The Future of Law Firm Business Models in the Age of AI, with Jordan Furlong

Episode Notes

Transcript

Zack Glaser:

Hi, I’m Zack.

Stephanie Everett:

And I’m Stephanie, and this is episode 607 of The Lawyerist Podcast, part of the Legal Talk Network. Today, I’m talking with Jordan Furlong about the future of legal, really. I mean, we get into what’s going to happen with this crazy profession of ours.

Zack Glaser:

It sounds like a big topic and it sounds like so much, but that’s what Jordan is talking about right now. You’re reading his Substacks, seeing him on LinkedIn. And I know that he’s going to be one of the keynotes coming up in a couple of weeks at the ABA Tech Show. Honestly, I’m jealous that you got to talk to him and I’m looking forward to listening to it.

Stephanie Everett:

Yeah. I think this was a fascinating conversation and I’m super excited to kind of pick it up and continue it in Chicago at tech show. So if you listen to this, I mean, there’s still time to register. You and I are going to be there and we’d love to see everybody. If you listen, please come talk to us at tech show because sometimes … I mean, that’s my favorite, is to connect with people and find out what they like, what’s working. Actually, this is kind of meta. I’m speaking about lawyer podcasting at tech show. So if you’re thinking about starting a podcast, you can come hear us talk about podcasts.

Zack Glaser:

I love that.

Stephanie Everett:

That I promoted on our podcast. But yeah, no, this conversation with Jordan is a great one. I think we’re going to hear more of this at tech show, but this is one of those conversations that we all need to really be thinking about. This is one that I’m going to listen to a couple of times and share with people. And then I think we need to really dig in and have some conversations because while none of us know exactly where all this AI is taking us, the profession’s changing. And I think what Jordan says is pretty valid of like, what do we need to be thinking about and how do we need to be preparing for those changes so that we can make sure we’re successful?

Zack Glaser:

Okay. Well, honestly, let’s jump right into it then. Here is Stephanie’s conversation with Jordan.

Jordan Furlong:

Hey Ver, I’m Jordan Furlong. I am a legal sector analyst, consultant and forecaster based in Ottawa, Canada. And it’s my great pleasure to be joining you today, Stephanie, on the Lawyerist Podcast.

Stephanie Everett:

Hey, Jordan. Welcome back to the show. I’m excited for this conversation too because, well, here’s what I thought we’d talk about and we’ll see where this goes. But I’ve been reading a lot about your recent writing on AI, on private equity, on the migration of profitability. I mean, you’ve been circling around something bigger than just technology here in the past couple of months. And it kind of led me think about who’s going to own the profit engine of the modern law firm.

Jordan Furlong:

Oh, that’s a

Stephanie Everett:

Good

Jordan Furlong:

One. Wow. Who’s going

Stephanie Everett:

To own the profit engine? Right, because I think, I mean, let me just kind of set this up and see how I did. For decades, law firms have made money, as you know, the same way. We hire a lawyer, we bill hours, we create leverage, we distribute those profits to the owners. And now it seems like that idea of legal production is moving into systems and AI and workflow and infrastructure. And then you talk about maybe private equity showing up and we’ll kind of get to that. But it seems to me that there is a shift happening even within how a law firm makes money. I

Jordan Furlong:

Think that’s right. And I think the question around where the profit center is going to go and who’s going to own it is actually really important because you’re right, we are seeing the means of production changing in the legal sector. I don’t think there’s much debate anymore about that. We are moving away from this idea that value is generated from the extended professional expert effort of human lawyers who carry out various legal tasks, which result in outcomes which are then sold to clients. I think that task performance, that value production is increasing going to be not just assigned to AI, but AI is going to become kind of the conduit. The workflow will be more or less operated by an artificially intelligence system. And the lawyer’s job will be to supervise that system, to monitor it, to validate its outcomes, and to communicate the impact of those outcomes along with any requested level of judgment or assessment or evaluation that the client might desire.

And so the question then becomes kind of twofold. First of all, where does the profit come from? I mean, because we used to, as you say, we used to build the effort of lawyers in doing this. We cannot, and no one seriously suggests we’re going to hourly build the work of AI, which does work in seconds. And I think if that brings us closer to the end of hourly billing as a pricing tool, I think that’s terrific. I think I maintain there will still be uses for the billable hour as a pricing mechanism for select types of work, especially around certain kinds of novel or high stakes advocacy. But for the most part, no. It never made a whole lot of sense for anybody and is going to make a whole lot of sense going forward. So then what do you price on the basis of?

I’ve written in the past that if you’re looking for something that you want to base your pricing on, then you start with what matters to the person who’s buying it from you. And from the client perspective, I think only three things matter in any kind of a legal issue or legal transaction. The outcome that they received from the relationship they had with you, the experience of gaining that outcome, which includes but is not limited to the price they ended up paying and in certain but not all cases, the relationship with the lawyer, is it one that was positive? Is it one that will make you want to come back and work with this person again or refer your friends and associates to this person? And I think if we, as law firm owners, and I’ll get to that in a second, that does not exclusively mean lawyers.

If as law firm owners, we are focusing on those kinds of deliverables and pricing according to that, because that’s value pricing, that’s what matters to the clients. And I think that’s really the way to move forward on that. Now, that again opens up other issues around ownership, but I’ll kick it back to you on that point to get your thoughts.

Stephanie Everett:

Yeah. I mean, I agree. I think that’s right. And I think we’re still trying to … For some of us, we’re still trying to get our head around what does that mean? What does that look like? I mean, my role is going to fundamentally change. And so then what is my production engine? If I used to think about building my business and having people, and that was my leverage, and they’re all billing hours, and that’s how we generate revenue, what should I be building instead?

Jordan Furlong:

Yeah. Well, I think, again, if you’re running a business the first place, and you’ve got to figure out how am I going to make money, which is kind of important, then you start with what is my costs of doing business. And that used to be how much do I have to pay the associates, and how much do I have to pay the people who own the building or the premises in which I’m working? And we’re actually kind of seeing both of those fade away to an extent that I don’t think anybody 10 years ago would have thought was plausible.

Where you are based, where you locate yourself to deliver the services that your clients want is becoming increasingly flexible and largely irrelevant, but focusing just on the second, yeah, I’m not going to need people around me to carry this work out, but I am going to need to be able to buy a system or to rent a system or access to a system, which has all of the capacities that I need in order to, again, operate, monitor, manage the workflow that produces all this kind of work. And maybe you buy that from Clio or you rent that from Clio on a monthly basis or from Lexus or from Thomson Reuters or whoever else gets into the game. Maybe someday it’ll be OpenAI or Anthropic. Who knows? Your cost of doing business in a way probably is not only going to go down, but it’s also going to become more certain you will know what you have to spend each year so that you’ve got your baseline.

I got to make more than this. How much more than that? At that point, you can say to yourself, how much do I think I’m worth? How much am I worth in the context of what other people are charging? How do I rank in terms of where compared to other people in this area? How much of a premium can I command because I am really good at the stuff that people are inclined to pay for. So if myself and the lawyer down the street are both equally adept at using AI and delivering services and so forth, but I’m a pleasure and I’m a sunbeam of lake coming in through your window as a lawyer and I return, get back to you within 24 hours with at least an acknowledgement, then I’m probably going to be able to charge more for that because I’m a better experience giving you equal or better outcomes.

So I think that that’s a kind of thinking lawyers are going to have to shift into. And what you’ll notice is that it’s moving away from this idea of, I can charge a premium because I’m so brilliant, because I’ve got such expertise, because I know the area really, really well. We are a very short period of time, a few years away, I would say, from a point where the smartest lawyer in the world is an AI and it’s not even close. We’re not going to be in that … The idea of competing on expertise, unless you’re in a really, really, really narrow area, and it’s going to be very few of those,

Doesn’t really make sense. So what you compete on is who you are. I say this to law students quite frequently. Over the course of your career, I say, who you are and what you’re like to deal with are going to be more important than what you know and what you can do because those last two items are going to be increasingly commoditized, but you cannot find anybody out there who will be the same as you. You are unique, you are you, and nobody else can relate to clients like you can. No one else cares about the stuff that you care about the way you do. Lean into that. That’s your differentiator from now on. And I think that’s the kind of mindset as lawyers won’t be easy, but I think we have to kind of get ourselves to that point.

Stephanie Everett:

Yeah. No, I love that because I do think there’s some messaging right now that we’re just going to get replaced and it won’t matter. Maybe, but not yet, right? So I hope not. Hope not in my lifetime. I mean, who knows which prediction to believe, because I can’t even, honestly, I just can’t even wrap my head around it. So I think I’m just like, “Okay, I got to figure out, but what do I offer? What do I bring over the short term and the next couple of years, five years, 10 years? What does that look like? ” And I think you wrote too, humans, we have our intuition and our integrity, our ability to form those trusted relationships. That’s a unique right now that the machines don’t have.

Jordan Furlong:

Well, there’s all kinds of talk about judgment being what we have to sell and what makes a lawyer a lawyer, which I think is true, but I’m just having conversation about this earlier today, we even have to dig down into that a bit more. What’s the point of judgment? If someone comes to us and say, “I need you to apply your legal judgment, why? What do you need?” And generally speaking, if you come into a lawyer to say, “I need your insight, I need your advice, I need your counsel, I need your direction,” they’re in a situation of uncertainty of … There’s a degree of darkness or there’s a degree of confusion, and they are desperately seeking clarity. “I need to make a call on this, but I don’t feel qualified or confident enough to make the call myself. Would you help me to do that?

“That’s the purpose, that’s the point of professional judgment to be able to say to someone,” My call based on, again, who I am, what I know, what I’ve experienced and all that, I think this is the best course of action. It’s your call, you’re the client, but this is my advice to you. “And by the way, that’s why I’m increasingly convinced that the only point, the only condition of licensure for lawyers from now on should be your capacity to have a trustworthy capability to render judgment under uncertainty in legal matters. That’s it. That’s really fundamentally what we have to be coming at. And the tale on that particular donkey is that, and this is a subject I’m going to write about a bit more often going forward, so much of that, getting back to the person you are, so much of that comes down not just to, yes, your intellect still matters and your perceptiveness, all your intuition matters, but it matters that you have integrity.

It matters that you are a person of character because that’s where a lot of reliability comes from, right? A person will say,” Yeah, I want to hire this lawyer because yes, they get back to me quickly and they always got to smile on their face. Awesome. But you know what really matters? This is a person who has demonstrated that they are reliable. I can count on them. They’ll be there when I need them. They have, I’m not looking for saints, I’m not looking for presidential candidates here, although maybe that’s a different thing than YouTube anyway. I’m not looking for an ideal, but I’m looking for someone I can count on and your character, your integrity goes to that. So to the extent that regulators have any interest in good character, and I’m deeply dubious about the ways I’m going about that, that’s where it actually matters.

And I think that’s where we want to be focusing part of our professional formation as well.

Stephanie Everett:

It’s interesting because I think a lot of us would think when clients come to us in that state of uncertainty, a lot of times today, what they’re asking for is our advice based on our experience. I’ve been with a business this many times over the course of my career. I’ve seen how this played out. And so therefore with that data, with that information, I can give you now some advice about how to handle this situation, but we know that the AI can do that exercise on real data. The amount of data it can analyze and synthesize and tell us like now it can go and look at this judge is going to probably rule this way based … I’m just sitting here digesting what you’re saying, saying,” Wow, that was a big chunk of how lawyers think of the value they provide to their clients that gets replaced.

“So it changes the equation of how we have to show up.

Jordan Furlong:

Yeah, absolutely. And you’re right, we are, again, very close to a point where you are running a small business and you need some advice as to, pardon me, what do I do in this situation? Well, I can go to AI, and that’s not a matter of going to ChatGPT anymore. There are much more sophisticated methodologies than that. I could go to AI and say,” Based on everything that has ever been written and every piece of data available in the world, tell me what are the likeliest options, what you think would be the most sensible way forward, and tell me the basis upon which you’re making that call. “And you’re going to get a tremendously, depending on what you’re using, you’ll get a tremendously detailed answer. The better you prompt it, the better you instruct it, of course, the more reliable the data will come. And then I think what we’re going to come to is a really important hinge point in society generally, and that is, will somebody be willing to look at that outcome and say,” That’s good enough for me That 20 bucks a month I paid or 200 bucks a month I paid to access this, I’m willing to stake my business or my relationship or something else on that.

That’s good enough for me to manage. “And if in fact, as I think by the way, will be the case eventually, eventually whether again it’s Clio or Lexis or OpenAI or whomever, when they offer me this package, they also say,” Oh, do you also want to buy an additional $9 a month rider for insurance so that if the advice we give you turns out to not to be good, you can sue us for negligence because that’s common. “And then we say,” You know what? I’m fine with that. But with the AI and the insurance to go with it, I don’t need to talk to a human lawyer. “That is plausible. That might even be more than plausible. If we get to that point, then I think we are talking about, we are at the edges of an extinction event for the legal profession in a lot of different areas.

I think that it would probably take out most everything that’s not straight advocacy and especially criminal advocacy, which is something where I still don’t think anybody’s going to ask, am I going to go … The AI says I won’t go to jail. “Okay, I’m fine with that. ” But for the most part, yeah, that could be an extinction event for the legal profession. I think that would be bad in a number of different ways because I like lawyers and I like the legal profession. I think we perform or we can or should be performing an important role in society, query how well we’re doing that. But yeah, it is possible people may say, “Screw it. The AI plus whatever insurance capacity is fine. I don’t need to pay for judgment. I’ll pay for this cardboard box replacement.” Or people may be more inclined to say, “That’s really helpful.

I’m going to take this analysis, go to a lawyer, say, here’s what the AI said, but what do you think? What’s your call? What’s your assessment?” And sometimes that’s not even based on how … I haven’t checked a million different cases on what happened when small businesses like yours did this, but again, I have talked to people, I’ve worked with people, I’ve got some experience, I’ve had good training, and I can give you my call on that. And then again, you can take or leave that advice. Happens all the time. People are always ignoring what lawyers tell them to do, right? Right. So I think that’s going to be the hinge point. I’m reasonably confident that we will go down the second road, not the first, but can’t count out the opposite.

Stephanie Everett:

Yeah. I mean, it definitely makes you think how we need to be training our young lawyers and what skillset we need to have in the future, which could look very different. First year legal writing and analysis, I still need those skills. They show up differently because to your point, I’m now checking the machines and confirming that work versus doing the first draft and making sure I don’t write and passive voice.

Jordan Furlong:

I don’t like to say truly radical borderline insane things too often because people can look you funny after a while, but we have got to adjust junk our legal education and lawyer licensing system. It was barely fit for purpose as it was. It’s not going to work. You cannot charge someone $150,000 to spend seven years getting university education that gets you one fifth maximum the way towards lawyer competence and teaches you things that will … Again, I could get an AI to answer the questions a law student or a new lawyer would answer in seconds. That’s not what we’re needed for anymore. The purpose of a lawyer going forward, I think right now, February 2026, who knows what I’ll think in two years time. The purpose of a lawyer is to deliver reliable, trustworthy judgment and under conditions of uncertainty. And if that’s what your job’s going to be, then we have to start training people to do that as soon as possible.

To the extent that legal education still has any purpose, it is around, number one, laying down a base level of capacity and competence and legal knowledge and reasoning and analysis. I believe those intellectual skills still apply. I call this legal intuition to get to the point where you hear a fact situation or you hear a story told and all these little flags, ding, ding, ding, are going off saying, “That’s an issue, that’s an issue, that’s an issue.” We call it issue spotting. I like to call it intuition because you don’t even necessarily notice where it’s coming from. That has real value to the extent that any kind of an academic experience still has some value, it’s in that. But at the same time, I would be immersing people, aspiring lawyers in that process of meeting people, listening to people, understanding their situation. I spent a number of years as a journalist and boy, it is really useful to get into the habit of knowing the right questions to ask, knowing the follow-ups to ask and listening attentively for what’s in between the lines.

That is a real skill that other professions know how to do and lawyers should be learning how to do as well. But what it really absolutely comes down to, and this is where I think we really have, this is the corridor that matters.

Law is something that I think really can only be learned with supervision and mentoring and guidance. You need to have someone to help you understand how to do this, who watches you do something, gives you feedback in the time afterwards, lets you reflect on it, encourages you, forces you to reflect on it, come up with, and move yourself forward all the time. You need someone to take you under their wing and say, “I’m going to help you get to where I am.” Now, that is the platonic ideal of the legal profession. We haven’t come close to that as far as I’m concerned in the legal profession for decades. And without costing myself too much business in the future from the Amal 100, I will say for the most part, mid-size to large law firms don’t do that very well. Smaller firms do. Smaller firms have to because you need to get that person providing value as soon as possible.

If there’s one real, I think, value advantage that smaller firms, and by small, I mean like the number of lawyers, but

That’s going to need redefinition as well in the future. A five lawyer firm in the future could be generating the same kind of income that a hundred lawyer firm does today. But firms that have, if you will, a smaller overall footprint that aren’t as gargantuan and multi-jurisdictional and whatever else, they’re in a better position because they build or they can build personal relationships of meaning and value and guidance with younger people to bring them forward. We need that. You could make every other change that you could take my entire wishlist for how the legal sector could be redone and the legal profession could be redefined and give me everything except that. And the whole project, I think, will grind to a halt. We need experienced lawyers to help new lawyers get over this, especially now to get over this period, to get to the point of, okay, I can figure this out now to develop judgment, to watch what the senior lawyer does, to listen to what’s being said and afterwards to debrief when the senior lawyer says, “Tell me what you saw.

Tell me what you noticed. Tell me what you think was missing.” And next time you’re going to deliver this part of the conversation with the client and this time you’re going to do this and you’re going to do that and you’re bringing them along. We need that. We absolutely need that. And I think at this point, if we don’t have that, we are in a lot of trouble as a profession.

Stephanie Everett:

Yeah. And that’s a great segue and maybe where we can start to wrap up since … I mean, I could probably talk to you for many, many, many hours. We didn’t even get close to all the things I had on my list. But I was going to ask since a lot of our audience is the small firm lawyers, I call them my speedboats because I feel like they can change and turn on a dime. And if you were talking to them right now and they want to stick around, they want to have a successful business in five or 10 years, what would you tell them that they should be focused on right now?

Jordan Furlong:

Find ways to use, again, use AI in responsible ways. It’s going to become much easier to do this in order to get as much work done as you can. If you have junior lawyers or have lawyers of any capacity or even contract lawyers, get them into the business of being able to identify, to review, to assess, to evaluate what the AI comes out with and say, “This seems fine. I would question this. ” And even to work with the AI, because we do this all the time. If you’re using AI enough times, it produces something, you say, “Go back and check this, this, and this. ” Oh, okay, sure. But not only is that quality control for the AI output, it is also the development of evaluative assessment judgment skills, but try as much as you can wherever you can to transfer the act of generating legal product, legal work output, transfer it from the people, humans doing it to machines doing it and humans evaluating it at a certain point in all likelihood, no guarantee, but in all likelihood, the checking will become fairly perfunctory at some point down the road.

But start that process of moving that out. And at the same time, say to your clients, “I would like if you are billing by the hour, if you’re not doing that, if you’ve already moved into a position where you’re doing stuff on a fixed fee basis or even better a relationship basis where you say to a client, I will do this for you every month. I will do this for you every quarter and you will pay me a set amount during that time.” Okay, fine. But get to the point where you’re saying, “I want to be able to bill you an amount. I’m going to charge you $50,000, $23,000, whatever amount of dollars for this service.” And that service is going to include these 19 things or these seven things and so forth. Make a list of the stuff that you think is going to happen.

I’m not going to charge you for that separately. That’s part of our overall retainer agreement. Here’s a list of things that don’t fall into that, such as the other side decides to do this and this, in which case we got a different ballgame, we have to remeat and talk about that. Okay. We’re going to have to do it anyway, but as we’ll attach the fee to it, okay? But you are getting more and more along the lines of the idea that I am here as a service professional to help you get from point A to point B. And point A, which is the reason you came to me, kind of stinks and you don’t like it and it’s uncertain or you’re hurt or you’re in trouble or you’re fearful, whatever, and you need to get to point B, which is it’s better. I have clarity, I have certainty, I have calm, I have a conclusion, and my job is to get you from here to there, and I will charge you this much money to do that.

And I think that is probably the best place to start. Change your internal workings, to increase your productivity by using technology, change your external pricing, and the relationships that go with it to focus on not the amount of work you did and the amount of time it took you to do it, which clients have never cared about and have always mistrusted and kind of resented you for and more towards, what can I do for you? This is what I’m here to do. You’re a point A. Let’s get to point B together. I will accompany you on that journey.

Stephanie Everett:

Love it. Jordan, people should probably follow you on Substack. I know I read cool. Yeah. I mean, hopefully, if you’re listening to this right now, you understand, even if you’re not sure about what the future is going to look like, you need to be paying attention. I guess that would be my personal message to anyone listening because it’s changing fast. There’s a lot of things happening and it’s not something I think you need to just be aware as a first step. And I find Jordan’s writings incredibly helpful. I make sure to make it a point to read them, so do most of the people on our team. So I would say, please follow him on Substack and LinkedIn and anywhere else he’s going to put information because you really appreciate the thought that you’re providing to us and helping us try to keep up with it.

I know we didn’t even get to private equity. Maybe we’ll have you back on that, but there’s a lot happening there too, right? So all these forces are coming at us at the same time. So it’s a lot to digest.

Jordan Furlong:

Yeah, it is. And nobody knows for sure. Absolutely not. I mean, I don’t know for sure. We’re all making the best guesses we can. Talk about making decisions under conditions of uncertainty, that’s everyone right now. So make the best call you can, gather the best information you can, but I will say this, my parting thought and what I say to any law firm, a lawyer that I’m consulting with, I said, “Look, in conditions of chaos and uncertainty, you got to go back to first principles. You got to go back to what matters.” That is your values as a lawyer. It’s your professionalism as a lawyer and it’s your integrity as a professional. If you’ve got those, whatever you need to build, build it on that, you’re going to be fine.

Stephanie Everett:

Love that. Thank you.

Jordan Furlong:

Thank you, Stephanie.