships, um, and not as businesses. So yeah, don't know if that really answers your question. That might have been more of a ramble. Where does the future lie? But I think there will be, I think there will be different, different models. And I think, you know, yours might be one. You might have a platform business, as I say, a native AI law firm. Um, but it's, it's gonna be interesting to see. The other thing, actually, I should say, um, you know, when we're s- seeing that advancement of AI, you know, people sort of saying, you know, AI adoption, where is it at? Um, people are using it, and they're using it a lot, but it's moving drudgery tasks really. It's beginning to get embedded. We're just beginning to see it get embedded into workflows and change the way that work is done, and that's gonna be the real sort of [00:45:00] game changer. And also, we're gonna get to the point where you don't even notice it. People won't even see it, you know. They'll be using it and just, it's just gonna be there. Yeah, I've heard it, um, you know, it's like autocorrect in Word. It's just kind of there, right? And comes and respells a word for you when you've misspelled it Um, you know, Kirkland is an interesting example. So they are the largest firm in the world by revenue, um, at about eight and a half billion. Um, they wouldn't qualify to be in the Fortune 500 if they were a public company. The floor for the Fortune 500 i- is right at around eight and a half, $8 billion. So the largest law firm in the world is still outside the Fortune 500, which- Yeah ... um, which tells me that we have a, a, a very fragmented market. I've heard a lot of figures thrown around, like globally, uh, legal services is a trillion-dollar market. Mm. I actually have a hard time getting, getting to that number. Um, and [00:46:00] but it, it-- I think it speaks to the very bespoke nature of how legal work has happened. That's part of why it's hard to scale to Fortune 500 levels. Um, the Big Four have done it. Uh, you know, KPMG is 40 billion, and they're the smallest, 45 billion. You know, Deloitte's 80 billion. So they're a partnership model who's managed to scale, and it's, you know, the Big Four and then the gap between KPMG and the next biggest, which is Grant Thornton, is about $30 billion. Uh, Grant Thornton's about seven, eight billion in revenue. So massive delta. Uh, it's the Big Four and then everybody else. In legal and in consulting, accounting is the closest adjacent market, at least here in the US, to legal services. Yeah. I think there's things we can learn about how things may transpire. Um, and you know, and they've got [00:47:00] They've got conflicts to navigate, right, as well that- Yeah ... are impediments or headwinds towards scale. You know, audit- Yeah ... customers who are advisory, they have to manage these things carefully. So I think there is a huge opportunity for consolidation in the US market, and I, I firmly believe that tech, um, will drive some of that consolidation. And w- the ABA rules here in the US have to change. Um- Yeah Model Rule 5.4 that prevents non-legal ownership, it has to change- Yeah ... because partner capital is not gonna be sufficient to build out the infrastructure necessary to build a really tech-enabled, you know, Big Four size, uh, legal practice. It, it- Yeah ... um, and that's really what's driving my C corp, um, prediction. Yeah. It's- Yeah ... when investors come in, you know, they need the governance protections that a C corp provides, that a- Yeah ... partnership is [00:48:00] very difficult. Um, so yeah, I, I-- What do you think about the consolidation? And I know we're almost out of time here, but maybe you can share your thoughts- Yeah. I think we'll definitely see- uh, on the consolidation. We'll see loads more consolidation coming over the next year or two. 'Cause there is a kind of, um, you know, a drive towards size. I mean, you've got the $3 billion club. It's like you're not really an elite law firm unless you've got a $3 billion turnover. Um, and I think what Latham, I call it like the Kirkland effect, but what Latham and Kirkland have done to the rest of the market is there, there had been previously, you know, you had your white shoe firms. There previously was this idea that you could be quality and small, but if you were larger, you weren't really that, you know, tha-that-- you weren't really that higher quality. Well, Kirkland and Latham have disproved that And now they're big, and they have quality, and they pay their partners a hell of a lot of money. Um, and that's now-- I mean, the whole market is turned upside down. It's not just AI. The whole pecking order in London and New York is completely different. Um, and you know, [00:49:00] for y- for me, for years, you know, the chambers rankings were always the same. That, that was always the, the top firms were the top firms. Completely changed. So you'll see a lot more consolidation. Whether we had AI or not, you'd, you'd be seeing consolidation. But I actually think this idea of knowledge and your proprietorial knowledge is gonna be very important. How you actually capture that knowledge, um, and it's not just about the law, it's also about the experience of your partners, their experiences of clients, you know. Uh, and this is what's really interesting about the A&O, uh, contract matrix pod- product. Talking to Hervé Ekue, their, their senior partner, who said actually what they're learning is that it's developing because it's capturing the experience of its partners. And so that then becomes, uh, a kind of, uh-- it's developing a competitive moat around it, and it's a proprietorial product to A&O. It's a legal product that a, you know, a mainstream LLM won't be able to compete with 'cause it won't have that experience factor, those insights, you know, all of the things that they're not the law, but they are [00:50:00] adjacent to the law, that adjacent sort of knowledge, that commercial knowledge. So Uh, yeah, I think I'm- we're gonna see lots and lots more consolidation. And the bigger you are, obviously, the more of that proprietorial knowledge that you can accrue and capture. A lot of it's gonna be just on w- how the firms institutionalize their knowledge, and they're still not very good at that, actually. No. No. So- Yeah, and, and, you know, knowledge management- Get the AI. Yeah ... doesn't, uh, knowledge management doesn't exist in- No ... a non-trivial p- portion of Am Law firms, even big ones. There are a few in the Am Law 50 that don't- Yeah ... now they call it other things. There's a, uh, it's weird. In cer- in certain firms, KM is, like, a four-letter word. Um, it's a cultural thing. I've- haven't fully wrapped my head around it, but when I've inquired, it's been like, "Yeah, we don't like the terms KM." And I'm thinking, uh, "Well, you better get used to 'em [00:51:00] because they're gonna be really important really soon." Well, one last stat. iManage have just done- Yeah ... this huge piece of research, over three, nearly three and a half thousand decision-makers, 26 jurisdictions, really, really interesting piece of research for your viewers to have a look at. Um, and we didn't do it, so it's, uh, it was, they did, another company did it. But one of the interesting things that came out of that, even with, um, confident professional services firms, one of their biggest challenges is retrieving knowledge. Even ones that are mature knowledge users, have invest- you know, have got good DMS systems, all of that, it's still a real challenge, and a profit breaker, and a revenue obstacle and, you know, all of that, just retrieving the knowledge that you need. And if that's still a problem, you know, w- we still have a, have a way to go for AI- Yeah ... really to- Well, and we look at-- It's opportunity. Uh, I look at it as opportunity. It, the, the, [00:52:00] the folks who solve these problems the best and the fastest will be at a, a, a big advantage. Yeah. Um, but this has been a wonderful conversation. I knew it would. We did, we deviated from our agenda, but this has been fantastic and, uh, I really appreciate you spending a few minutes with us today. Oh, no, my pleasure, Ted. Good luck with it all, and I hope to see you in the summer. Yes, yes, yes, you will. We'll see you in June. All right, have a good one. Bye-bye. All right, take care. Thanks for listening to Legal Innovation Spotlight. If you found value in this chat, hit the subscribe button to be notified when we release new episodes. We'd also really appreciate it if you could take a moment to rate us and leave us a review wherever you're listening right now. Your feedback helps us provide you with top-notch content.