[00:00:00] How are you this afternoon? It's really great to connect again, Ted. I'm good. Uh, the first few times that we talked, we had really great conversations, so I've really been looking forward to this and we're recording this on February 5th. It was a really interesting week in, uh, legal tech already, I should say another interesting week. So, uh, anyways, I'm glad we had this on calendar. Yeah, no doubt. This is probably the most interesting week in quite some time with respect to legal tech. And I'm gonna move this episode forward because of what we're gonna talk about. So we might, um, I'm gonna try and get this out next week. Uh, so we'll, we'll see how we do there. But, um, before we jump into the dialogue, let's, uh, let's get you introduced. So tell us a little bit about, you know, who you are, what you do, and where you do it. Yeah, sure. I'm a former lawyer. Most of my career is at McDermot Oil and Emory, but I've been founding companies, most of them in the legal technology space for the last 20 years or so. Uh, I'm currently, uh, the global head of Harbor [00:01:00] Labs. Um, that's the division of Harbor Global that's focused on essentially bringing the future forward through advanced technology and ai. We have a team of probably 50 people, uh, really deep technical expertise, domain expertise, designers, engineers, uh, and we advise, implement, manage, uh, around advanced technology. And it's a very cool time to be doing that work, by the way. No doubt. No doubt. I mean, I was legal. Legal tech used to be this sleepy little outposts where not a whole lot happened, and there was very little Silicon Valley interest. And man, how times have changed. It's like we're going warp speed. Um, like, so I would assume that some of these engagements, or many, or most of these engagements, uh, are AI transformation related. Is that accurate? Yeah, I mean, for the first time in my professional career, everybody wants the same thing at the same time. Everybody wants to put points on [00:02:00] the board around ai and that's kind of oxygenated everything. Like we have clients calling us about stuff that was on the back burner, but it has like, you know, an AI adjacency and firms and their companies are interested in them again. So, um, everyone wants to do stuff with ai. That's most of our work, but a lot of stuff. Kind of on the periphery of AI is getting attention and budget these days. So it's a super exciting time, I think to be involved in legal technology at all. And as you've said, we're like. Right in the center of the areas of focus. Um, and it's not surprising I guess. 'cause you know, what we do as legal professionals is consume massive amounts of information, distill and synthesize, and then create words as output. And LLMs are really good at that. So now we have this amazing tool. So, um, the transition, as you point out from. Back water to, uh, front and center, uh, in the economy is, is pretty amazing for us. Yeah, it's, um, you know, [00:03:00] change is always, uh, a little scary, but, um, I actually enjoy, I I try to be a glass half full kind of guy and think that there's much more opportunity than there is risk and. Things, and I think we're gonna talk about this a little later. Um, when, when markets change, it's really hard to, you know, let's say you're, you're trading securities. Um, making money when markets are flat is, isn't nearly as, there's not as much opportunity as when there's movement can be movement in either direction in legal tech. I've got a, I've got a hot take on, on the situation that I, I wanna share with you and I'm, I, I can't wait to hear your thoughts on this, but, so this week Anthropic announced the legal plugin for Claude and. Um, there were hundreds of billions. The number [00:04:00] I saw was like 285 billion wiped out from publicly traded legal tech companies. That's just the public markets. Um, you know, we don't know what the impact to valuations are in kind of the PE and VC uh, spaces, because those. Um, we don't have visibility there like we do in the public markets, but, you know, Thomson Reuters lost around 20%. Uh, LexiNexis Walters Klu LegalZoom, and my theory on this is that what was announced and released was fairly incremental. And, um, fairly well expected from people who were paying attention. Like, I honestly thought something like this would've happened maybe a few months ago. You know, we saw Claude for Finance happen last year. We had GPT for healthcare, uh, what, two or three months ago. [00:05:00] So it was. Just a matter of time in my mind. So I think this, all this hoopla, all this big reaction is pent up anxiety in the markets about, um, the level of investment and the. I watering valuations that people wrote checks for. I mean, you know, in the private markets we've got Harvey and leg trading on their last round at 80 times revenue. And, um, you know, that's, that has to be a little, I would be a little anxious. Writing that check. And when you see something even that was expected. And what if you're paying attention is incremental, not a huge leap forward by any, I don't think anybody thinks that, but I don't know. That's my, I So I feel like a lot of pent up anxiety in the markets, um, manifested itself and has created [00:06:00] this dynamic that we're seeing. Uh, what's, what's your take on, on what happened? Well, first thing that came to mind is as a guy running a company in this space, you should be delighted by these massive valuations. But I, I take your point, and I think you said it, um, really nicely. Anthropics release of this legal plugin into its cowork environment was quiet. There was no fireworks or big product announcement or anything like that. It just kind of got released. Um, tremendous amount of impact. The capital markets for companies that were not particularly impacted by the kind of function that this has. I mean, Thomson Reuters is so diverse. Relic, which owns Lexus so diverse, Walters Klu, barely any, um, competitive, uh, overlap with this plugin, yet something else is at work there, right? So I think, uh, it's a little bit of a relief valve from the tension that you're seeing that [00:07:00] people feel compelled to support. These valuations to be a player in this space. But I think there's some nervousness for sure, and it was maybe the first of what I think is gonna be many major shakeups to how we think of the ecosystem. I'm writing a paper on this right now, and the working title is, um, anthropic, quietly Rewires Legal Technology. And I think that a, a foundational language model moving. Legal technology native to other enterprise applications is, um, a tremendous potential, um, change to how we think about getting work done. It's a super important signal to the SaaS industrial complex, which I think has a lot of evolution, uh, that there need to focus on. And um, I think it just creates a general awareness in the economy that there's really exciting stuff happening in legal. [00:08:00] The foundational models are noticing legal as one of the places they need to play is really exciting for us generally long term. Yeah. You know, I mean, even the, so I had, uh, Winston Weinberg from Harvey on the podcast a couple of weeks ago, and he said it on the podcast and he said it. Six, eight months ago that they, every quarter or so have to reestablish their position as not being a rapper on top of an LLM by, yeah, staying ahead. So like this is, the messaging has been pretty consistent in terms of. You know, we've always recognized the competitive element of the foundation models potentially delivering technology directly to either law firms or inside legal teams. Um, so [00:09:00] it, this, it's not really it, this isn't new, um, but. The market behaved as if it were, if it were new. I know, I agree. Um, they're sharp at Harvey and they're gonna stay ahead of there. There's no comparison between what you could do on this plug and what you do on Harvey and not worried about them necessarily. But as an ecosystem, I think that there's gonna be some changes if you don't have proprietary content or a real domain specific focus like Harvey and Lag and those, you know, I was interviewed on Bloomberg TV two days ago on the third, right after this announcement, and we were talking about the market drop. I made this prediction that it's an overreaction and these companies are gonna recover their value in a couple of days. And I haven't even checked to see if that's right, but that was my prediction. Uh, I don't think it was rational. I think there was a psychological overreaction for the reasons you state, right. The valuations have been super high. Everybody knows like there's something tectonic that's coming and we were reaching as if this was it. But that's [00:10:00] not to say there won't be something techno that's coming that's a real threat to the SaaS industrial complex. You know, I do think that that is, um, in our future. I've been saying that for a couple of years and some of my colleagues at Harbor Labs told me I was crazy two years ago, and everybody's kind of on board with this. I didn't invent it, but you know, I bought into that proposition when I first heard it. Uh, ultimately I think a lot of solutions are gonna be a really sound data strategy. Plus a language model, plus a thin customization layer at the top, and there will be some cases where enterprises say, I'm just gonna release myself from this hostage situation to SaaS subscriptions. But that's not gonna be true for all of them. If you have proprietary content or you have a particular domain experience where you understand the workflows like Harvey does, I think you have a moat still, but you know it's gonna be good for the market. They're gonna have to continue to run fast. Yeah, they're gonna have to say one, one step ahead of the sheriff, so to speak. Yeah, for sure. And for [00:11:00] the entities that can't afford your Harvey's and lags, there's a great solution for them. So there's a democratization, I think. Um, and, you know, we talk generally about the commodification of knowledge, and in this case legal expertise. I think it's really good for society that, uh, some of these tools are gonna be available, you know, the cowork environment, so like a hundred dollars a month or something like that, you know, in these. Premium product could be 10 times that. So, um, you know, they're luxury items. So I'm really glad that. We have more availability, um, up and down the kind of economic ladder, you know? Yeah. So I, I shared this on LinkedIn and I don't mind sharing it again here. So at info dash we have, uh, we have about a quarter of the AM law 200 as clients. We have about 50 4:00 AM law firms, I think is the, is the number, and we don't. Really engage with out outside counsel for MSA negotiations. We've done this so many times, we [00:12:00] understand the process. Um, we, we occasionally get thrown curve balls or get stuck and we then absolutely, you know, bring in outside counsel, but. We, um, we do a lot of this kind of in-house because they're small tweaks where, you know, we'll make a small concession here or tighten. So something up there. Yeah. You know, the four issues that always come up. Right. Indemnification, IP ownership, liability limit, you know, it's. Becomes pretty focused at some point E. Exactly. Now that you've done a lot of them, you know, so what I think this legal plugin has will probably enable on our side is us to be more efficient about how we do that, what that process looks like internally. But it will in no way have any, it will have zero impact to our external legal spend. Um, it will just make us more efficient. So, to your point, I think it does enable efficiencies. Pro probably not gonna have a big impact on outside legal spend. And, um, [00:13:00] with the legal tech vendors specifically, you know, like the ones that you mentioned, that's not really, you know, Thomson Reuters. I mean they and and Lexus have huge data moats and, um, I, yeah, I really struggled to kind of connect those dots. That's that, that's my read on it. Yeah. I'm, after our conversation, I'm gonna go check the, the tickers and see, uh, if some of those gain losses have been called back. I think shorting the shorts would've been a good idea a couple of days ago. I looked last night and, um, TR had recovered slightly. So I think they, at one peak at one point went down 25% and they were down about 18% when I looked last night. Okay. Um, but you know what's interesting is like people who are really well informed in this space, uh, I've had, I've had a couple people who surprised me. They used like, well, this is like kind of the deep seek moment. Um, and I'm like, Hmm, no, very different. Um, [00:14:00] and I, I'm curious how, if you see it the same way. So with Deep seek, several things happened that were materially different than, than this. The first thing that was very different is that it was not an incremental. Um, step forward. This was deep seek, demonstrated that they could create a world class model, not using the latest and greatest NVIDIA hardware. That's not incremental. That was really kind of, yeah. Transformational and intense. The cost of training, you know. Exactly, and you know who, who knows if those numbers are reliable, but we do know that we have sanctioned China and they've not been able to get broad access to or easy access to those chips. So that's a key difference. And then another, even probably more important difference is nobody saw that coming. Like that caught everybody by surprise. Like here, we've got an incremental step forward that everybody. Should have saw coming. If you didn't see it [00:15:00] coming, you should have. Um, so I don't know. I see it different, very differently than, than the deep seat moment. Do you I agree with you entirely. Yeah. It's not a Scott Galloway, one of my intellectual gurus talks about, um, the, uh, the Old Navy model where if you can deliver 80% of the value for 20% of the price of the gap at the Old Navy, like that's kind of a model. And, and that's probably what deep seek was. I don't think that this plugin is delivering even the same things that we're getting from the software companies that were depressed. So I think your initial presence is PR premise is probably right, that there was just kind of some anxiety in the market. Valuations are high, everybody kind of knows it, and people have been waiting for a shoe to drop and they interpreted this as that shoe. Yeah. And you know, what's, what is some, I, I think one proba potential negative sign, uh, associated with this or signal is that it was irrational. And when things start [00:16:00] to become irrational and hard to predict, uh, it can point to instability and ultimately. Things could lock up and change direction pretty easily when you start to see that that skittishness in instability in, in valuations and market caps. Um, I don't know if we're there or not, but that was such a dramatic swing. I never, yeah, I I would've lost a pretty good amount of money on a bet if somebody told me that these companies would've lost 20, 25% of their value. I would've, yeah, I would've lost money on that. You raise like we're not capital markets experts, but we're participants, right? And observers at least. And you raise a really interesting question about the volatility of those markets. Like how does a mature company with a diversified business lose 20% of its value in a single day based on a mildly competitive announcement? Now, TR also had an analyst warning that came out, you know, around that same time. So there were some [00:17:00] compounding factors, but I don't think that happened with Walters Klu or legal Zoomo. I think this was just, uh, oh, you know, legal SaaS is in trouble and people didn't explore it. It's too deeply, you know what I mean? You know, Ted, it could be that somebody said, listen, if Philanthropics doing this today in this space, which feels more like a watered down Lara than it does, uh, watered down tr maybe the sentiment was it's coming for TR too, you know, although I don't see how you cross that data mode. You know, so it could be just kind of, uh, you know, a leading indicator of product announcement that might come down the road. But yeah, like I said, I don't see it either. Yeah, it might've been a good time to get into that stock. I don't know. Yeah, yeah. No, no doubt. Um, well, you and I had had such a good conversation. We, we were, uh, chatting at the KA and I and LTC conference, and then we, uh, we, we had another call and we talked a little bit about the, um. [00:18:00] Moments of transformation from a historical standpoint and things that we can learn from that on how things may, may play out in, in this transformation. And one of the metaphors that I look at and have studied a little bit is automobile production. So pre 1910, um, which is about when the Ford really. Productionized the assembly line. Uh, automobile manufacturing was a very bespoke process, much like legal work where you would have highly trained, uh, you know, artisans who, uh, leveraged, um, not very standardized. Well, standardized parts and assembled vehicles. It took a very long time. Um, replacement parts were very difficult. It was a very expensive, slow proposition, much like a lot of legal work, uh, frankly, [00:19:00] and post and so production pre 1910 was in the low six figures. Uh, I think it was 1913, something like 6 million vehicles were produced. Um, I might be getting my dates wrong, but not by much, and, you know, so, uh, 10 plus x production, uh, cost dropped dramatically. And, um, I know I, I, I think a lot of lawyers, I don't know if, if you feel this way, but. Kind of give you the RCA dog head tilt when you talk about a production line and comparing my legal work to a production line, you know? And the reality is, yeah, I'm a poet. Right? Exactly. I'm an artisan. This is an artisan process. Legal is bespoke by nature. And, um, I, I think that there, there's still gonna be a lot of that, that's gonna be very. Done in a very bespoke and, and, and hand holded manner. But a lot of [00:20:00] stuff is blocking and tackling that's gonna get productionized. Um, I don't A do you agree? And B, are there any other, do you leverage any kind of metaphors to think about this? I'm really interested in this topic and I'm glad you bring it up. Um, talk a little bit about why we care about this topic specifically. So in a technology transformation, and by that I mean any technology that. We don't exactly know how it's gonna be used in the future, right? Like, um, you know, Excel and PowerPoint. We know how those are gonna be used. They're important transformation technologies, but not transformational technologies. The internet was a transformational technology. We thought it was about sharing files between universities. Turned out it has fundamental backbone of our economy. So. I think AI is a transformational technology. We can't predict all the ways it's gonna be used when that's introduced. There's a lot of talk in society about the technology itself. So the technology systems, which we've talked about a minute ago, very important. But then there's the human systems that are affected by those, and [00:21:00] you and I are both very interested in what the implications are gonna be for humans as a result of this technology transformation. What you see in the paper all the time and on the internet is. All are going that the industry is gonna shrink and that draws clicks because it's sensationalized. And that's kind of how we're wired to kind of relate to that. So like you, I've been trying to figure out what's really gonna happen and. We're not good at predicting as a species. There's all kinds of things that have turned into punchlines. Thomas Watson, CEO of IBM, saying there's only gonna be a market for five computers. And Paul Krugman saying the Internet's gonna gonna have a significant impact on the economy. That's from a noble laureate economist. So we're pretty bad at predicting, but like you've done really helpful to look back at historical analogy and see what we can learn from that that might. Intimate what's gonna happen in the future. And this, uh, assembly line analogy, I, I think I described it to you as a [00:22:00] appropriate but not obvious analogy to what might happen in legal. I, I buy into your premise there, which is that, um, when production becomes commoditized and price goes towards zero, industries tend to get much larger. So, you know, as you point out what happened, um. When, when automobiles were an artisan, uh, people who were building them couldn't afford them. Very few cars on the road. All of a sudden, uh, costs went. Towards zero for a car and the people building them and everyone else could afford cars and the auto industry exploded. Uh, there was much more demand for cars. And then of course you had these side businesses. People had to open window companies and upholstery companies and paint companies and all these other things. So you had this giant ecosystem that developed because of this transformational technology. The assembly line, one of the ones I really love, 'cause I'm a book nerd, is the printing press. In 1450, before the printing press, there was probably [00:23:00] about a hundred books made a year. There was maybe several thousand in circulation in the whole world, only the clergy had them. And some elite people. Most of the world was illiterate. Uh, Gutenberg used a wine press actually to come up with a movable type printing press, where all of a sudden you didn't have to have guys with a feather quill. Handwriting books, uh, you could manufacture them relatively cheaply and widely. In a couple of years, there was a million books in circulation. Um, the whole world became literate, as in, in a, in a few decades. And, um, there was a tremendous demand for books all of a sudden. So the people who were in that industry had many more opportunities. People became authors that became book binders. They, they opened bookstores. They became traders. So that industry. Exploded, uh, substantially. And I see that happening in legal. Um, legal is a luxury item right now. Most people can't afford it. Most companies can't even afford it. I mean, you mentioned even at your [00:24:00] company, which is successful with a lot of people, you're not going to Kirkland analysis for a lot of work. It just doesn't make economic sense. Um, a lot of rights that people have don't make sense to enforce 'cause it's too expensive to enforce your rights. So, um, I think we need to commodify. Or the technology is gonna commodify work, that there's a lot more activity that happens in business and that's gonna have legal implications. So, long way of saying, I think what happens as a result of the transformational technology of AI is that the legal industry gets much larger, not smaller. That's at least what the historical analogy. Now, it could go the other way, but I can find no precedent in the arc of history to support that. The other, the other thing that the industry's gonna shrink. Roles will change, of course, but roles were changing anyway. I think that'll just be accelerated. And that's maybe the interesting thing to explore at some point are what are the new roles gonna be like, and um, what, what's the life gonna be like for the [00:25:00] people associated with it and, and the users. So, and, and I, I agree with you. I've got an interesting example that's like, I'm dealing with it right now. So in addition to Info Dash, my wife and I own five gyms here in St. Louis, and at one of the gyms we got a tax bill that was ba uh, sales tax bill that was based on estimates for a period of time where we weren't even open yet, like we had not opened our doors. And um, it escalated to the point where. We now have to show up at some sort of a hearing. And so we engaged our legal counsel and he said it would be cheaper for you to just pay the 2,500 bucks than it would be Yeah, right. To pay me to go and represent you. Yeah. That's not justice, you know? Yeah, exactly. And he goes, it goes, this, this goes against every grain of my being. But um, that's the reality of the situation. I think we're gonna pay him anyway, because I'm worried about them maybe going a another [00:26:00] period back and I get another bill. But I mean, these are the sorts of trade-offs that you have to make as a small business person. Yeah. And again, like, you know, our, our, our MSAs that we don't usually get legal counsel for, again, we've, I've got people on staff who are very experienced, but they're not jds. Um, and you know, we, we don't take very big risks in that regard, but I would love to just have an attorney, uh, do the work it, but it's, it, it doesn't, to your point, make economic sense. So with, given all of the historical precedent, why do we have such a, um. Uh, what, what's the word? A not, not an, the opposite of an abundance mindset. Um, a scarcity mindset. Yeah. Why do we have, why are we bringing, why are we bringing such a scarcity mindset to this when it's been proven over and over that it usually doesn't play out the way we think it's going to. [00:27:00] I know, I mean now you're getting into human nature and to some extent, uh, lawyer personality I think, and legal organization personality. We as humans are fear the unknown, you know what I mean? And certainly there's a lot unknown about what the future's gonna be when there's been a fundamental change in, you know, the pieces on the chessboard. So I think it's as simple as that. And also I think, um, you know, people in legal organizations we're trained, uh, to identify risk and there is some risk. You know, one of these things about human nature, I've noticed is that people will take an imperfect situation rather than an unknown situation. So even if. Driving a truck or collecting tolls or doing some of these things that we think machines can do, uh, people will take that rather than not knowing what the future's gonna be. And there's good reason sometimes, you know what I mean? It's hard to retrain yourself and stuff. But, um, it, last thing I think is, you know, our meteor environment, um, exacerbates those kind of fears. You know, like I will click on an article that says, your job's going away, because [00:28:00] that kind of hits me in a very m. You know, historically, um, things tend to work out okay. That's just not emotionally engaging and I'm gonna forward the threat one. You know, so, you know, all this research about, you know, the original sin of the internet is that it's, it's eyeballs based, it's advertising based, so everybody's trying to drive eyeballs. So I think all these things create this perfect storm that puts fear in the world. And that's why every time I get a chance, I'm trying to get people to look at what's actually happened in the past. I've gone all the way back to, I'm a history buff, so I looked at the first in, uh, agricultural revolution and you know, then the second one, the mechanized, uh, industrial agricultural revolution. And what happened to people who were like pushing plows and stuff, which is one of the hardest things in the world to do. And, um, they didn't run out of jobs. You know, that economy changed. There was many more jobs as a result of all those changes, and I try to get [00:29:00] people to see. There's no counter examples that I can find in history. So, um, you know, we gotta fight maybe our immediate urges to fear the unknown and also kind of resist some sensationalized media around, uh, fear, you know. That's a really good point. You know, one, uh, key difference I think with this transformation and the automobile transformation that happened with the advent of the assembly line is, um, a key difference is that there existed virtually no management science or organizational theory that Ford. Was able to leverage in order to build the structures and scale the business. He kind of had to, him and his team had to build that on the fly. Um. I think that will create a very accelerated timeline because we do have, we do know now how to scale [00:30:00] businesses and processes and you know, we have things like Lean Six Sigma, which I was a practitioner of for many years in my corporate, uh, America Days. And, um, so I do think that the timeline is going to be compressed relative to what we saw in the early 20th century with assembly lines. Do you agree? Yeah, I think that's fair. Probably if you think the rate of change has been fast in 2026 already, it's probably as slow as it's ever gonna be in our professional lives, right? Uh, the technology is as primitive as it's ever gonna be. Um, so I think we can expect a lot of change going forward, but change has been pretty good for humans. I mean, if you look at, um. Quality of life over the last four or 500 years or something like that. It's been amazingly in the right direction. And it's mostly been on the backs of technology changes and science, right? Which is technology is science activated, you know, so those things are related, of [00:31:00] course. So I think as a species and as professionals and legal organization, we should be super enthused about, um, what technology change is gonna bring. The possibilities. Yeah. So I come from a data background. I was on the SQL team at Microsoft and started consulting on the side, which is how this software business kind of happened. That was 27 years ago. Uh, but um, in my data days, um, we used to use something called the DIKW pyramid that created a metaphor around, at the first layer you have data and then you have information. And then you have knowledge, and at the top of the pyramid you have wisdom. And, you know, um, I've heard the, the metaphor, which is a, a good one. It's like, um, uh, knowledge is knowing that a tomato is a fruit and wisdom is knowing not to put it, um, in a fruit salad. [00:32:00] And, you know, I think that if we look at, uh, it, it's a pyramid for a reason. They're at the. It, it's a indicator of abundance. So we have, there are masses amounts of, of data, especially these days out in the ether. Uh, there's less information, there's even less knowledge. And at the top of the pyramid, less, less wisdom. But I think we, it is going to create a scenario where we are gonna have to elevate ourselves up that. Um, continuum and leverage the wisdom of, you know, our experiences and the blocking and tackling work, uh, is gonna go probably largely automated. So, um, I guess the question is how much of that work that, that leverages the, the top of that pyramid. And is it enough to sustain the industry? Um, I'll [00:33:00] give you a quick metaphor before you answer that. Uh, I studied another transformation, WA which was when, um, spreadsheets came out, what it did to the accounting industry. So this is early eighties, 1982, Lotus 1, 2, 3. It came out, and there were same scenarios there. Uh, there was a lot of, uh, fear, uncertainty, and doubt around what it would do to accounting. So, uh, accounting actually grew. Um, if I, if I'm recalling, there were fewer than a million. Uh, accounting professionals in 19 82, 19 83, and like 1.6 million. So the industry grew in those 40 years. It's been a long time. 60%. Um, what do you think about kind of that expansion or contraction opportunity that this creates? Done. Kind of the most important thing that we can leave anybody who listens to this with, which is, what am I gonna [00:34:00] do in the future? Right? People are asking them. So that's a really personal thing. I mean, a lot of us are interested, uh, clinically in what's gonna happen with the technology, but I think everyone wakes up every day and says, you know, what's my future like? And I think this, um, the DIKW pyramid highlights that a lot. Uh, let me answer it this way. Um, so what technology tends to do is make what was previously scarce and expensive, cheap and available. So, uh, machines in the Industrial Revolution did that with muscle, right? So all of a sudden we had machines taking the place of muscle. So what did humans do? They moved up to knowledge. And we were born, you and me in the knowledge economy. We spent our whole career in the knowledge economy. Used to be a skills economy. You know, could I build a car, could I farm? And then we got pushed into a knowledge economy where most of us made our living. So now knowledge is becoming, um, which was once scarce and expensive. It's becoming cheap and available. Um, it's the end of knowing, as I like to say, as a [00:35:00] differentiated because the machines are gonna know everything. So whether, you know, you know, more than me is going away as a differentiator. So yes, we get then pushed up the ladder into what I think is wisdom. And I got a paper where I'm kind of pushing the wisdom economy as you know what, our children are gonna grow up. Performing in. And uh, that's a really wonderful activity for humans to engage in. You know, there are things that I think are still uniquely human that the algorithms are gonna be great at. You know, one is taste, right? Like you see someone who has style or like, you know, wise a Mac have a different feel than than a Dell or something like that. Well, there's an element of taste that goes into the design of those products that. It has to do with empathy for other humans, right? So I think taste, there's judgment, there's ethics, not what can we do? What should we do? There's trade-offs, you know, um, there's reading the room, you know, when you walk in for a negotiation or in front of a judge, a lot of these things are wisdom [00:36:00] related. There's inspiring others. There's ambition, not how do we get somewhere, but what should we get to? Those kinds of things I think are in the realm of wisdom, and I think most humans are going to be directing AI agents. To achieve the objectives that we set with wisdom. So I think that's what happens in the wisdom economy, and we should just equip ourselves to be really good at those kinds of skills. Storytelling, synthesis of variety of ideas, um, strategic planning, um, honing our taste, um, focusing on. Ethical and judgment issues and getting good and building a reputation for being qualified in those kinds of areas. Inspiring people, you know, I think those are gonna be the things that are, you know, where we're gonna have a great and important role to play. How, how does one acquire wisdom without working its way through knowledge? You know, how does one become wise without spending some time and knowledge [00:37:00] work? Um, it feels like that is a gap that. I haven't really heard a articulate approach to how we bridge it. Uh, I don't know. How do you see that? I dunno. I mean, I'll look at history again for a guide, you know? Um, I'm not smart enough to see the future, but I. I grew up in a knowledge economy. I didn't have to have skills, economy experience to be successful in a knowledge economy. I didn't need to know how to ride a horse or build a car or something like that. I jumped right into the knowledge economy and learned there. Right? So I. I think most of us are in a knowledge economy right now, so we are through it. Right. Maybe you're thinking of people who are not born yet and you know Right. How are they gonna get there? Um, I think they're gonna be like you and me, right? They're gonna jump over. Um, farming and industrialization, we jumped into knowledge. If you're born today, you're gonna jump into this wisdom economy and you're gonna grow up being used to managing. AI [00:38:00] agents and technology, just like any 4-year-old you see right now, can like drive a iPad, you know, without any training. So I don't think it's necessary to go through all those steps. I think that is something that's talked about a lot like law firms. Oftentimes say like, well, how are we gonna train these young lawyers? I mean, I was a lawyer for 10 years. Nobody spent a whole lot of time training me, right? Like the, the economy didn't allow it. You know, did maybe a generation before that where you could bring four associates in on your deal and they'd just build a client. But clients wouldn't tolerate that anymore. So we kinda learned on the job by watching, by reading, um, and, um, the experience. So my take is as humans, we're not gonna have a hard time. Guiding, um, activities done by machines, I think we're natural at it and I think it hits something that's uniquely human, which makes us very good. I think it was harder to learn how to plow 'cause we don't like that, you know, that [00:39:00] grinding manual labor, working in a factory like we did it. But I don't think that that's how we kind of connected with our humanity. But I think wisdom work, I think is really connected with our humanity. Yeah. We are wired to conserve resources. Your brain is by far the most, um, uh, calorie hungry organ in your body. And, um, but going out and doing, plowing a field. Will pales in comparison in terms of resource consumption to thinking through, you know, um, a work of Aristotle while you're sitting in your air conditioned couch. Yeah. Ironically. But you're right. Yeah. Yeah. Um, what about, you know, you and I disagreed on this a little bit, which I, I always like it when I have I somebody with different perspectives. 'cause that's where I think, you know, we both learn. So I have a. I [00:40:00] have a theory, which my listeners, uh, have, have heard me talk about before, that there's gonna be a mass consolidation in legal. I think if we look at probably the closest adjacent industry to us, which is accounting, um, it's a very different concentration. Picture there, there are four big firms and then everyone else. So KPMG's the smallest at about 45 billion. The next biggest is Grant Thornton at a mid single digit billion. So you've got four players that kind of dominate the space and I, I, the, the way we're legal is currently fragmented, I think is unsustainable, especially kind of post. AI transformation because I think resources being deployed like ie. Capital, uh, and human resources to build out the tech infrastructure to allow us to compete post transformation is gonna require scale. And scale is something that law firms have not really achieved. The [00:41:00] biggest one is, wouldn't even qualify to be in the Fortune 500 if it were public. And it's a bit of an outlier, KE at eight and a half billion. Um, and you had some, I don't know, maybe some different thoughts on that and scale and law firms and I don't know what's, uh, do, do you see it the same way or do you see it different? There's a lot there Ted. Um, I wish I could remember that conversation 'cause it was great. Like it was 10 minutes in every aspect and you said a bunch of things I hadn't really considered before. So I really value that kind of dialogue too, which I was so eager to continue our conversations. Um, so a couple things come to mind. Um, we'll just approach it fresh, I guess. One is, I'm not sure that. Getting bigger is what's likely to be needed. I think getting smaller is just as likely. Um, a lot of people say that there's peak employment in the tech industry. Microsoft, Google, Amazon, they're all smaller than they were two years ago. Meta, you know, uh, they're driving more revenue, a lot more revenue per employee. They've got a lot less people and they filled the gap [00:42:00] with technology. Now that kind of counter to what we said before, those people are not out of the tech world necessarily. They're out of those individual companies. Right. Um. One could argue, um, you know, there's a lot of conversation in Silicon Valley about the single employee unicorn that it's possible for a single founder with a vision who has taste, who has empathy for what people want, can build a company now by themselves that gets to a billion dollar valuation. So there's a lot of reason to think that law firms might get smaller, not larger, that, um, a company like yours can handle a lot of their legal needs and they just go to Kirkland and Ellis occasionally, you know, um. So maybe that happens, but you raise the point, like, we're gonna have to have deep technical in infrastructure right now, globalization and all that stuff. Um, yeah, I mean, Deloitte has 450,000 employees right now. And, you know, you mentioned KE and Denton's maybe has 11 or 12,000, so nowhere near there. Um, I guess I might have posited [00:43:00] that lawyers don't want to get any bigger than that. Yeah. Um, you know, one, uh. It's kind of nice to feel some sense of ownership if you're a partner in a law firm rather than feeling like an employee. And you know, once you get beyond a size like that, you'd probably lose all kind of personal connection. Um, then there's also kind of the conflicts issues, right? Which, you know, the more people you bring in, the more potential conflicts issues and that cuts against your business. There's some structural things, which is that, um. Non-lawyer ownership or capital are not allowed. So, you know, maybe beyond a certain scale, all of a sudden you need more capital to kind of grow there. I don't even know that's true and I don't know what those rules are in accounting. Uh, to be honest, I don't know if they have any of those restrictions. I know they have break between their accounting functions and their consulting functions, so they have some conflicts, issues too. I, I guess my, my sense is when I started practicing law, um, I think the largest firm in the world was Baker and McKenzie, which had [00:44:00] 1500 lawyers. The next had like 500 lawyers, right? So that was normal 30 years ago, and now the largest ones have 11 or 12,000. So, you know, maybe that's just the pace, you know, maybe they're gonna get 'cause. At the time, it was the big seven, they were way bigger than the biggest law firms. So I don't know, maybe the pace of growth has been relatively even. It's just they started with a bigger base. Yeah. I, I, I, I have a strong point of view on it really. Um, today, the, uh, so in terms of scale, I don't know any lawyer who, who doesn't wanna make more money. So, um, that, that's the purpose of scale. Uh, you don't scale for scale's sake. You scale to. Uh, reap efficiencies, um, and economies of scale. And so, I don't know too many lawyers that wouldn't wanna make more money, but I think that you're, you're, you're right about the limitations on external capital and the partnership model in general, I think is [00:45:00] a, create some limitations to scale. Um, and maybe I learned that from you in our last conversation, but it seems, uh, to make some sense to me right now. Yeah, you wouldn't necessarily make more money just by getting bigger Now you're right. I mean, we do tend to get efficiencies by getting larger, but if you're already 1100, 11,000 lawyers and 22,000 employees or something like that at a place like Denton's, um, hard to say that you're necessarily gonna get more efficiencies if you're twice as big. I mean, you're already scaling your infrastructure pretty well and your real estate. You know, so I think what might happen is the people in charge start losing a little bit of influence. You know? I mean, how do law law firms get bigger? They acquire other law firms, or they merge with other law firms. So then you have another a. Group of people who are used to running things. Now here, my old firm McDermott just merged with Schulte Roth, and I [00:46:00] know there was a whole bunch of brain damage around who's gonna lead because you have other groups who were leaders too. You know what I mean? So, I don't know, it, it could be that that personal hassle outweighs some of the efficiencies and, you know, um, smaller firm Wachtel makes more than, uh, they do it. Stantons, right? Quin, Amanda. Yeah. There's a lot of examples of, of that. Uh, Davis Polk, um, all small powerhouses sometimes, you know, so all highly profitable and, but I think that to your point, yeah, in terms of scale, not delivering on the efficiencies. When you're in a bespoke industry, it's, it's true. It, it, it's hard to, it's hard to generate efficiencies when so much of the work is bespoke. And so many lawyers do things so differently. Um, I've, I've actually seen this happen, uh, where you get one partner at a firm who gives you a commercial lease agreement and he's outta the office when you're during [00:47:00] your next negotiation and you go to the partner in the office next door to him and you get a completely different, and it's like, um, yeah. When there's that, it's hard. When there's a lack of consistency, it's difficult to reap. Or leverage efficiencies of scale or economies of scale. Um, so I think that's maybe part of the problem too. Let's explore this for a minute, Ted. Like, you know, take this the straw man case on scale. If this was 2022, I think it would be easy for us to say, well, you know, if you got to 10 or 11,000 lawyers, you might as well just keep going to 20,000 lawyers for the reasons you say, you know, like there's good business, uh, precedent behind continuing to grow, but now. It's post ai, right? Post AI introduction. At least we're like in the midst of this whole thing, like what's the case? So you got that. So, uh, we could do a lot of things with agents that we don't necessarily need people for. Um. We've got, uh, this movement to kind of [00:48:00] deregulate the industry a little bit. You know, Arizona has already allowed non-lawyer ownership and that's probably not gonna stop there. The UK is much richer. You have the big four who we talked about before, taking a lot of stuff that used to be, um, traditional law firm work, and you've got these, a LSPs that are doing a lot of stuff that used to be true. So. Isn't there a pretty good case a law firms are gonna get smaller? Uh, people wise? Yes. Um, for, in terms of lawyers, I think that the leverage is no longer gonna be people. It's gonna be tech, so. Mm-hmm. Yes. I do think the lawyer count will, will go down. I think you're gonna have different people taking the place of lawyers, like data scientists and AI engineers Yeah. And project managers and business analysts. Yeah. Um, so I think the scale will look a little differently and you'll have some. Uh, attorneys that essentially will be system architects and helping define the logic that lives in these tech-enabled legal service delivery machines. I can totally see it. [00:49:00] Yeah. Yeah, it's an interesting, it's an interesting prospect. Like I, I pay real close attention to the AI native firms. There's not many of them, but, um, you know, Crosby was one of the first and every chance I get, you know, they don't do a lot of pr. Um, I have a. Uh, somebody I know over there, he talks to me from time to time, but they stay pretty tightlipped, but they've been on a few podcasts and, um, I've been paying close attention and it's almost like a one-to-one in terms of they have an attorney and an engineer that kind of sit right next to each other and they turn around, uh, master services agreements and data privacy agreements in an hour. Yeah. Right. That used to take days to redline and the value proposition is for these SaaS companies, time to revenue, recognizing, you know, RevRack, it's a big deal. Oh, it's a huge deal. And, um, it's a huge deal for us. That's my company a lot for sure. Yeah. You know, value that's, it's not value added cycles. We all know the same [00:50:00] issues, but there's just so much churn, you know, and if we could, essentially that should be an agent to agent negotiation. My agent knows the things I care about, my parameters. So does your agent. And it should happen almost instantaneously. Eventually. I see a future like that, you know? And so we're kind of at this inflection point now where places get bigger and more important, maybe not by adding more people. So we could be at like peak law firm in terms of size, you know, attorney count. Yeah. In terms of attorney count. Yeah. Yeah, yeah. No, it's um, it's a fun time, man. I'm, I'm having a blast. Uh, you know, I. I get a lot of questions from outsiders, uh, that are like, aren't, you know, aren't you worried we're a hundred percent of our clients are law firms? And they're like, aren't you concerned? And, you know, um, I look at it differently. Um, we're trying to skate to where the puck is gonna be rather than where it is today. And our infrastructure deploys in the client's tenant. So we have a, a very deep [00:51:00] integration layer. There's all sorts of AI capabilities that we enable. So when we deploy our integration hub, law law firms can then leverage Azure Open AI and Azure AI search and build amazing, um, AI experiences with it without paying the Harvey's and lags premium. They're just paying for token consumption. Um, yeah, and we're starting to do that now and, uh, in addition to the internal and external collaboration. So, no man, I'm excited. Um, and it sounds like you are too. Law firms are great clients. Hey, um, what's one thing that you would tell somebody coming outta law school right now that they should be thinking about managing their careers? Let's try to leave a nugget for somebody. That's a really, really good question. And, um, I recently had someone on a podcast who is transitioned from practicing lawyer to innovation lawyer, and as soon as I got on the phone with her, I, I recognized her eq. It [00:52:00] was just abundant. She was very attentive to, and um, where she sits in the organization is she has to negotiate with it. She has to negotiate with the practice, both of which can be difficult personality types. Mm-hmm. If you know what I mean. And she has to leverage what. Boy do I? Yeah, exactly. You know, probably better than most people. And, um, the, the empathy, which is something that lawyers as a group fall short on. Um, they score below the mean, you know, uh, citing Dr. Larry Richards extensive work on this topic. And, um, they're highly autonomous. They value autonomy and I think a lack of empathy and, um. A bias towards being autonomous are going to be things we need to get better at in the future state of this, because we're gonna have to work with our tech partners [00:53:00] and, you know, our business development people more closely and non-lawyers. Uh, I know everybody hates that term and I'm, I'm one of 'em, but executive management that you brought in. From outside of legal who maybe from Amazon who have scaled a infrastructure. Um, and you're gonna have to work with those people. So yeah, if I were coming outta law school right now, I'd be really focused on eq, empathy and collaboration. How about you? I think you said it nicely. I mean, one sentence I try to leave someone with is embrace your humanity. You know? Um, it was not. A particular skill that people cared about when I was a junior lawyer at a large New York firm, right? It was a different kind of thing that we had to manifest. But I think the human skills, the things that the machines can't do, the things that can't be done overseas, cheaper is the area you wanna focus, right? Because that's your market opportunity. [00:54:00] And largely that's about inspiring people. Um, it's about being seen as somebody who lifts the culture. Um, it's about understanding. What's the right thing to do? Uh, not just, you know, what can be done. That's gonna be important. Clients need interpretation of the knowledge that machines are gonna generate. What does this mean for me? Get really good at connecting those kinds of things. Become a great storyteller. Learn how to say things in emotionally engaging and concise ways, uh, so you can move people towards a direction that's important and so that you can bridge those various skill gaps that you pointed out. And what's so great about this, I think, is this is what people who went to law school want to do. None of us wanted to do document review. None of us really wanted to fight all the time, you know what I mean? We just wanted to make the world a little bit better, and I think that's kind of a very human tendency, and I think that the kind of skills that are gonna be needed are gonna be those, you know, fundamentally human [00:55:00] skills. That's a pretty cool time to go into the profession. The last thing I would say is. Get familiar with the technology, of course, but don't fear it like you used to. People, lawyers would turn away from technology because they thought there was such a big gap between where they were and where they could influence technology, but that's not true. Technology now is so human friendly. So much code just generates itself. What you just need to do is know what the technology can do, what kind of problems it can solve for you. You don't need to. Be an engineer. You don't need to code stuff. Like, and that's today, tomorrow it's gonna be even better and more frictionless. So I think, um, some kind of deep understanding of what technology exists and what problems it can solve for you is, uh, something else I'd advise. It's kind of cool time though, I think, to be coming into this profession. You know, it is definitely an interesting time. Um, I'm, I'm a glass half full kind of guy, so I, I view it, um, optimistically and, uh, this has been a [00:56:00] fantastic episode. I knew it would be, you know, I don't know if you know this, but Patrick d Domenico's, a friend of mine, I think a friend of yours as well, he recommended you long time when I first started the podcast, he's like, you know what, you gotta get Rudy on the podcast. And then we finally got a chance to meet. You know, we, we clicked well, um, immediately, so I really appreciate, uh, everything that you shared here. Kind of final thing, um, how do people find out more about the work that you do at, at Harbor? Oh yeah, thanks for that. Um, I mean, I'm Rudy DeFelice on LinkedIn. Easy to find and, uh, you know, our website's, harbor global.com. I run Harbor Labs. So we're all about advanced technology and ai and we're true believers in addition to practitioners. So I'd love to talk to people and. I hope we keep this conversation going. I'm very grateful to Patrick for the introduction. It's a, I have a lot of respect for that guy, so it's a real compliment I think if he said, uh, that we should meet and, and I'm glad we did. I'm sure we'll keep the conversation going. That sounds like a plan. All right. Thanks for, uh, thanks again for spending time with me today. [00:57:00] My pleasure, Ted. Thank you. 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. 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