Bringing Innovation to Law: Think like Elon Musk

  1. Introduction

The legal industry is in need of ideas for change and innovation, and I found just the person to look to.

 

Elon Musk is the founder of SpaceX, and the co-founder of Tesla Motors and SolarCity.

 

With SpaceX, his goal is to make humans a multi-planetary species. In Tesla, his vision, dubbed the ‘Master Plan,’ involves creating a fully electric car that is affordable and can be manufactured at high volumes. Using SolarCity, he plans to create low-cost sustainable energy by harnessing the power of the Sun.

 

iron-man
“Doth mother know you weareth her drapes?” image credits: http://www.wired.com/images_blogs/underwire/2010/04/im_large_660.jpg

Before that, he was the founder of Zip2 and Paypal. The former was a software company that designed online city guides, and the latter is an electronic online payment platform.

 

He is the closest thing to a real life Tony Stark that lives in our time.

 

So how does a man who started his career in software engineering end up being at the forefront in aerospace, automotive, and solar energy? There are many things that lawyers and law students can learn from a man that is attempting to change the landscape of 3 gigantic industries.

 

Here I have offered 2:

  • First Principles Reasoning; and
  • Learning Transfer

 

  1. First Principles Reasoning

Musk describes that one of his core philosophies that guides his method of thinking is called First Principles reasoning.

 

First Principles, Musk describes, is a physics way of looking at the world. You boil things down to its most fundamental principles, stripping away all the assumptions that we have accumulated about the topic, and then reason up from there.

 

He gives an example of a battery pack in an electric car. Historically, a battery pack costs $600 per kilowatt hour. The assumption is that battery packs are expensive. As a car manufacturer, you take that assumption as an unchangeable fact and figured you will just have to integrate that cost into the price of the car.

 

With first principles, a person would attack that assumption. You boil the battery pack down to its fundamental principles and look at what are the material constituents of the battery, how much those materials would cost, and how much it would cost to assemble them into a battery. If you realize that it will actually only cost you $80 per kilowatt hour, you have now changed what everyone else took for as a fact.

 

As law students and lawyers, our challenge is to identify the assumptions built into our legal industry that we had accepted as fact over time.

 

For example, take the cost of legal services. In a 2015 Canadian Lawyer legal fees survey, the average hourly rate of a 10-year call was $360 per hour, and the national average cost of a 5-day trial is $56,439. The assumption is that legal services are expensive, have always been expensive, and will always be expensive.

 

Let’s take a first principles approach. Attack that assumption. Boil down the cost to its fundamental parts, and take a look at what components are no longer needed or can be changed.

 

Take a look at what Axiom Legal did. It realized that a big law firm with a large beautiful office space that is located in a prime location garners prestige, but also attracts a massive overhead. Instead, Axiom has its employees working remotely or onsite with their clients, and the result was that Axiom was able to eliminate 30 percent of a traditional firm’s overhead.

 

Another example is the billable hour. Lawyers have been using the billable hour to charge their clients because it is simple, familiar, and is flexible enough to account for the varying times it can take to work on a file. The assumption is that the billable hour is the best way to charge clients because no better method exists. However, the billable hour is unpredictable for clients because they do not know how much they will be billed for, and this allocates the risk to them.

its-how-weve-always-done-it
image credits: http://stevedigioia.com/blog/wp-content/uploads/2015/12/The-Same-Old-Thinking-e1450563823707.jpg

 

Let’s look at how Hughes Amys LLP has attacked this assumption. Hughes Amys employs an alternative fee arrangement. They use a practice management software to gather data on personal injury files. They looked at the average costs for different claims, the average times it took for these claims to be resolved, and the average awards that were paid out. The firm then presents this data to the client to provide a transparent estimate of how much a flat fee for the month would cost.

 

What other assumptions should we tackle?

 

  1. Learning transfer

Elon Musk has become a leader in many areas of industry such as space exploration, automotive and energy. He is also a leader in many areas of their technology including reusable rockets, self-driving cars, and residential solar roofs.

 

One of the reasons he is so competent in these different areas is because he is very proficient in Learning Transfer. Learning Transfer is a process where you transfer what you learned in one context and apply it to another.

 

Elon Musk is an avid reader and eager learner. According to his brother Kimbal Musk, Elon would read 2 books a day. The books he reads spans multiple disciplines and interest areas, including philosophy, religion, programming, and science fiction. He would also read the biographies of influential figures such as Benjamin Franklin, Albert Einstein, J.E. Gordon, and Howard Hughes.

 

Musk then uses what he learns in one industry and applies it to another. Combined with the first principles approach, Musk would deconstruct a field of study into its fundamental principles, compare and contrast these principles with a second field of study, then reconstruct the lessons learned from the first to the second. He has done this to quickly become proficient in the field of artificial intelligence, physics and engineering.

 

As lawyers and law students, how can we apply learning transfer in our practice?

 

In an essay written by Ben Heineman, William Lee, and David Wilkins titled “Lawyers as Professionals and as Citizens: Key Roles and Responsibilities in the 21st Century,” the essay urges lawyers and students to develop complementary competencies in addition to our core competencies.

 

Our core competencies are things like our basic legal training on the main legal subjects such as contracts, torts and property. It also includes legal skills such as critical thinking, analysis, and issue-spotting.

 

However, with new technology such as the artificial intelligence lawyer ‘ROSS’ that can do legal research on an entire body of law faster than what a human can achieve, including legislation, case law and secondary sources, the contemporary lawyer must possess inter-disciplinary knowledge and skills in order to stay competitive in the market.

jealous-husky

 

This is where learning transfer can be useful in developing our complementary competencies. Complementary competencies are things like cost-benefit analysis, creative and constructive thinking, risk management, negotiation, communication, and value-based decision-making.

 

For example, one of the core competencies we develop in law school is issue-spotting. During an exam we are given a fact pattern and, drawing from the topics we’ve learned in that class, we can determine what legal issues need to be analyzed in that question.

 

Now let’s use learning transfer to apply that skill set to another context: negotiations. The fundamental principle in issue-spotting is being able to identify the ‘triggers’ in the fact pattern that tell you what legal rules will be engaged. You can transfer that fundamental principle to negotiations by learning to identify the key information in each negotiating party to determine how much bargaining power each party possesses.

 

As a student trying to become a 21st century lawyer, who better to learn from than the 21st Century Industrialist? There we go, we got a little bit of learning transfer going on right there.

 

  1. Conclusion

The legal industry is notorious for being very conservative. Clients want more value for their money, and new technological advances are threatening the old ways of doing things. Elon Musk is trying to break the status quo in 3 very large industries, and we can learn a lot from him.

 

As law students and future lawyers, we have the controls to choose the direction our profession takes in the coming years. It’s easy for us to be resistant to change and be protective. After all, it feels personal to us because it is our livelihood. However, this is an excellent opportunity for us to be at the forefont in changing how lawyers do their jobs.

 

Or … we could be like Comcast to Google Fiber and bury our heads in the sand. The choice is ours.

Law Graduate of 2017: Am I Ready?

6 months from now, I will be wrapping up my time in law school and preparing to bravely enter the legal profession. As I think about this, one question unduly crosses my mind: Am I ready? Has law school truly prepared me to be the best practicing lawyer that I can be? Perhaps it has, and I just haven’t realized it yet. Or, maybe it hasn’t, and this is due, in part, to the lack of hands-on experiential learning that exists in traditional law schools.

My answer to this question is: No, I do not feel as ready as I probably should feel after almost three years of legal education.

Why might that be the case? In my opinion, and based on the numerous discussions we have had in L21C, there seems to be a significant gap between what is taught in law school, and the actual practice of law as it exists today. There is more to the practice than simply knowing what the law is and applying it to a legal problem. Essentially, this is already taught in law school, and it is reflected in how our understanding of law is evaluated when we write 100% final examinations. But what about the skills required for interviewing an emotional and frustrated client? Or the skills required for building strong, lasting relationships with clients, and fellow lawyers? More importantly, what about the skills and competencies required to succeed in a world in which lawyering is rapidly changing with innovation, the utilization of technology and the provision of legal services in general. Should we really be learning all of these skills and competencies after graduation? No, we should not! Personally, I would definitely feel more prepared to enter the legal profession if law school offered more hands-on learning and practical experiences.

Recent legal discussion has focused on the transformational changes that are occurring in the legal profession, and how changes to the content of legal education may address this gap between what is taught in law school and how lawyers actually practice. Not only that, if lawyers are going to meet the needs of the 21st century, there is no better way than to start from transforming legal education, and how we train our future lawyers. I strongly believe that incorporating a practical component to legal curriculums and programs across Canada may be a viable solution. With that being said, I believe that Ryerson University’s proposal to open a “different law school” is a great idea for the following reasons.

1. It would provide more opportunities for hands-on learning.

The idea of having a mandatory placement or practicum component added to the legal program seems promising. This would definitely give law students an excellent opportunity to work in the legal profession under the supervision of a practicing lawyer. Having this exposure before graduation would prove useful to those students who may have no idea what it means to actually practice in the field. Moreover, it would help law students network, build relationships with other professionals (not just legal professionals), and develop their practical skills.

2. It would produce practice-ready legal professionals.

Having practical experience would produce law graduates that feel confident in their skills and abilities as new entrants in the legal profession. Law graduates need to be prepared to enter into a workforce that is progressively changing with new advances in technology. They should be informed of how these new innovations can benefit (or hinder) their practice as they prepare to provide legal services. For this reason, Ryerson’s strong emphasis on the use of technology, both as a tool for education and as a tool for future success, will be an asset to law graduates.

3. New competencies would be taught.

Traditional law schools already teach us how to be analytical thinkers, problem solvers, legal researchers, and good communicators. Ryerson’s proposed legal curriculum would also teach students competencies required for the future. Some competencies listed in the school’s Letter of Intent include: emotional intelligence, entrepreneurial spirit, network building and technological proficiency. These highly transferable competencies would ensure that future law graduates are career-ready and capable of adapting to changing societal expectations. Students may even feel encouraged to explore unconventional career options, practice in a legal area that is novel or respond to unmet legal needs by promoting access to justice.

I know Ryerson’s proposal to open a new law school in Canada has been the subject matter of an interesting and heated debate. However, after reading Ryerson’s Letter of Intent, I appreciate that what the school is trying to do is prepare students to become “practice-ready professionals with knowledge and transferable skills required to compete in a rapidly changing profession.” In my opinion, transforming the way we teach and train future lawyers is exactly the kind of change we need if we are going to keep up with the shifting legal profession, and the 21st century.

Riding the Technology Wave

The Technology Wave and the Solo Practitioner

Friday’s meeting introduced us to the brave new world of technology changing law firms as we know them. It was both fascinating and a little fear inducing. There certainly seems to be a wave of technological advances pushing out the “old law”. Corporate law is changing. Big law is changing. While it was interesting, the focus on corporate law left me wondering about solo practitioners and small law firms. Much of the software discussed at the meeting was not affordable nor tailored towards solo practitioners. How is technology affecting them? What technology is available to help to them?

I decided to do make a list of a few different programs available out there that might help solo practitioners or smaller firms. They are not all legal based, but then running a law firm is a business as much as it is a law practice.

  1. Accounting software

It’s important to stay on top of your accounting as a small business. You don’t want to be that person making a frantic run to your accountant with a shoe box full of receipts at the year end. Using Cloud-based software such as Toronto’s Wave, or Mint (now owned by intuit), it’s easy to update your records from your laptop, tablet or even your phone when you have some free time. Wave is geared towards companies with 9 or less employees, and it’s free to use. Mint supports all Canadian banks and is user-friendly.

  1. SEO (search engine optimization) software

You’ve made a sleek, modern, professional website for your firm! It cost a pretty penny (okay, a few hundred thousand now obsolete pennies) but it was worth it. Proudly you type your company name into Google. Nothing. You search frantically, page after page, but nope, Google doesn’t seem to know your beautiful website exists. That’s where SEO software comes in.

SEO is a massive industry. So don’t be afraid to hire someone to do this for you (which will also cost many obsolete pennies). However, if you are feeling brave (or cheap), here are some Cloud-based SEO products that may help: Moz.com can give you a simple action plan with steps to help you rank, position, and building your search rating on Google. SEMRush takes a different approach. They let you see what your competitors are spending adwords to help you stay in the top advertising spots.

  1. Clio

Yes, Clio has its own category. This product isn’t just for larger firms. They have packages as cheap as $39/month. Time tracking, billing, and lots of other goodies make Clio a useful product for almost any firm.

  1. Other niche software

There are lots of programs out there for specific legal areas. DivorceMate is a software product aimed at family law. It streamlines child support guidelines and spousal support guidelines, among other things. They have a Cloud-based version as well as a desktop version. You can choose to pay for a $500/subscription or $55 per file option. Do Process Software has several different specialized software for real estate, wills, estates, and others. The costs vary on the product you choose.

 

Hopefully this list helps you think of the different ways technology can help solo practitioners and small firms. The technology wave is coming for everyone, not just big law. We should all learn to ride and embrace the wave.

Transitions

Let me give you an image of me as a starting-out lawyer.  I’m on the phone with a client – a terrifying proposition in itself.  Client is talking about something incomprehensible (some Wall Street acronym or something) and assuming I not only know what it is but have an informed and expert opinion about the thing as it relates to the client.  I am googling this thing while on the phone, hoping the client can’t hear me typing.

Transitioning to law school to practice was like that.

One of the reasons L21C exists is that I wanted to try to fill what I think is a gap in legal education in preparing students for this transition, from law student to professional.  Law school does not provide students with much understanding of or information about the practicalities of practice, or about what the ecosystem of the legal services world is like.  It’s a big chasm indeed from pondering the significance of peppercorns to billing, spreadsheets, attempting to tame clients, navigating the internal politics and ego-bruises of working in multiple teams, and googling financial jargon as quietly as possible.

I often hear that it’s not an appropriate goal for law school to prepare students to be “practice-ready,” that there is no substitute for real-world experience and hands-on training.   As far as it goes, I think this is true, even just obvious.  It doesn’t follow, though, that law school can’t do more to prepare students for the transition to practice.  We can, and we should.

That’s the aspiration of L21C: to make students, if not “practice-ready,” at least a bit more ready for the challenges, surprises and mysteries of the coming transition to practice.  To demystify the mysteries, make at least some of the surprises less surprising, and, I hope, stir up some excitement about the challenges.

L21C is also transitioning this year.  Last year it was a completely brand-new course, still a prototype really, and I really was not sure what to expect.  This year is … well, honestly not that different, but it’s no longer completely brand new and I have a little bit more idea what to expect.  Last year’s class was a fantastic group who did some truly inspirational work.  Therefore, my expectations are very high.  I’m looking forward to equally great things from this year’s group, possibly even greater.  Go on, challenge yourselves!

The design of the course is substantially the same as it was last year, but there are some modifications.  The first few weeks are more structured, with fewer guest speakers and more lectures and activities that I planned.  In the later weeks we have many really amazing guest speakers, a panel, a field trip to Kamloops Innovation Centre, and plenty of time built in for teams to work on their LawHacks projects.  The idea is that in the first part of the semester students will get a solid understanding, from the lectures, readings and class activities, of the themes we are covering, and in the later part of the semester the group will be very well equipped to engage with the wonderful leaders and thinkers who are joining us as guests.

Of course I can’t end a post about transitions without mentioning the central focus of this course, the Big Transition: what’s happening to the profession itself.

Richard and Daniel Susskind, the authors of one of our course books (The Future of the Professions), say that the legal world “will change more radically over the next two decades than over the last two centuries” and the legal profession is “on the brink of unprecedented upheaval” (pp. 66-67, internal citations omitted).

Jordan Furlong, writing in the Canadian Bar Association Legal Futures Initiative publication Do Law Differently: Futures for Young Lawyers – another of our course texts – says “[a]lmost everything about career choices and employment options for new lawyers is in flux,” and that the generation of lawyers entering practice now “has both an obligation and an opportunity that its predecessors never experienced.”

David Scott, the co-chair of Borden Ladner Gervais, has said that the lack of access to justice for ordinary people is the legal profession’s equivalent of global warming.

These are the big, systemic transitions that we are going to learn, think and share ideas about in the course.  I hope that the discussion will carry on outside class – and will engage the wider community.  That’s what the blog is for, and I’m really excited to read posts and comments by our new class of L21C partners, as well as everyone else who wants to join the conversation.

This time of year people often say that September, not January is the real new year.  It’s a time of transitions.  Here we go!

Embracing Change, Innovation and Technology

Recent socioeconomic trends have significantly accelerated the pace of need for change for the legal industry and the law firm business model.  One of the big themes that our firm’s well credited visitors have pointed out is technology.

In the past, the legal sector enjoyed great comfort in the linear nature of progression. Students attended law school for 3 years, then articled, then became associates, then made partner and went down the path of success until retirement, but that seems to have changed now.  There was an understanding between the law firms and their clients that good work costs money, and there was no surprise that billing rates were expected to rise, but that’s no longer the case either. One common indicator that projects the future of this industry is the emergence of technology, and firms which adapt to the changes are ahead of the game and will be industry leaders.

We’re a profession that I would suggest in the last 100 years has not done anything differently than how it has always done, and we are the only industry that is proud of that fact. The legal industry by definition looks to the past for finding ways of the future and that in my opinion needs to change. The comfort that comes with predictability and precedent is perhaps the main factor in postponing the realization of need for change for the industry as a whole.

For us as a profession not to embrace change and innovation, we are setting ourselves up for failure.

A Thought Experiment

A lot of law students today are apprehensive and troubled about the prospect of change in the legal sector and what it means for your career plans. These are very understandable reactions to a confusing and uncertain situation.

Before you went to law school, you probably didn’t have a very clear sense of what a legal career looked like, unless you have friends or family members who are lawyers. Once you’re in law school for a few months, the paradigm of what a “good” law career is supposed to look like becomes pretty clear in your mind: summer at a good firm, article at the same good firm, get hired back, work hard, make partner.

Now, things are changing, and the rug is being pulled out. You’re being told that the firms where you should go to follow that well-worn path have flattening revenues, hiring is down, maybe some of them will even go under like Heenan Blaikie, maybe some of them will change their business model altogether. What are you supposed to do? How are you supposed to make a living? Try to get a foot in the door at one of these new weird businesses like Axiom? Create your own startup, and risk failing?

Why, why, why do you have to deal with all this change, when five or ten or fifteen years ago all you would have needed to do was to get on that nice, predictable path and stop worrying?

It is very understandable, and completely rational, to have this reaction to change in a system when you have invested a lot of time, money and effort on the expectation that the system will continue to be roughly as it has been for the last couple of decades.

But I’d like to ask you to indulge me for a couple of minutes and try a thought experiment.

Imagine that we live in a world that I am going to call “Scenario A.” In Scenario A, lawyers have a diverse range of career options. These options are enabled in part by technology that enables people to work together without physically being together. Also, lawyers don’t do routine, automatable, high-volume tasks, because technology has made it completely unnecessary and uneconomical for highly educated humans to do that.

Lawyers have the option to work for companies that allow them flexibility, permit them to do a large portion of work at home, and let them take time out and mini-sabbaticals – like Axiom or Cognition. They can work for publicly traded law firms where they participate in the growth of the firm from their first day on the job through stock-based compensation, and where professional managers handle the management functions while lawyers concentrate on doing the legal services (just as, at Air Canada, pilots do the plane flying and leave it to the trained management experts to do the management of the company). They can work for multi-disciplinary one-stop shops where lawyers, accountants, IT professionals, engineers, counselors, financial advisors and any number of other experts cooperate and share the profits. They can work as employees of tech companies capitalizing on opportunities in the legal sphere, like LegalZoom and Knomos, which are growing fast and need employees with legal training and expertise.  And those daring entrepreneurial types who want to start their own businesses providing legal services can seek investment from venture capital / private equity firms to get their companies started.

Now imagine that this world, Scenario A, is the status quo.  But all of a sudden the status quo faces change.  After all, we do live in an ever-changing world. We are shifting (let’s imagine) from Scenario A to a situation that I will call “Scenario B.”

Scenario B comes into being in large part because of regulatory changes.  New rules come in about who can provide legal services.  Under these new rules, no business providing legal services can be owned by anyone other than a licensed and regulated lawyer.  Businesses that provide legal services cannot have any equity investors who are not licensed lawyers.  Fees for legal services can’t be shared with anyone except licensed lawyers. No one can control a legal services firm except licensed lawyers. That means no professional managers (unless they are licensed lawyers), and no outside experts on the board of directors (unless they are licensed lawyers). Only law firms structured as partnerships in which all the partners are lawyers are allowed to provide legal services.

Things change fast.

The only entities allowed to supply the enormous demand for legal services now are these new lawyer-owned “law firms.”  The law firms quickly realize that a great way to maximize profits for the partners is to charge for the firm’s services by the hour, and hire a large number of salaried “associates” whose services they can bill out at an expensive rate while paying them a fixed annual amount (maybe with a small variable bonus at the end of the year so they won’t quit in the middle of the year).  It is also good for the partners’ bottom line if they make sure each associate “bills” the highest possible number of hours.

Law firms are keen to hire lots of law school graduates so that they can maximize the billable hours they can charge out to clients. They splurge to attract law students, taking them out for expensive meals and giving them goodies like coffee mugs and pens. This is kind of fun for law students.

Law firms start moving routine, high-volume tasks away from technology that can do the work very quickly and efficiently to teams of associates who do it more slowly, but much more profitably – from the law firms’ standpoint, because those hours are all billable hours. Even better (better for law firm profit, that is), there’s no need to invest time and money in training or mentoring the associates or develop their professional skills before the firm can get profit out of them. Associates can do this routine stuff without any training. They are highly motivated to do it diligently and for many hours a day, because that means more billable hours and a better chance of keeping their jobs.

Law firm partners aren’t bad people.  They’re just rational self-interest-maximizers like the rest of us. They understand that the system makes more money for them if they make certain choices.  They don’t even really like the net outcome of the choices that much.  But if they didn’t maximize their profits a competitor firm would, and they’d fall behind and risk going out of business.

The associates are highly motivated to work hard and work many hours.  But the motivation is almost entirely extrinsic (fear and greed), and associates take little real pride in their work. The overriding pressure is to work a lot of hours, translating into a lot of dollars for the partners.  The extremely long work hours wreck their personal lives. Also, they sense that their interest in generating high billable hours is misaligned with their clients’ interest in getting efficient service.  And they feel that their intelligence and education are wasted on the dumb but demanding tasks they are doing. So, the associates are not happy.

Obviously the clients aren’t tremendously thrilled either.  Imagine getting a bill for hundreds of hours of associate time for due diligence or document review that in the old days, in Scenario A, a computer or legal process outsourcer could have done better, faster and cheaper.  And then try explaining it to your boss, who expects you to stick within your budget.

To counteract the unhappiness of associates and ensure a steady supply of new ones (needed to replace the large number who quit each year immediately after the annual bonus is paid), law firms raise the salaries that they pay to incoming associates.

Then law schools raise their tuition, because starting salaries have gone up, so, hey, it seems fair enough to charge more for an entry ticket to a high starting salary.

That happens several times.

As a consequence, law firms keep raising the billable rates for the associates’  time, so that the salary increases don’t hit the partners’ bottom line.  They also have to cover the cost of the billed hours that the clients refuse to pay because the billable rate is stupid. When clients call partners they know and trust to point out that the billable rate is stupid, the partners can’t really disagree.  So they write off bills.  And that has to be made up somehow.

So, the cost of legal services at the high end keeps going up. And, inevitably, that also drives up the cost at the low end too. Many ordinary people who need help from lawyers can’t afford it. Law graduates who want to help ordinary people with their legal problems – who went to law school because that’s what they dreamed of doing – can’t afford to do that, because they have to pay back those big tuition bills, driven, if you trace it back, by the high rates at the expensive law firms.

Change is hard. If you lived in Scenario A and had to change to Scenario B, I think we can agree that would be really, really hard.  Almost unbearable.

More than that: it would also be just plain bad – for you, for society, for everything that the legal profession is supposed to be about.

Actually, as you probably noticed, we currently live in Scenario B.

But things are changing. It looks like we could be on the road to something more like Scenario A.

Change of any kind is hard and frightening. But I’d rather see change from B to A than the other way around. What about you?