Embracing the robot revolution

We are entering what some call the ‘fourth industrial revolution’ – a phase of change in business, society, government, and the economy powered by artificial intelligence and a range of other disruptive technologies. The resulting transformations could have greater impact than its revolutionary predecessors, which gave us first steam-based mechanisation, then electrification and mass production, and then electronics, information technology, and automation. This new era of what the World Economic Forum calls ‘cyber-physical systems’ – or ‘smart machines’ – is enabled by exponential improvement and convergence of multiple scientific and technological fields.

So, what is it? AI is a computer science discipline that seeks to create intelligent machines that can replicate critical human mental faculties. Key applications include speech recognition, language translation, visual perception, learning, reasoning, inference, strategising, planning, decision-making, and intuition.

The true transformative power of AI comes when it is coupled with other exponentially accelerating science and technology developments in fields such as neuroscience, large-scale databases, super-computing hardware, network communications, blockchain-distributed ledger systems, digital currencies, the Internet of Things, 3D and 4D printing, and cloud computing.

How the rise of AI and its sister technologies will impact law firms is very much a matter of choice. For some lawyers, AI, and the technologies it enables, represents an existential threat to a $650bn global industry. They are concerned about its potential to automate knowledge, expertise, and advice-based roles and the resultant risks of eliminating differentiation, commoditising premium revenue streams, losing out to technology providers, depersonalisation, and the loss of professional roles.

However, a small but growing number of firms can also see an array of new opportunities arising as these technologies help transform the $78tn global economy. By 2025 that could be over $120tn – with over half coming from AI-enabled industries that don’t exist today or are in their infancy, like synthetic energy, autonomous vehicles, self-replicating machines, and adaptive, self-repairing materials. In most cases, the legal ramifications are yet to be explored.

Consider the scale of change that could arise when every industry sector across the planet has its Amazon, Skype, Uber, or AirBnB moment. These ambitious upstarts are challenging long-established industry norms and unspoken rules of engagement. This is driving massive legal opportunities for the firms that are representing the innovators, their adversaries, and regulators.

The speed at which changes are taking place means those firms that can successfully build a range of service offerings to support both industries in transition and nascent new sectors are likely to see exponential improvements in key areas, such as the rate of revenue and profitability growth and the acquisition of new customers. In addition, those that can internally harness the technologies effectively could also benefit from exponential improvements in key operational areas such as professional productivity, quick response to client queries, proposal development, cost and speed of research, and the time taken to do multi-jurisdictional submissions.

Many firms are putting a tentative toe in the water with the internal exploration of technologies like AI and blockchain. However, our research and experience suggests experimentation is constrained by risk aversion, fear of the unknown, and a lack of understanding of the potential size of the prize. Experience and evidence from across the sector suggests these barriers to change can be dismantled quite rapidly when there is a market pull. There is no more powerful accelerant of change than current or potential clients demanding a firm demonstrate how it is using a technology, or prove its depth of understanding of an emerging field of science, before the lawyers are awarded a contract to provide advice on those topics.

There are four increasingly common routes to developing new practice offerings in these emerging sectors. First, a client asks a firm on its panel to help it explore the implications of a new field it is venturing into. Indeed, there are many firms that now have thriving internet law, biotech, and cloud-computing practices, having been led there by clients.

A second approach is where an individual sees the opportunity and pursues it with vigour. A good example is Dax Hansen, a partner specialising in IT, payments, and international transactions at Perkins Coie. He recognised the opportunities arising out of digital currencies such as Bitcoin and their underlying core technology – the blockchain. As a result, Hansen launched the first legal industry blockchain practice in May 2013. The firm now has a thriving blockchain advisory practice with over 40 lawyers focused on the legal impacts of blockchain technology, from digital currencies to capital markets and distributed applications of all types. They are supported by a webpage, resources page, weekly team training calls, a blog, and a mobile app.

A third approach is becoming increasingly popular with small to medium sized firms – where partners and relatively junior staff are seconded to spend time truly immersing themselves in a client’s business. This is typically done where the core technology is extremely complex and the legal ramifications are myriad. For example, there is growing interest in the notion of cryogenically freezing someone on death – or while still alive – with the hope that one day regenerative technology will emerge to restore the physical body, mind, and consciousness of the individual. Cryogenics facilities are launching around the world and it has the potential to become a trillion-dollar industry within a decade.

While reading the above alone, a good lawyer will probably have identified at least ten and possibly many more legal questions and issues that could arise. Servicing such a business requires a very deep understanding of the cryogenics process, the risks involved, the commitments being made to customers and their expectations, the costs, and the status of the science and technology that might one day lead to a regeneration solution.

The fourth and most repeatable approach is gradually emerging. This is where firms acknowledge the changes taking place in the world and make a commitment to immerse themselves in the opportunity and be a relative front runner in developing practice offerings for the emerging fields. Such firms make a conscious commitment to put professional staff at all levels through a deep immersion in the enablers of tomorrow’s world. For example, Latham and Watkins has undertaken a series of events in partnership with Singularity University to immerse its leaders and partners across the practice in a deep exploration of the technologies shaping the future and the ways in which they could transform current industries and enable new sectors.

Others, such as Allen & Overy and Hogan Lovells, have taken key partners groups on different forms of ‘deep dive’ immersions into specific technologies to get ‘under the hood’, see how they could impact client sectors, and identify the potential service and product offerings that could result. In each case, the goal is to help partners and business development professionals understand the emerging science and technology in sufficient depth to be able to start meaningful conversations with current and potential customers.

Other key steps in the immersion process include joining and actively participating in the formation of industry associations, hosting events for meetup groups, attending conferences, and devoting time to reading around the industry and writing thought leadership articles on the legal ramifications. For example, it is almost certain that legal considerations will not be top of mind for the 17-year-old developer of an AI facial recognition app that shows the dating history and associated comments and ratings for everyone you meet in a club.

Indeed, as we scan across AI and related technologies and the trillion-dollar sectors they are helping to spawn, the range of legal issues and resulting opportunities are almost overwhelming. For example:

• The emergence of autonomous self-driving vehicles opens up the potential for self-owning assets including buildings and public infrastructure. What issues does this raise around legal liability in the event of failure to perform or when accidents occur?

• If an AI-based system makes a poor decision that leads to a car crash, the death of a patient, or an aircraft being delayed, who will be held liable – the owners of the application, the developer of the underlying AI tool, the provider of the data set from which the system was trained, those guiding the training, or the provider of the technology platform on which the system runs?

• If AI is increasingly used for scientific discovery and the system infringes a patent, who will be held liable?

• Where AI is being used to run hugely complex and interconnected transaction platforms with the trading taking place in digital currencies and via blockchians – where the source of the funds and information about the counterparties is unknown – how can the risk of fraud and money laundering be addressed?

• What procedures will be required for rollback, recovery, contract review, and dispute arbitration for fully automated, AI, and blockchain-based financial transaction systems?

• How should we account for the jurisdictional and taxation implications of firms that are using AI to move their financial assets around the world on a continuous basis in real time to attract the best second-by-second interest rates?

• How should we write the contracts for goods and services when AI tools are being used to define and combine elements of the offering and set the pricing in real time based on the user’s profile and requirements?

• With ‘precog’ systems emerging that can predict an individual’s propensity for crime, what governance frameworks might be required for such AI-enabled ‘pre-crime’ units?

We have focused quite deliberately on the potential of AI and emerging technologies to create exponential business growth opportunities in the marketplace. There are also immense opportunities to drive exponential improvements within a firm, in the products and services it provides, and in the way it delivers its offerings. There are seven distinct areas of opportunity:

• Automation of legal tasks and processes;

• Decision support and outcome prediction;

• Creation of new product and service offerings;

• Development of tools and applications for in-house legal teams;

• Process design and matter management;

• Practice management; andFully automated online services.

The next one to five years will see an explosion of legal opportunities arising from the transformation of existing sectors and the emergence of new ones. AI and related technologies will enable and accelerate the birth of new markets, commercial concepts, business models, and delivery mechanisms – ideas we would struggle to get our heads around today.

Growth-motivated law firms of all sizes are giving themselves permission to invest the time and energy to embrace new world thinking that could deliver exponential growth. The big question for everyone to ask is: what will it take for our firm to believe it can be a winner in the exponential future of legal services?

Rohit Talwart, pictured, is the chief executive officer of Fast Future Publishing and Steve Wells is the chief executive officer of Informing Choices and operations director of Fast Future Publishing

@fastfuture fastfuturepublishing.com