COVID-19’s Impact on the Legal Ecosystem

Episode Notes

Transcript

Law Technology Now

COVID-19’s Impact on the Legal Ecosystem

06/10/2020

[Music]

Daniel Rodriguez: Hello, and welcome to another edition of Law Technology Now. My name is Dan Rodriguez, and I will be the host for today’s show.

I’m absolutely delighted to welcome to our show one of my favorite legal innovators and thought leaders and action leaders, Mark Cohen, my friend Mark Cohen who is CEO of LegalMosaic. He is a regular columnist for Forbes and I strongly recommend his always interesting columns on law.

I’m hesitating because it’s hard to summarize exactly what the topics are about. Some involve legal technology, the changing dynamics in the legal profession, legal culture etc., topics that we will surely be able to touch on. He is truly one of the great legal innovators of our time, not only nationally, but internationally and I’m absolutely delighted to welcome him to the show today.

Before we get into our show, I want to take a minute to thank our sponsors.

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So again, welcome Mark. Thanks for taking time out of your very busy schedule to join us on this LTN podcast.

Mark Cohen: It’s always great to be with you, Dan, albeit, this time virtually.

Daniel Rodriguez: Exactly. Well, I hope I won’t embarrass you, Mark, in noting that you seemed to be enjoying the moment, and if “enjoying” is the right term, what I mean by that is I see — virtually see and listen to a variety of your posts, of your webinars, you have been in this incredible tag team with our mutual friend Richard Susskind, I know talking about the future of law and of course your Forbes column that I mentioned.

So this moment as it were of course is a moment for all of us, given what we’re experiencing on the one hand with COVID-19 and the pandemic, which is as we record here today is still raging on sadly and tragically, and on the other hand the evolution and changes in the legal and the business marketplace.

So what’s unique now? I mean what is going on sort of now as we speak in this ecosystem that has engaged you and so many other really incredible thought leaders who are looking at these issues?

Mark Cohen: Well, Dan, I have of course pandemic civil war climate change problem and global depression aside. I’ve been waiting for this moment for a long time and that moment being the changes in the legal industry of course, and I think that what is different essentially is that in a remarkably quick period of time, a matter of literally weeks, think of what happened within the legal ecosystem.

The Academy, which of course you were a stalwart of, the Academy has gone virtually completely to online teaching, something that in many quarters it is resisted for decades. And in terms of legal providers and I don’t mean just law firms but also in-house departments and so-called alternative providers, all of these legal delivery sources have themselves gone from office-centric kind of workplaces to remote workforces. And I think the implications of those things are really significant. In a nutshell, Dan, because I’m not going to give a ten-minute answer as you teasingly said during the set up that I would do, I’m going to get in under nine.

What has really happened I think is that the circumstances that we find ourselves in have done two things really to the industry; number one, they have cast a very bright light on latent technologies, underutilized technologies that existed and have existed in some cases for a very long time that allow us to be able to work in a much more dispersed fashion, and yet very cohesively.

The other thing that it is done, is I think it has given legal buyers an affirmation that once you cross the divide of being able to work remotely or being able to learn remotely, you begin to see that there are not only alternatives that are viable, but they may actually be better than the default models and delivery systems, whether it’s education or delivery of legal services that you had. And I think those are the two things that I would cite as being very different this time around.

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Daniel Rodriguez: Can I probe a little bit? Let me go back to the first part, which is the availability of technologies, as you said those technologies were available before but they are underutilized and now there would be utilized. Can you give us a couple examples of that, of course, I mean, just take the low-hanging fruit, which is Zoom, in the availability of videoconferencing, do you have something else in mind?

Mark Cohen: Well, sure. I mean, look, back in 2008 when I co-founded Clearspire. We had a global geographically dispersed workforce, we had tools that would able us to seamlessly collaborate with clients and they would be able to identify where we were on a particular matter, and work with us if they chose to on matters in real-time, that would be one example. Another example —

Daniel Rodriguez: And it didn’t take — let me just jump in and say, it didn’t take a pandemic or anything like that to encourage you in that setting to make greater use of remote technology and engagement without always being on airplanes.

Mark Cohen: Right, and if I may, just a step even further back in time, I go back to 1991 which I’m sure many of your listeners weren’t even born at that time, but in 1991, I had a multi-city law firm that I had founded and I was the managing partner of. I went to AT&T who was then one of my biggest clients and I said, here’s what I want to do. I want to be able to link up these three offices so that we have one centralized chirpy voiced attendant. I want to have one set of legal resource’s books, but I’d like to see if we could go digital with that and I’d like to have videoconferencing where we could not only video conference between and among our three offices, but with our biggest clients. This was back in 1991, Dan, and we did it, and in a matter of 90 days I stroked a check for a million dollars to AT&T, we had all of these things.

So if we were doing that in 1991, I daresay that’s what, almost 30 years ago, and it worked perfectly fine. Why did it take so long, why did it take a pandemic before people suddenly realized we can really do it this way?

And by the way, there are all sorts of things that that drives changes in models. It allows for sort of more agile workforces, more flexibility in terms of when people work, how people work and significantly with whom they can and very often should collaborate, because once you start working remotely and you realize that it’s really the competency that you’re looking for, not the person who happens to be working from the same office building as you do, it doesn’t take a big leap of logic or imagination for clients to say, maybe I can start really cherry-picking the people with the best competencies as opposed to necessarily going to one provider for all of my services.

Daniel Rodriguez: So as I’m listening to your toggling between the interests of the clients, the consumers, the buyers and the interests of the lawyers, whether in law firms or others, of course I don’t need to tell you those interests are often misaligned rather than aligned. One profound way in which they are misaligned, which is relevant to what we’re talking about, is the holy grail of the billable hour. So what you call in label efficiency which of course is of enormous benefit to the clients and consumers may not be to the benefit of the law firms, he says cynically, right? So how does that marry with reliance on the billable hour?

Mark Cohen: Yeah, well, I would just say that the reliance on the billable hour is really such a small part of the overall transformation that I see going on in the industry. And what I see going on in the industry is that the client, the customer particularly in the corporate space has wrested control of the buy/sell dynamic from the provider, historically the law firm. So the first iteration of it was disaggregation to so-called early stage legal process outsourcing; high volume, low risk type of activities.

Then after the financial crisis of 2007-2008, you started to see a lot more work migrating away from law firms and into in-house legal departments, but increasingly after — in more recent years you’ve seen a lot of in-house work being done by firms like Axiom, by companies like UnitedLex and the reason for that was is because they had deep benches, it’s not just a matter of price, it’s also about competency, it’s about flexibility.

(00:10:01)

And it’s not necessarily having to take on the exorbitant cost of FTEs (Full-Time Employees), and so you put all of those things together and you say that the customer now is really in the driver’s seat, and the customer is really not focused, I don’t think so much on the billable hour but who in the first instance should be doing the work who has the competencies, and increasingly, Dan, I think they are going to be looking to things like data-driven decisions as opposed to decisions made by anatomical parts.

How many times have you heard a lawyer say, “My nose tells me this or my gut tells me that”? To business, that’s laughable. They are looking for data-driven decisions of which by the way law is only one of several business risk factors that they have to put into the mix before they can make an enlightened decision. So those are the things that I think are really changing.

Daniel Rodriguez: So to circle back to the pandemic, I mean, a very over-simplistic way to look at it, I’ll concede, but one perspective on this might be, look, the firms and clients are undergoing as we speak enormous changes because the overall, the economy is tanking and the overall share of legal spend is down and we’re hoping and praying and awaiting to come back, but that’s sort of an across-the-board hit.

And when we see that to the extent that that plays an important role in that, we don’t necessarily see innovation. We instead see this wishing and wishing and wishing that this too will pass and then there’ll be a bounce back. How much of that is driving this?

Mark Cohen: I think quite a bit, quite a bit. To the issue of the bounce back, I mean, again, I don’t have a crystal ball to the extent I ever owned one it probably cracked with Clearspire but I would say this, that I spent a lot of time with GCs and large companies around the world and I’m increasingly spending a lot of time with CFOs of those companies, Chief Digital Officers of those companies, and in some instances, CEOs of those companies.

And what I’m seeing and what I’m hearing is that they are looking for a paradigm shift in the legal function, how is it and what is it that lawyers are expected to do and what should they not be doing? And I think what you’re seeing is you are seeing from the sophisticated consumers, what you’re seeing is a real questioning of when do I in the first instance need a lawyer and what is and what is not legal practice?

As you well know, legal practice until fairly recently was pretty much anything that lawyers said it was. It was almost as if it was their birthright upon getting a law license to determine what it was that they and only they could do?

Daniel Rodriguez: Well, a birthright — just to stick with a metaphor, birthright that was enforceable by law —

Mark Cohen: Exactly right.

Daniel Rodriguez: — because of unauthorized practice of law rules.

Mark Cohen: Exactly right. But if you look at, for example, the UK regulatory scheme, I know you are very well acquainted with and you look at the way legal practice has been defined, it is six very narrowly drawn so-called reserved activities and only those six activities that only lawyers can engage in. So everything else is open game.

Now that doesn’t mean that any charlatan off the street can come and start doing it but what it does mean is that increasingly law is truly legal delivery, it’s not just practice but it is also the intersection of business skills, technology and a whole host of other things collectively referred to by many in our industry as legal operations; the business of delivering legal services, which of course is very different than the practice of law.

Daniel Rodriguez: So we’re going to talk a bit about what implications that has for not only the practice of lawyering but for lawyers themselves, and we’ll do that after the break, so let’s take a break here from our sponsors.

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Daniel Rodriguez: Welcome back. So, Mark, let me offer you a thought experiment and it really builds on just what — just the sort of fascinating picture you’ve been painting about the changing dynamic in legal business. So let’s start with a group of junior partners, folks who have a lot of their career ahead of them but they are sort of invested in law firms, they come to you for advice.

Okay, how should we react to this marketplace? Should we get out of the practice of law, should we significantly engage in what’s called upskilling, should we be the sky is falling folks who come to our firm. What would you advise them about how to best prepare themselves and pivot as professionals in this — given these changes?

Mark Cohen: There is no one-size-fits-all because the first thing I would do to each individual is say what’s your objective here, what is it that really floats your boat, but I realize that you’re asking more generally and so this is what I would offer in response.

First of all, I don’t think there is anything inherently wrong with law firms. There is no reason why law firms can’t continue to do good and do well. But I think it really goes very much to the model and to the culture. I think that the partnership model is as you know built on historically on labor intensity on a pyramidal structure.

You are rewarded more for your input than you are for your output and more from just the amount of sheer labor that you are putting down on your timesheet as opposed to the results or the efficiency, and how it ultimately impacts clients.

And so that model which worked for a very long time is now being challenged. The billable hour is just one of many manifestations in my view of that challenge. So I think that that is the model part of it. In terms of the culture part of it, I think that goes with the model. It used to be when you were a young lawyer, you would bide your time, you would be an associate for 8-10 years typically.

And if you were a good doobie, you had a pretty decent shot at becoming a partner and if you were in a partner at that firm then the firm would in a very genteel way make sure that you became a partner and maybe a lesser tiered firm. Today that has changed of course because there’s a lot of instability and in terms of the culture of law firms, I think it’s a real challenge because there’s a whole generation, there are probably two or three generations of lawyers who worked for large firms, many of whom have virtually no direct client contact.

And when I say “client contact” I’m not even talking about the general counsel. I’m talking about the person who is in the business that the general counsel is servicing.

Daniel Rodriguez: The client is a black box as it were from there.

Mark Cohen: Right, you are so many steps removed that you begin to think that your client is either your immediate supervisor within the firm or maybe the in-house lawyer and I think that has a tendency number one, you think that the client is another lawyer. Lawyers tend to think like other lawyers and that’s caused I think this tremendous divide between lawyers and the businesses that they are serving.

Business, as you know, operates on very different methodologies, very different speeds, very different reward systems, very different metrics and on and on and on, and I think one of the tragedies of the profession which I think is going to be addressed and one of the reasons why you’re beginning to see the transformation is clients are beginning to say, hey, you know, since I’m buying a trillion dollars to global legal services, maybe I have some say in terms of who and how they’re being delivered and what kinds of models and what kinds of cultures I am going to patronize and what kinds of skills are necessary.

(00:20:08)

So I think these are really Dan in my view some of the sort of big changes that are all — we are reaching a point of convergence and I think it’s all being driven by the client.

So back to your question, I would tell those folks that number one, if you want to remain as a law firm, I suggest you break off from your firm. I suggest that you start a firm that is going to start from the perspective of the client, what is it that the clients need, what kind of structure, what kind of model would best suit clients.

I would say that I want to be very differentiated. I am not necessarily going to be all things to all clients. If I am going to practice, I have practice skills, I want them to be truly differentiated. I want pricing to be efficient. I want to use data. I want to be better communicators and provide better service to clients. And finally, I want to create an environment where I recognize, unless I am going to outsource all of my technology, which is certainly something that could be done, unless I am going to outsource my project and process management which certainly is an option, then I am going to give a seat at the management table for those who have those skill sets and recognize that they are just as important in the servicing of clients today as it is being an expert in a particular legal domain.

Daniel Rodriguez: That’s great. I started out this question by saying it’s a thought experiment and without naming names, you and I can think, you especially of some examples of some lawyers and prominent lawyers who have morphed or shifted or pivoted in exactly the way you are suggesting.

This is a good segue too to take an earlier stage in the process and that is law students and lawyers just entering the profession. You mentioned one central point and you have spoken about this eloquently so many times in the past in your Forbes columns, which is the necessity of collaboration and multidisciplinary skills and in particular giving lawyers, law students and young lawyers business skills, not just business law training, but business skills in that regard.

Can you talk a little bit about what advice you would give the proverbial groups of law students who want to best prepare for what’s going to be a very different profession when they graduate?

Mark Cohen: So let me just assume Dan for purposes of the question and my response that we are talking about lawyers who want to go into corporate law as opposed to sort of retail law.

So for those students I would say number one, how in the hell are you going to represent a business client if you can’t read a balance sheet, how are you going to be able to represent a business client if you don’t understand the basic vocabulary that business speaks, how many lawyers, sad to say, know what Net Promoter Score is, and yet that is something that as you know the business world lives and dies from. So that would be one set of skills.

Not everybody has to be a coder, not everybody has to create apps, but I think that lawyers certainly and you know that this is now in many jurisdictions, this has now become a competency requirement for lawyers that they understand how technology is being applied to deliver legal services. And as you know, American bars are generally not known for being terribly forward-thinking and you can quote me on that.

So I think that you basically have to be — it’s table stakes to understand the basics of doctrinal law and certainly if you are interested in practicing law, you must learn your craft, you must learn your skills. But at the same time unless you are the one of maybe one-half or one-quarter of 1% of the law school grads who are going to be Supreme Court or federal clerks who are going to go into high levels of academia or other things like that —

Daniel Rodriguez: It’s a small group, as you emphasize, yeah.

Mark Cohen: Yes, it’s a very small group. It’s like saying I am a basketball player and I am going to go to the NBA. I would have a plan B. And so I think the plan B for lawyers has got to be to have a more rounded curve of skills and also a couple of other things. I would really invest a little bit of time in learning what is going on both in the profession and the industry.

(00:25:00)

Daniel Rodriguez: And here I know I am preaching to the choir, I can’t resist jumping in to say something we simply don’t do a very good job of doing in American law schools.

Mark Cohen: I would agree. I don’t agree because it gives me any joy, quite the opposite. I would be remiss Dan if I didn’t say one other thing. I feel for American law school graduates because so many of them have their career choices, put aside whether or not they are adequately prepared, put aside the fact whether or not they have these additional skills, but so many of them are laboring under the burden of significant student debt and I think that that is a big elephant in the room.

There was a marvelous article by an NYU Stern Business professor; I think his name is I want to say Goodnow, it was in the New York Magazine. It was a remarkable article where he absolutely with a laser precision analyzes what has happened with higher education and just one of many things he says is that in the last 40 years on average it’s increased by 1400% and that the profit margins are just enormous.

Daniel Rodriguez: And quality, declaration against interest, but quality is not improved 1400%.

Mark Cohen: Correct. No, no, I will give you blanket immunity in the discussion because I know you are a Law School Dean who really was in my mind an outlier; I wish there were more, but I do think that this is something which unfortunately I know many law students have told me, particularly from elite schools such as yours, where I spent a couple of very happy years and they tell me, Mark, I would love to have done something other than go into big law, but I really have to do it if I can get the job to start paying off my loans.

So really there are a lot of different things, some of which I think are in the students’ control, others a little bit less so, but I think that clearly law schools have to take a long hard look in the existential mirror because — and I don’t think you disagree with me, there will certainly be top schools like Northwestern and a handful of others are not going to be wanting for students to fill seats. But a lot of second tier schools are going to be borrowing from third tier schools, applicant pools, and a lot of third tier and fourth tier schools are going to be out of business.

And I think that that should be a day of reckoning, both for the providers of educational services and also maybe the law students will be a little bit more — become more discriminating consumers and say is it really worth it to go to this school versus that school.

Daniel Rodriguez: I think that’s exactly right.

Mark, when we were preparing and I know we are coming down to the end of the time, but when we were preparing for this interview I thought of many questions to ask you, there is always more topics than time, issues of regulation, legal culture, actually I want to end on this note. We are experiencing as we speak and recording this, I don’t know what vernacular to use, a period of upheaval and protests that is heartbreaking, as is and I know you agree with that and the origins and the reasons for it, the murder of Mr. George Floyd and others.

You have been a champion, really an eloquent champion for the importance of diversity in the legal marketplace in a variety of forms and I wonder if you just take a couple of minutes as we wind down to try to reflect on what we can do as a profession to do better, to really meet the imperative that you have again written and talked about so much with respect to diversity in our profession?

Mark Cohen: Well Dan, I am so glad that you asked that question. So there has been a lot of I think good-natured intention to bring more diversity into the profession, but again this goes to culture, this goes to how — in the first instance how is a good law school prospect measured, and all too often it’s by a very narrow set of criteria, is the person a good test taker, in many instances now regrettably can the person or the person’s parents or benefactors pay the full freight tuition.

And I think as a profession where I always learn that you are serving two clients simultaneously, one is the client that engages or retains you, but equally the other client is the larger society. I think we as a profession have to come back to what makes the profession so great and I think we have lost our way a little bit and how can we enforce the laws if we don’t follow them ourselves.

(00:29:51)

So you have a gender pay disparity within our profession, the statistics in terms of advancement and all sorts of other things are just appalling to say nothing of our profession’s internal problems with drug abuse, alcoholism, suicide, mental health issues, clearly we can do better, we must do better.

And on the societal role, I am shocked frankly that we as a profession, and shame on me for not talking out more and being more forceful and others, we have an obligation to speak out against the madness. We have to do things. This is really — I was very fascinated as a student for various reasons in studying about the rise of the Third Reich. This is getting really scary and I was very curious, what did the legal profession do when Hitler was coming to power? Answer not a whole hell of a lot. And I think we can and must do better.

But to the diversity issue, I would really like to see our profession sort of bend over backwards. I think we do a reasonably good job with pro bono, but I think that we can do a lot more if we utilize tools in a very thoughtful way.

I think that the legal system top to bottom has really got to be reevaluated Dan, because I think as a profession we are failing, as an industry I don’t think we are serving our clients or societies as well as we might. This really requires a re-imagination of what’s needed from a societal perspective. What do we need from the legal function?

And a real come-to-Jesus in terms of what should a lawyer in today’s society really be doing, and the answer is it’s got to be a lot more than making seven figures if you are a big firm partner and perpetuating the system and then just sort of saying well, I am stroking a check to a pro bono program. I think we really need to do more than that and I think it all starts with we should reflect the society that we live in and we should be much more inclusive.

I think we need to be much more culturally aware. If we as a legal profession are not setting the tone who is and I absolutely am stunned at how many people in our legislative branches are lawyers and what are they doing to say nothing of the oath that they take to protect and serve people and our democracy. So I think we can and must do more and I think we have to find a way to speak with a more unified voice. And frankly the ABA, which tries at some point very hard, but I mean we have just got to do more.

Daniel Rodriguez: You use the term reimagining Mark and you have been such a big part of that and again this conversation and other conversations we have had, not all of which have been recorded and in your Forbes columns and elsewhere, you have really been a great champion to this, for this reimagining in this conversation.

So I want to thank you for this wonderful conversation. I know that the listeners of this podcast will benefit from it.

And this is Dan Rodriguez from Legal Talk Network. Thank you for joining us.

Mark Cohen: Thanks Dan.

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