Editor’s note: Sarah Reed is General Counsel at CRV, a VC firm with an abiding commitment to disruptive innovation.
According to TechCrunch, law is the sector with the least VC investment. I’m not at all surprised by that. I’ve been practicing law for nearly 25 years, in myriad settings (large firm, GC at a tech company and now GC at a venture capital firm), and I’ve seen precious little innovation in my field over that time, and certainly nothing that promises to be “disruptive” in the way VCs look for.
However, recent reforms in the U.K., and litigation underway here in the U.S., give me hope that we may yet experience disruptive innovation in the law in my lifetime.
First, why is it that the law remains resistant to innovation to a far greater degree than any other industry or profession? The fundamental reason for this is the “guild” nature of the law. Guilds arose in the 13th century as associations of artisans/merchants; their purpose was to tightly control the practice of their craft in a particular location. Their “arts” were closely guarded trade secrets and they retained ownership of their tools and materials. Think of them as a cross between a trade union, secret society and a cartel.
While guilds in general came under attack by the 19th century (as anti-free trade and hindering technological innovations, among other things), the legal guild has managed to survive and thrive for centuries, rigidly adhering to the central precepts of the guild structure: self-created and self-policed rules of conduct and sanctions, an arcane and burdensome admittance scheme that requires the endorsement of existing members, and a ban on outsiders having any ownership interest.
The legal guild has managed to survive and thrive for centuries, rigidly adhering to the central precepts of the guild structure.
When we think of “innovations” in the law, they largely fall into the category of “efficiency” or “sustaining” innovations as described by He Who Coined The Phrase “disruptive innovation,” Clay Christensen. Those types of innovations are, by (Christensen’s) definition, unexciting and un-impactful. Sure, we lawyers “offshore” too (be it to India, like Pangea3, or simply to West Virginia, as Orrick has done), and we’re trying our best to apply AI tools to legal search and research (e.g. Judicata and Ravel Law).
But my main observation about our anemic innovations is that the benefits thereof (e.g. cost-savings) have redounded primarily to the guild, not its customers. Hey, we lawyers may not be particularly innovative, but we’re not stupid either: as tools become available to reduce the costs of services to be provided, we generally ensure that the work expands (i.e. the services that “need” to be provided) at the same rate. Don’t you hear litigators “complain” that e-discovery has expanded the scope of discovery by an order of magnitude? As the cost of drafting and prosecuting patents goes down, doesn’t the number of patents explode?
It speaks volumes about our profession that throwing some form documents out on the Internet for free/at a low cost is considered innovative. Laughably, I was considered a firebrand for leading a VC-industry initiative a number of years ago to open source the legal docs we use in making venture investments. Such forms have gone more mainstream, and today you can DIY incorporate with LegalZoom (or free on Goodwin’s Founders Workbench). Okay, so these days Bartleby could at least print some of his legal forms off the PC rather than writing them out by hand – but in general, we lawyers still prefer not. And for justifiable reason. How much of the legal market is readily addressable by “commodity” type legal documents/services (incorporations, no-contest divorces and the like)? Precious little.
Most legal needs are “artisanal” and not “commodity” and can’t be solved with an off-the-rack form. There remains an immense, untapped market for high-volume, low-margin legal services in this country – services that today are largely available only to the wealthy and the sophisticated. This is precisely the kind of market that disruptive innovators tackle.
I look around at all of the student legal service bureaus at my alma mater, Harvard Law School, and see just the very snout of this iceberg of massive demand. There are, to name just a few, clinics providing free (but supervised!) legal services to prisoners, low-income tenants, indigent defendants, homeowners in foreclosure, immigrants, vets, local small businesses and startup entrepreneurs who are still in school at MIT and Harvard. If we had the equivalent of emergency rooms in the law, they would be overflowing.
Precisely in order to address the imbalance between supply and demand for legal services, the U.K. has taken the radical first step towards overthrowing the guild: Non-lawyers are now allowed to own and operate legal services businesses in the U.K. and Wales. The U.K. reform may be anti-guild, but it is pro-business.
There remains an immense, untapped market for high-volume, low-margin legal services in this country – services that today are largely available only to the wealthy and the sophisticated.
Oh rest assured that there was plenty of hand-wringing by the guys in wigs before the reforms passed – but the post-reform data simply does not support their concerns (e.g. sharp operators will prey upon unsophisticated and vulnerable consumers!). We lawyers already hold our own on those fronts, and the sky has not in fact fallen over the U.K. In fact, according to U.K. regulators, consumers are better-served under the new regime. Spoiler alert: the reforms permit innovative entrants to provide new, low-cost legal services to previously unserved or underserved groups, and spur a competitive response among the incumbent players!
So maybe the experience of the U.K. will give us a kick in the butt here in the U.S.? Seriously, is there any profession other than the law where we’d be taking a lesson in disruptive innovation from the U.K. and Wales? Don’t they still have a monarch, for Pete’s sake?
Well, at least one group of lawyers, the law firm Jacoby & Meyers, has decided that it is tired of waiting for reform, and, doing what lawyers do best, they’ve brought suit in New York challenging as unconstitutional the rule of professional conduct (drafted by lawyers) that prohibits non-lawyers from having an ownership interest in the business. (Each state bar has a similar rule; NY is the firm’s beta.)
I wish them luck, and I don’t know how and when we will get there, but this is what I imagine a new world for legal services might look like. We’d train and license the equivalent of nurse practitioners, who could, for example, assist with real-estate closings and small business loans at fixed fees, with only minimal supervision from “real” attorneys. Companies would be formed to provide end-to-end services related to insured disputes/accidents, integrating claims adjusters, doctors/medical examiners and (non-lawyer) arbiters. Estate, tax, accounting and financial planning services could be integrated. Corporations with huge in-house legal departments could monetize their excess capacity by selling to third parties at fixed or low cost services where they have great expertise but inconstant demand.
To my brethren at the bar, I ask, are we really going to let those prawn salad eaters make us look like Luddites? It’s time to dismantle the protective barriers we’ve erected and mount the barricades to the battle-cry of “disruptive innovation now!”