Are AI-native law firms the wave of the future?

Episode Notes

Transcript

Announcer:
Welcome to the ABA Journal Legal Rebels Podcast, where we talk to men and women who are remaking the legal profession, changing the way the law is practiced and setting standards that will guide us into the future.

Victor Li:
I know I often come across like Jay Leno on the show. Have you heard about this? Have you heard about that? And don’t worry, I’m not going to buy a bunch of classic cars or give this show over to someone else only then take it back a few months later. But for the purposes of this show, I have to ask, have you heard about AI native law firms? They’re law firms that have AI baked into their DNA so that instead of just using a few tools to help with traditional methods to perform intake, draft memos and pleadings, review documents, do research and other things that lawyers do, AI manages the entire workflow from start to finish under human supervision, of course. The potential time savings are astronomical and could maybe even upend the traditional billable hour, but the drawbacks are also real. What would an AI native law firm mean for lawyers, especially junior level associates whose jobs might be at risk?
And would clients really be okay with so much of the work being handled by AI? My name is Victor Li and I’m assistant managing editor for the ABA Journal. My guest today on the ABA Journal Legal Rebels podcast is Ryan Walker, CEO and co-founder of General Legal, an AI native law firm. Before founding his firm, Ryan was CTO at CaseTex, one of the first generative AI legal assistants that helped kick off the AI boom in the legal industry. He’s here to talk today about how he built his firm and what he hopes to achieve down the road. Welcome to the show, Ryan.

Ryan Walker:
Thank you so much, Victor.

Victor Li:
Thanks for joining us. I appreciate it. So obviously I’ll just give a very quick version of your bio. Can you tell me a little bit more about yourself and your background?

Ryan Walker:
Yeah. So I came into legal from a fairly non-traditional background. I’m not a lawyer. I was a mathematician by training. And I was fascinated by problems that involved language, search and machine learning. And I was looking around, as I was thinking about my next kind of job, I was looking around for what is the space where those kinds of techniques had the most impact? And I met up with Jake Heller, who was the founder of CaseText. And Jake very quickly convinced me that legal was exactly the right place to apply this technology. And so at CaseTex, I was CTO of CaseTex, we built across the different waves of AI tools that made the practice of law more and more and more efficient. We were always at the forefront of the latest things that were coming out of the machine learning community and bringing those tools to legal practice.
And that put us in a very good position. When the generative AI techniques started to take off, we were really first in line to receive access to them. And we were able to very, very quickly build out a product on top of them because we’d been practicing in this space for quite a long time.
And it came too legal from this kind of nerdy perspective of how do we take this technology out of the world and apply it to a language rich domain? But I’ve stayed in this now for quite a long time because fundamentally, I think the problem of making legal practice efficient, affordable, scalable is a vitally important one. And it’s still completely unsolved. General legal for me is the next chapter of how do we do that? We have seen with these generative AI tools like co-counsel, like Harvey, like Lagora, there’s now billions of dollars put into tools for making lawyers more efficient. And yet I think the outcomes for clients still lag significantly behind what is possible to do with the technology.

Announcer:
My

Ryan Walker:
Two co-founders are lawyers. We all came from the case text background. And I think we shared this vision with each other early on that the fastest path to see real change for what clients receive from their lawyers is not to take technology and retrofit it into an existing firm, but instead to rethink the firm from the ground up and build it on top of that technology driven core. And so it is, as you said in your intro, across all of the different phases of what a law firm does, there are now these huge opportunities to introduce efficiency.

Victor Li:
Gotcha. So let’s unpack some of that a little bit and we’ll talk more about the firm later on, but I want to kind of go through some things that you said. So you’re a math PhD, so obviously you can’t generalize things too much, but that pretty much makes you a unicorn in the legal industry. What made you decide to go into legal from studying math at a graduate level? I mean, what caused you to do that?

Ryan Walker:
I think I’ve always been someone who’s very drawn to language. And my work as a mathematician had many applications in natural language processing. But I was not inclined to take an academic route. I really wanted to see how these kinds of techniques could impact a really important facet of the world. And legal touches every single aspect of our lives. Everything we interact with in the world, every physical object we interact with, every piece of software we interact with, every company, everything has some contracts sitting behind it, has some regulations sitting behind it, has case law precedent built out over hundreds of years and in some ways thousands of years that sit behind it. All of that is language data. And ultimately, I think that’s just an incredibly exciting, interesting area to work in. And that’s what drew me in. And then ultimately I became very, very early on kind of obsessed with how inefficient legal practice seems to be.
And I think that’s a problem that I can’t let go of.

Victor Li:
You don’t have a JD, right?

Ryan Walker:
I do not have a JD.

Victor Li:
Okay. So I guess the main question would be sort of like, and maybe this is too thinking too in the traditional means and whatnot. I mean, most jurisdictions have very strict regulations as to who can run law firms, what the profit sharing things are like and whatnot. So how is your legal setup to comply with those regulations?

Ryan Walker:
And even just beyond me, we are a venture-backed company. We have great VCs on our cap table. How is it possible for a law firm to take investment like that? Well, the truth is we’re not exactly a law firm. We’re a management service organization like many of these AI native entities. That means there’s really a dual entity structure underneath where there’s a law firm and the law firm exists to provide the legal services to the client and receive compensation for providing those services. And a technology services provider that supports the work of that law firm in its delivery of service, but doesn’t direct how that service gets done, doesn’t tell lawyers how to advise their clients or doesn’t provide the substance of that advice to clients. This is a structure that I think is now fairly established in legal. I would guess there are now thousands of these entities out there.
Certainly the big AI native players that now exist are of this model, but it’s a structure that’s been long present for other professional services industries. I have the same kinds of challenges where you want to be able to keep legal guidance sacred, keep it protected from the business influences that might otherwise skew it in a negative in a way that’s detrimental to the client.

Victor Li:
Gotcha. So yeah, I’m sorry to jump around a little bit. I just wanted to ask that because that was just on my mind. But just kind of backtrack a little bit. So I did speak with Jay Keller of CaseTex right around the time that ChatGPT first became commercially available or whatnot. And so I asked him this question, I’ll ask you the same thing. So what did you think when you first saw the technology? I assume you guys got it a long time before any of us did, but what was the first thing that you thought of? Was it like, oh my God, this is crazy? Or were you just kind of like, eh, I don’t know if this is going to catch on?

Ryan Walker:
We were immediately convinced that this was going to catch on. It was like we were looking at the future. To me, it was like imagine seeing electricity for the first time. I think that was the feeling all of us at CaseText had. There was no question for me that this should have immense impacts on how legal gets practiced. And in fact, general legal evolved out of that feeling. I look at what’s possible to do with the capabilities we have. I say that what we’ve got now is it’s nowhere near what it could be. The tech is so good in the hands of competent practitioners who really know how to use it, where to draw the lines. You can do amazing things that allow us to scale legal services in ways that had never been possible before. And being able to produce that scale of great legal services has huge implications for society.
The vast majority of people who need legal services cannot get it today. Legal is this incredibly scarce resource. And now we have technology in hand that makes it so it doesn’t need to be. And that I think is, that was actually my initial take seeing this. And we are continuing to chase that kind of exciting vision of what’s possible to do with this. And it should have huge implications for legal practice.

Announcer:
Gotcha.

Ryan Walker:
Maybe to tell just a quick case tax story on this, just to emphasize the point. We saw the early version of ChatGPT, I think it was four to five months before it was publicly available. The next morning we had an all hands and we rearranged the entire company to build everything around this emerging technology. We went all in immediately overnight.

Victor Li:
Was that a little scary for you? Because obviously you see the potential of it, but I mean just completely –

Ryan Walker:
I saw it was scary to not do it. Jake, me, Pablo, Laura, all four of us believed there was no choice. This had to be done.

Victor Li:
Gotcha. And then obviously the technology has progressed so much in a short amount of time. And now people are talking agentic AI. So how would you define agentic AI? Because it seems like people have different definitions of it or what it entails. How would you define it?

Ryan Walker:
When we started the thing that we saw back in September 2022, you had this little tiny context window and you would spend a lot of time writing prompts that could ultimately deliver very good work product or very good drafts. That feels like ages ago because we’ve now advanced to a world where these things called agents are incredibly capable. And to me, an agent really is an LLM equipped with a set of tools and an ability to use those tools to do tasks based on the prompts that it’s given. And these agents are in some sense kind of embodied individually and allowed to coordinate and communicate with each other. And it turns out that an approach like that allows you to significantly uplevel the capabilities, the technological capabilities of these tools. The idea of having multiple entities that are working on the problem, able to use a set of underlying tools to do the work, that turns out to be how you up level what’s possible to do with the underlying generative AI tech.

Victor Li:
And then we’ll talk a little more about general legal and the role AI plays in the next segment. In the meantime, let’s take a quick break for a word from our sponsor. And we’re back. So let’s talk general legal. So how big is it right now?

Ryan Walker:
We just passed 40 employees total. Of those, about half are attorneys. We have a very specific set of hiring criteria. We hire senior associate levels typically from good law firms or from great legal departments. We look for about 10 years of practice experience. The bulk of our work is across commercial contracting, employment and corporate services. We recently launched an emerging company’s practice as well. And we’re bringing together this senior level attorney talent and embedding them into a workflow platform that we’ve built out on the underlying AI technology. And you see the technology contribute across the different phases of the life cycle all the way from client intake up to actual turnaround and delivery of work product back to the client.

Victor Li:
Gotcha. So if I were a potential client, could you walk me through what I could expect from start to finish?

Ryan Walker:
Sure. If you as a client came to general legal, you would often be a company with a growing legal department. You have a variety of legal work in front of you. If you’re in a hyper growth stage, you also have a significant volume of that legal work to do. And it’s hard for you to get the expertise you need to move through that legal work quickly. General legal integrates directly into your system. So we join Slack channels with your people. For example, we’ll jump into your CLM. You can use our web platform to do work with us. You give us say a contract to review or an employment agreement to review or to draft. Our lawyers will collect context from you. We’ll look at past agreements. We’ll look at documentation that you have publicly available or whatever you can share with us. We use all of that context to shape our AI-centric review, as well as inform our attorneys of your strategy and your positions.
Our attorneys can then use the system to turn that work around for you within a matter of hours. We do all of these services at a flat rate. Our commitment is to always have a price that you know exactly what it is upfront. There’s no hourly component to the work we do. And we price things so that we understand legal work is complicated and sometimes takes more time, sometimes takes less time. And we price things at this flat rate, kind of understanding what the distribution looks like so that we can ensure this consistent uniform delivery across these legal services that can happen at this very fast pace. And that’s really consequential to especially companies that are growing really, really quickly.

Victor Li:
And so what would the difference be with just the approach that you have as opposed to the approach to maybe another firm where maybe they, again, they’re taking contracts from a client and then running them through some generative AI tool, pulling out the clauses and then they’re pulling out the relevant clauses and pulling out the relevant data and whatnot and then kind of going from there. What’s the difference in what you guys do as opposed to what the retrofit approach is?

Ryan Walker:
So I think a big part of the retrofit challenge is ultimately some of the barriers to law firm transformation are much more deeply structural. Moving off of the billable hour, moving to an outcomes-based model, that’s a challenging proposition for most law firms. Just at the upfront when we’re talking about the experience that clients receive, those models are new to these kinds of entities. Our belief is that that’s where the world needs to go. The world across all other professional services, they’ve made this transition in most areas. Legal now has technology that allows you to price in an outcomes-based way and it’s time to do that. So I think that is probably from our client’s perspective, one of the biggest differences. I would say another difference, as I call two other differences out, another difference between how we approach legal work, we believe that the best legal work is integrated into your internal processes and the way you want to work.
We virtually never engage with clients over email. We’re always either plugged into a workflow system that they use, a ticketing system, a CLM that they use for document kind of management, or directly in a Slack channel where you talk back and forth freely with the attorney who’s taking in the work on our side to process for you. And so that experience of being embedded into workflows, we actually think that is part of what it means to be AI native. And then finally, I think a difference in our approach that we think is really important and part of what our clients get a lot of value out of, we believe that great legal service is kind of fully integrated. When you take an MSA or a DPA or whatever in a regulated industry, like say a health tech company or a crypto company, you have contracts in these spaces, there’s expertise that not every commercial lawyer is going to have.
And in fact, a lot of the value that you can get from a traditional law firm is they have centers of expertise across a range of practices. If you’re talking about a big firm. General legal is working with that same kind of mentality. We should be able to put all the expertise into a box for the clients that we serve. And so if you bring to us a contract in a regulated area that has a significant privacy implication, behind the scenes, we pull our privacy attorneys into that workflow alongside the commercial contracts person who is driving the work forward. And so you get this integrated expertise through the delivery life cycle. And to be clear, I think unlike traditional providers, that isn’t a line item that shows up on your bill. It’s just the expectation that if your work involves a privacy component, a privacy expert weighs in automatically.

Victor Li:
Okay. And what kind of savings are we talking about as far as time and money?

Ryan Walker:
Our median turnaround time for work product is around three to four hours. So significant time savings relative to traditional providers. We’ve staffed in such a way that during our operating hours, there are always attorneys available. And in many ways that’s part of our value prop as well, that this is a law firm that’s available. We can take the work immediately and we can process the work for you very, very efficiently. In terms of price savings, it’s typically something like a quarter of the cost of services from a traditional big law firm.

Victor Li:
Okay. Wow. And then how do you deal with clients who might not be comfortable with that much AI being involved with the process or with their work?

Ryan Walker:
That’s a great question. Most of our clients, especially on the kind of higher end, are themselves attorneys. And attorneys are inherently and rightfully, I think, pretty skeptical people. What helps them to understand us and what we’re doing and build trust with us is showing them the real lawyers who are doing this work, supervising this AI work, and are putting their bar licenses and reputation on the line. Our lawyers are great, serious lawyers and they’re endorsing the work that they’re doing on behalf of clients. That’s very, very meaningful to the customers we talk to. I think it’s also meaningful to tell them more about how we do the work and why we do it the way that we do it. We do this because we think this is the way that you get better legal service than traditional providers. You get this expertise base that is able to inject at any point in the life cycle.
You get multiple levels of review in this process. We have practice expertise that is fully integrated into our AI pipeline. As we do more deals, we get better and better and better at the deal work that we’re doing. All of these things I think are pretty easy for folks to understand why this might be worth a try. And then ultimately the proof to any skeptical person is to show them the good work that you do. And that’s been our model from the very beginning. We make it really easy for someone to engage with us on an initial basis. There’s no minimum commitments to use our services. There’s no retainer upfront. You use us for as much or as little legal service as you want. And that really helps. Your clients aren’t being asked to sign a multi-year enterprise deal. We’re actually just asking them to try a contract in parallel with whatever your existing solution is.
Just try one. See how that goes. We’ll show you side by side. Look, you’re getting really good work product. We’ll often just find things your other attorney didn’t find. And we’ll often show up as much more adapted to your company’s strategy than your traditional providers because we are making such efficient use of your company’s context in our delivery process.

Victor Li:
So let’s take another commercial break and we’ll talk more about law firms and AI and where things are going. And we’re back. So Ryan, you talked about general legals model and whatnot. Do you think we’ll see more of these type of AI native firms going forward? I

Ryan Walker:
Think we absolutely will. I think we’re about to enter a period where we’re going to see a ton of small AI native firms emerge or firms that call themselves AI native. I think there’ll be this moment of lots of small entities that come up. I think what we see just in the field as we interview people to come join General Legal, there are a lot of lawyers out there who are thinking about what does this technology mean for practice? And is there an opportunity for me to split out? Is there an opportunity for me to take my book and run that with much, much less overhead than my traditional firm? And I think we’ll see a lot of that. I think it will lead to a lot of kind of boutique small firms in the beginning. I think over time though, this is an area where consolidation is, in my view, it’s inevitable.
It’s inevitable because the ways that AI native firms are going to gain advantage and gain efficiencies, it’s all about scale. The more deals that a firm and one of these AI native firms does, the smarter and better and more capable they get. And so that I think on its own is a consolidating motion. I also think that for clients, a highly fragmented marketplace where you have a great commercial contract attorney who’s hung up the shingle and gone AI native, but that person doesn’t have a tax expert attached to them, doesn’t have a trademarks group attached to them. I think that’ll actually make it harder for these entities to operate as small firms. Ultimately, companies that have real scale behind them need some of the value of a full service law firm. And so I think that’s the other force that will push in this kind of consolidation direction.

Victor Li:
Gotcha. And so you talked earlier about the billable hour and whatnot. I mean, people have been putting the death of the billable hour for decades now and it’s always survived. But do you think this might be the moment where maybe it does take some hits or maybe even goes away?

Ryan Walker:
I think it’s definitely going to take some hits. I try not to even ever say that the billable hour is going to die. I’ve been in the space for 10 years and so I’ve lived through at least one or two of those like, oh, it’s all over for billable hour now. I’ll say billable hour is done for us, like firm, company policy, no billable hour work period. We believe it’s unnecessary and that you should be able to price things in a way that deliver you much better margins than firms get today without needing to resort to billable hour work. What is maybe a bit surprising at this point in time, I think that it’s just the tip of the iceberg client pushback on law firm pricing models. I think we haven’t yet quite seen, and we certainly have not yet seen the level of pushback I expected to see a year ago from law firm clients, but I think that’s coming.
I think Meta’s statement a few months back, it was in March about how we’re done paying for anything that an AI could do for us. We’re going to redline that out of our bills. There’s a lot of bluster in that. But I think that is kind of, to me, where the puck is going, that clients are going to have much more rigorous expectations for what good service looks like and how they’re going to pay for it.

Victor Li:
And how about for you guys? Are you guys looking to expand into different types of fields, different areas of law? Are there some areas of law that maybe you’re avoiding because maybe the approach might not work as well?What’s sort of the future for you for your firm?

Ryan Walker:
We want to be full service for the clients that we serve. And so our kind of path, we’ve been around for about seven months now. Our initial kind of start to that was to take early to mid-stage startups and let’s become full service for them. Meaning for 80% of startups, can we offer the full set of legal services that that company might need to get to the mid stage of company growth? And I’m really proud to say we’re there now that we’ve added an emerging companies practice that kind of completed the picture there because we can support price round financings, for example. That I think is a major accomplishment. We’re going to continue to do that. So we serve larger clients who have fairly sophisticated legal teams, have much broader range of legal needs. And so we’ll be adding practice areas that make us more and more full service further and further upmarket over the year for sure.

Victor Li:
And I did want to ask sort of about jobs and whatnot. So I noticed earlier you talked about the firm, you have a lot of more senior level associates and whatnot. So what does that mean for junior level associates or for even contract attorneys or people on the early end of their career? I mean, this approach would seem to potentially take a lot of their work away. Should they be worried about this approach or are there ways that they can kind of weather that?

Ryan Walker:
So I do think there’s a reality to what’s going on and there’s a possibility for what can come next. The reality to what’s going on is that the highest leverage that you can get from AI today comes from taking experienced practitioners and plugging them into the workflow. That on the surface is a tough reality for people who are just entering the field. The opportunity though is the way that junior talent becomes senior talent in the traditional firm model, I suspect is not an efficient way to do it. They just grind and grind and grind at low level tasks. And then over time they get more and more complex tasks, but they’re getting there by just this constant rote repetition. And yes, at After 10 years of grinding away, you become a really, really competent practitioner. I think what we’re going to find, and we have started as general legal to explore this with our summer associate class, we brought in a couple of really talented summers this year.
We’re going to find ways to accelerate that rate of learning. And I think AI actually opens up the door to that. I mean, just being part of general legal, you’re going to be exposed to a much higher volume of practice, a much faster volume of practice. And the places you as a junior are going to start to see and weigh in on are actually the kind of higher level reasoning tasks that seniors are able to do. It’s developing, I think it will develop much more quickly those talents that make someone a great senior attorney. So I think that’s the opportunity. My encouragement and advice, both our incoming summer class and to folks who are thinking about legal careers, this is actually, I think in many ways, it’s an exciting time if you can embrace that the way people are going to learn is changing. And so embracing this technology early on, figuring out what does the future of legal practice really look like and how you kind of get there as fast as possible in your career trajectory.
I think it’s opportunity and there will be need for great legal talent for a very, very long time. Lawyers remain valuable in legal practice. The way they practice is going to change. So we still need rising lawyers. We need lawyers to come in and fill the ranks.

Victor Li:
And so you recommend that they take math classes and go for a PhD in math?

Ryan Walker:
That’s an interesting question. Probably not. That’s

Victor Li:
Where you would lose me, to be honest with

Ryan Walker:
You. That’s

Victor Li:
Where you would lose me.

Ryan Walker:
At this point, using this technology really doesn’t require you to know the math of how it works. I think if your goal is to do really competent legal practice, spend your time focusing on that and understanding how you work with these technologies to get good work out. And how do you review that good work efficiently? How do you find the errors and the flaws fast? How do you build workflow systems that allow you to accomplish that inherent supervisory obligation as efficiently as possible? And maybe more importantly, figure out there’s still many, many ways that human lawyers add immense value to the client process beyond just being supervisors that sit on top of contracts. They are vital in that link of really understanding what clients want and need and how to guide clients to the best outcome, how to negotiate for the right thing. And so I think figuring out how to use the technology to get more reps at the higher level work is kind of the move of the junior right now.
Yeah, don’t take math classes.

Victor Li:
That’s music to my ears. And finally to wrap up, if our listeners want to get in touch with you to ask questions about your firm or just general questions about AI and whatnot, what’s the best way to do that?

Ryan Walker:
Absolutely. So we are at general.legal. So the perfect URL for the company. Folks can reach out to us there. They can email. I’m active on LinkedIn. We’re active on X, and love to connect with lawyers and rising lawyers in the space and engage on this really exciting moment where we see legal practice changing dramatically.

Victor Li:
All right. Thanks again for joining us, Ryan. Appreciate it.

Ryan Walker:
Thank you so much, Victor. This was a lot of fun.

Victor Li:
If you enjoyed this podcast and would like to hear more, please go to your favorite app and check out some other titles from Legal Talk Network. In the meantime, I’m Victor Li and I’ll see you next time on the ABA Journal Legal Rebels podcast.

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