When first entering the legal profession, young lawyers can sometimes feel ill prepared for the everyday rigors of working at a law firm and practicing the law. In this episode of Law Technology Now, host Monica Bay talks with Professor Daniel Martin Katz about the industry’s need for law school curriculums to better reflect the demands of the legal marketplace and his efforts to change the profession by creating a different type of lawyer.
Professor Katz is a scientist, technologist, and law professor who applies an innovative polytechnic approach to teaching law to help create lawyers for today’s challenging legal job market. Both his scholarship and teaching integrate science, technology, engineering, and mathematics.
Law Technology Now
Closing the Gap Between Law School and the Legal Industry
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Monica Bay: Hi. I am Monica Bay and welcome to Law Technology Now. We have a terrific guest today, Daniel Martin Katz; I love that name, also known as Dan. And you may remember him through the ReInvent Law Series that he did a few years ago, and he has now moved to a new job. And I am going to turn the mike over to him to tell a little bit about what ReInvent was and your decision to move to Chicago and what you are doing now.
Daniel Martin Katz: Well, thanks so much for having me Monica. ReInvent Law was a sort of effort when I was working at Michigan State to make the curriculum of the law school look more like what we were seeing in the market in terms of what market was needing a lawyer to be or a lawyer to become.
And so I wanted to try to have a place within the law school where we could experiment with new curriculum, where we could have students sort of engage with new ideas. It was actually called ReInvent Law Laboratory, and the idea was that sort of the sciences laboratory environment is a place to train people to explore new ideas. And so I wanted to have a similar sort of environment inside of the law school.
So we did a number of things there. There was sort of curriculum and training and there was also, we ran these conferences that were trying to build bridges between what was going on inside the legal academy and what was going on in the legal market, and so we wanted to help curate a conversation about the future of the industry.
Monica Bay: And then you decided recently to make a big move to Chicago, tell us a little bit about what made the decision to do that and what you are doing now.
Daniel Martin Katz: Yeah, Chicago-Kent, the new school that I am working at, which is the law school of the Illinois Institute of Technology, as a person that’s interested in legal technology and legal innovation I would say that they were doing a lot of this stuff before it was cool. They were like the hipsters of law, so to speak, they were — they have been working in the legal tech space for many, many years.
So when I was at Michigan State I would always look at Chicago-Kent as a place that I was trying to help the place become, and so when I had an opportunity to go to the place that I was trying to have my current place become, it was just too attractive of an offer.
So it was mostly more about the positive properties of Chicago-Kent rather than sort of the negative properties. We were having a lot of success at Michigan State, but just the chance to kind of come here and build upon what had already been done here.
I can say a little bit about a few initiatives here. One thing that they are well-known for is a platform called Access to Justice Author or A2J Author, and it’s a software platform that allows people in legal aid to help automate some of the forms and some of the work that they are doing with their clients so they can serve more clients.
Legal aid turns away like two people for every person they are able to serve, so being able to help them have better throughput is really just an opportunity to have a lot more justice in the world. And so that was one thing that really attracted me to here was that’s something they have been, not just talking about, but been doing. They have had three million people use the software in the last I think five years. So it’s a pretty serious effort here.
Monica Bay: So tell us a little bit about what you are doing at the school, and I know you are about to launch a new event, and it sounded to me from looking at the material that there’s multiple things ,you mentioned the one now, what are some of the other things that you will be doing there?
Daniel Martin Katz: Well, the school has a Design School similar — so Stanford has the d.school. I spend some time at Stanford, like you do Monica, with CodeX, and real close to CodeX is the Design School at Stanford. Well, Illinois Tech actually has a Design School and it’s very longstanding, and they are actually right here on the same floor that I am on, that’s another opportunity.
We want to engage in sort of joint projects with them. We have a couple of things that we are working on building out. That’s sort of one goal I have.
Another thing I would like to do and we are working on is — and I had done a little bit of this stuff at Michigan State with my friend Dan Linna, who sort of took over at Michigan State after me, which is training students in lean thinking. So we had students at Michigan State going into — getting lean certifications, which were being offered on the main campus at Michigan State. We want to do that here also at Chicago-Kent.
Again, Illinois Tech has a history in these sorts of topics. And so the opportunity to do at a place that does a lot of STEM, Science, Technology, Engineering, Mathematics as a core function of the university and has designed and has sort of a engineering or process improvement sort of methodology that’s longstanding, and then lot of entrepreneurship, both coming out of this school and in broader Chicago area, it’s too attractive of an opportunity to try to create a different type of lawyer and try to change the legal profession in meaningful ways.
Monica Bay: And that sounds like it was a wonderful link from what you were doing before as you were saying. A couple of weeks ago you were down at ILTA and did the Tuesday Keynote, and ILTA is the International Legal Technology Association. Every year they do a massive program, they now call it ILTACON, that’s usually the last week of August, and amazing.
And one of the traditions they do is to have keynotes on most of the days. It’s like a five day event. And you did the Tuesday Keynote called ‘Measure Twice, Cut Once: Solving the Legal Profession’s Biggest Problems Together’. And I know it’s going to sound like I am sucking up to you, but I wrote this on the CodeX blog, so I will just repeat it, which is, I thought it was the best keynote that I have heard at CodeX, probably second only to the astronaut that talked about duct tape. It was so good and I think you did a fantastic job, and from my point of view you took us to the next level.
Can you tell us about what your approach is and the upcoming program you are going to be doing in November, which links into what you are doing? I just found it absolutely fantastic and I will turn the mike over to you to really give us a deep dive on what that’s about.
Daniel Martin Katz: Well, thank you very much. That’s more generous than it deserves, but I really do appreciate it. I spent a lot of time trying to prepare those comments, so I am glad that you thought they were well put together, because — I mean, I just sort of spend a lot of time trying to take stock of what I observe and kind of try to draw parallels to what I see in kind of the rest of society, and in a lot of ways things in law look like things in other sectors of the economy.
There’s been a lot of interest — I mean, it’s an interest of mine in sort of artificial intelligence, sometimes called sarcastically robot lawyers, but to me that’s an important conversation, but financialization of law is a much more fundamental disruptor, if you will, than robot lawyers, and that’s something we want to explore in this event.
I explored it in the keynote and we are going to explore in this event that we are calling Fin (Legal) Tech, which is kind of, there is Fin Tech, which is — so FinTech sort of has two big branches to it, and one branch is about sort of removing socially useless frictions from typically financial laden processes. So you see stuff like peer-to-peer lending, which is challenging traditional lending institutions, or you see people removing friction in payment processes, so things like Square. And in the developing world, particularly in Africa, M-Pesa is a mobile payment system, a currency where you pay all through your phone. But you see examples in FinTech, that’s kind of one branch.
The other branch is characterizing exotic forms of risk that historically has been things that people thought you couldn’t predict and trying to develop financial and/or insurance products around those types of risks.
And so when you look at law and in Legal Tech you see a lot of similar parallels, at least I do, and so we are calling this sort of intersection of the two Fin (Legal) Tech, and that’s what we want to explore. We have kind of both of those branches represented.
So if you look in law, we have things like litigation finance, which is explicitly FinTech, all the thing in law, people trying to predict outcomes in lawsuits and basically turning that into an asset class, like a security that you can try to predict and price.
And there’s other examples in the insurance space, so if you do — if you look at like mergers and acquisitions (M&A), you see insurance products around things like reps and warranties. So that’s a thing where an insurance company will essentially sell a policy to someone about the representations that the company has made coming out of — even after due diligence this is an insurance product that sits on top essentially of that due diligence process.
And it’s an example where law didn’t really figure out how to better characterize the risks than say a large insurance company who is selling a policy in that space, which I find very interesting, because that could in principle in a different world had been something where that could have been something that lawyers were doing or law firms or whatever, and again, that would be in a different world, but just conceptually, we have all these places that I see where we have left all types of opportunities on the table because we are only just thinking about being lawyers in the most traditional sense.
But what we are not doing is solving for the real problem, because the reason somebody hires a lawyer is, in my view, two major things; characterizing legal and other classes of risks and managing complexity. Those are kind of the two dominant themes I see when somebody hires a lawyer, and that’s the actual problem being solved for.
And so FinTech, to me, and Fin (Legal) Tech is a dominant threat to some assets of what lawyers are doing, because what they are actually selling is risk mitigation, but not in the ways that you would traditionally see done in other sectors of the economy.
So if you look at the way we underwrite risks outside of law is, we have all types; we built statistical models, we convene panels of experts sometimes to do exotic — to write an exotic form of insurance, if they are like Lloyd’s of London or something like this. These might be the ways you would write an insurance policy on something that’s never been done before, where it’s not like doing car accidents, where there is a sort of known rate of risk and known rate of hazard.
But then you look at law and we say, we hired the lawyer essentially to do risk mitigation, but all that — and I am really channeling my friend Paul Lippe when I say this is, all the lawyers are good at doing is identifying that there are risks, but the great lawyers need to be focused on pricing the risk, because those business people say, of course, I know there’s risk here, I am already aware of that, what I need to know is how risky is this and try to make sure that you are not taking out outside risk relative to the return that you are receiving on some action you are about to take.
That to me is not the way the conversation typically goes now. It’s not the way the lawyer-client exchange at the — kind of at the enterprise level, it doesn’t sound like that at all. This pricing of risk now, you go back to my M&A example, here you have got somebody else, a third party comes in, a big insurance company comes in and sells reps and warranties insurance, because they are actually solving the pricing risk problem for the parties involved, the person selling their company or something like that.
Monica Bay: When we were at this year’s FutureLaw, Jim Sandman did the keynote, and it was amazing, absolutely amazing, and one of the themes that he had I think works really well with yours, which is the concept of, if we are going to change the structure of big law, in particular, and you did a lot of conversations about this in the ReInvent era that we have to look at changing the approach to have big law wanting to drag things on, because they make more money by the hour. And this has been something we have been talking about for my entire career. I have said this a hundred times, for 17 years I have been saying that the billable hour —
Daniel Martin Katz: Might as well go for 101 today.
Monica Bay: Yeah, it’s like crazy. But one of the themes that Jim had was to suggest that we may be at a point where we simply have to leapfrog the lawyers themselves and get the malpractice folks, the insurance folks, who ironically are also part of the problem that he said when he was looking at what’s causing problems to get services, but also can be a heavy force in improving it, because there’s, like you have been saying on the money side of this thing, if they are being able to get better, faster, cheaper things, it helps everybody.
I have sort of rambled a little bit, but do you see alliances between what Jim is saying and what you are saying?
Daniel Martin Katz: No, I do, I very much do. I mean, I think the idea is that we want to have a better ability to predict and characterize a whole range of questions in law, where right now we are just letting human experts sort of do the risk characterization. And the problem is, if you wanted to call that insurance, that’s underwriting the judgment of single individuals, which is not — I mean, if you are am insurance company operating under that basis, you wouldn’t last very well.
I mean, we are long past that thing on the insurance side; in fact, in most major suites of judgment in the world we don’t want things this way. But here in law we have this odd thing where we are doing manual underwriting with the cult of single person’s expertise driving very significant decisions, and I view that as not a particularly sound practice. So that’s a critique to offer.
Now the question is how do you fix that, and I think if you are going to offer the objection, you have some obligation to offer a way forward, so let’s look at how manual underwriting works.
Let’s say you wanted to write an insurance policy in something that really hasn’t been done before, right? Again, auto insurance is an absolutely, almost no margin business, because we have so much data and it’s so well-understood and characterizable that there’s massive competition on it. There’s no margins to be made. The memorial margins are in these exotic offerings, where there hasn’t been a lot of history.
And again, litigation finance is a 15:24 space, where the margins people are making are pretty substantial, because these were things people would say, oh, you could never predict the outcome of this type of case. This case is very exotic. If you are a financier and you are like, yes, I can actually. You don’t even want to convince anybody other than the person you are trying to take this away from that anything else is true.
You want to actually simultaneously stoke that idea that discusses on characterizable, let’s say, well, fine, if it’s uncharacterizable, then you should be more than happy to opt for the risk. Meanwhile, you actually know the rate of risk and you have a huge margin as a result of that.
That’s a kind of high-level conversation, but there’s a million little things that look exactly like that as far as I am concerned, where people say you can’t model it, but you really can actually. It doesn’t mean you nail it on every individual case, you nail it over the portfolio of cases, over the portfolio of transaction, that’s the kind of, we need to move away from this sort of everything is a one-off, a special snowflake, to thinking about things as portfolios, thinking about things as tranches of risk. We are not quite there yet, but that’s — but I already gave you some concrete examples where people have already figured out how to do it, litigation finance, reps and warranties insurance.
I mean, there’s several other examples that we will bring out at the conference where people — I mean even an AFA, an alternative fee arrangement is a form of self-insurance on the extreme sense, because you are saying if there’s a cost overrun, we are essentially going to eat the difference.
Well, now you have taken a law firm and turned them into an insurance company because they are self-insuring the risk. But then you start asking yourself, everything else is self-insurance too, every piece of litigation that is on my books is self-insured because I have to eat the liability if I get it wrong.
Monica Bay: So let’s shift to the actual event that’s coming up in November. Tell us a little bit about it, and if folks are interested how can they attend and what can they expect. And how about talking a little bit about the younger lawyers who may be new to this, as well as the baby boomers, because they are the ones who are starting to leave, but there’s still — many of them are still in control. What advice do you have for the folks who have been in the trenches for a long time?
Daniel Martin Katz: Well, I will just start with the basic facts is that the conferences, you can find it at HYPERLINK “http://www.finlegaltechconference.com” finlegaltechconference.com, and thanks to our sponsors the tickets are free to come to the conference.
Monica Bay: Who are your sponsors?
Daniel Martin Katz: Our sponsors are the Law School, Nextlaw Labs, which is the innovation arm of Dentons, the world’s largest law firm, and we just have another sponsor that will be joining us, which is soon to be announced, which is one of the litigation finance firms here in Chicago will be one of our sponsors.
So they are helping to make it so that we can offer this as a free event. It’s an educational event to try to have people who are doing a bunch of this financialization of law, explain what they are doing, why they are doing it, and how they are doing it. And so I think it will be something that will be educational to a lot of folks.
I guess to answer your other question, why we offer these events in some sense is to curate a community, but the other reason is just to bring people up to speed, because everybody is really busy with all the things they are just trying to do that are immediately in their field of vision that they may not be seeing these bigger sort of, let’s say, tectonic plates and how they are moving.
But I am sort of in a privileged position as a legal educator who gets to sort of study the market for a living and I just see this as a very dominant and emergent phenomenon that you are seeing sort of creep in, in various sorts of ways; people trying to do better on a whole range of questions.
The most well-known maybe of these would be something like corporately the clock Group or the ACC version of legal operations. That’s an example where people are trying to get better data and better understanding and better predictability about what lawyers are doing, how well they are doing it, and how much it ought to cost to do that stuff, whatever the thing in question is.
Monica Bay: I would totally agree with you on the whole procurement thing, and it’s really been rising. And one of the things you just mentioned really strikes me, because I went to a conference in New York about six months ago that was put on by Silvia Hodges Silverstein and it’s BUYING LEGAL COUNCIL. And it was an amazing conference and very, very interesting to see big changes in the Corporate Counsel.
And we have also seen a lot of movement in the big four accounting firms. I just sense that they have their eyes on the Corporate Counsel, and I think the Corporate Counsel is so fed up with a lot of the lawyers that there is really some traction there.
Does that arena fit in with what you are doing with the work you have been telling us about today?
Daniel Martin Katz: Yeah, I mean if you think about what the accounting — first of all, there was a great article on The Economist which I always like to reference when I go out and give presentations just to show you what scale is all about, like the top ten law firms in the world taken together are smaller than Deloitte basically.
Monica Bay: Wow, I didn’t know that.
Daniel Martin Katz: There is scale there that’s like — I think Deloitte has 200,000 employees or something like this. It’s an astronomical sort of circumstance, just scale there is a whole another level.
So there’s a lot of pressure in that — on their side to find new horizons. Imagine you have an organization that that’s large, and I talk to a lot of managing partners of the law firms and they are always talking about, I have got to feed the beast. What they mean is I have got to get enough work to keep everybody happy and keep things moving forward.
Imagine you have got to feed something that is 10 times the size, 20 times the size, 50 times the size or whatever of your law firm, it’s a different scale. So what happens is you start getting very aggressive at finding new market. And then you look at what lawyers are doing and you think, well, yeah, there’s certain aspects of what lawyers are doing that aren’t even really the practice of law, they are just sort of adjacent to the practice of law, and maybe the accounting firms can get in on it, and they have been in on it for a while now.
And what they are very good at doing and what law firms historically have been very bad at doing is productizing some aspect of service provision. And so what they love to do is create some sort of like a software offering embedded in the client and then sell a bunch of services around the software offerings. So they love these sort of beachheads or tentacles into their clients, where they sort of get some — some sort of point into one of their Fortune 500 clients or whatever and then they sell a whole bunch of services around the software offering.
Then you look at, wow, we don’t really have great examples of — you can find an example or two, but as a general proposition it is a service only business. I think that the one thing that — and I have gone around many places and suggested this is that people need to figure out better how to create these productized offerings that allow them to sell services around the products. It makes you so much stickier with your client than if you are just a service provider.
Because if you are just a service provider, I can find another service provider, it’s not — I would have to believe that you are the best person in the world for X, otherwise this is just a question of cost and benefits and payoffs. But I mean, there’s just not — there’s this loyalty that is not ever present in a situation where it’s just the service provider, and again, that’s why they are good at doing this product-service hybrids.
Monica Bay: Well, we are running out of time. Is there anything that I haven’t asked you that you wanted to share with our audience?
Daniel Martin Katz: I guess I want to encourage people to come to our event on November 4. As I mentioned earlier, there’s two branches of FinTech. I have taken a lot of time talking about the financialization part or the sort of insurance/risk modeling or risk characterization, but I do want to also mention the kind of frictionless law side of the equation.
We are going to have a number of speakers sort of talk about applications of the blockchain, which I think is something that lawyers should want — transactional lawyers in particular, but other types of lawyers as well should try to learn more about, because I think that there’s a range of reasonable — there’s a bunch of applications that wouldn’t help, but there’s a bunch of reasonable applications.
It reminds me, there’s a lot of hype around it, but it reminds me as sort of the early days of the Internet, where people didn’t really even know quite what all it was going to mean, but you sort of knew there was a there, there, and we didn’t know how it was all going to play out. This feels a lot like that to me.
Monica Bay: Me too.
Daniel Martin Katz: Where it’s not even clear what all the answers to it are, but you can see that the dominant feature is it’s solving for trust and it’s solving for trust problems, which we currently use lawyers for, and it’s solving for creating — basically removing frictions from friction laden processes, which is a big feature of FinTech. So I wanted to just put that in there as a plug for the event.
Beyond that, I would like to just have folks check us out. My new venture here at Chicago-Kent called The Law Lab, which sort of pays homage to what I was doing before at Michigan State, but it’s called HYPERLINK “http://www.thelawlab.com” thelawlab.com and it’s part of the law school here. And we are focusing on this legal innovation, education, technology, process improvement, entrepreneurship as part of the legal education. And we think that that’s a pretty cool and distinct offering out there, and we would love to work with people who are like-minded.
We are also interested in employers who are looking to hire a different type of lawyer and a different type of law student. So if you are interested, please feel free to drop me a line. I would love to talk to anybody who is interested in exploring any of that further.
Monica Bay: And Dan, how would people reach you?
Daniel Martin Katz: Yeah. You can get me, just hit me up on my Gmail, just HYPERLINK “mailto:[email protected]” [email protected], or you can hit me up on my Twitter, @computational on Twitter, @computational on Twitter, or on my blog, HYPERLINK “http://www.computationallegalstudies.com” computationallegalstudies.com.
Monica Bay: Well, Dan, thank you so much for your time today, and again, congratulations for a phenomenal keynote. It was just terrific. I am really looking forward to the conference and the very best of luck in getting it organized.
Daniel Martin Katz: Thanks so much Monica, look forward to seeing you soon.
Monica Bay: Thank you. I am Monica Bay and thank you for listening to Law Technology Now.
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