What AI Is Already Doing to the Legal Industry

Summary

Odd Lots: What AI Is Already Doing to the Legal Industry

Podcast Information:

• Title: Odd Lots
• Host/Author: Bloomberg
• Description: Bloomberg's Joe Weisenthal and Tracy Alloway explore the most interesting topics in finance, markets, and economics. Join the conversation every Monday and Thursday.
• Episode: What AI Is Already Doing to the Legal Industry
• Release Date: July 17, 2025

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Introduction to Legal AI Transformation

In this enlightening episode of Odd Lots, hosts Joe Weisenthal and Tracy Alloway delve into the transformative impact of Artificial Intelligence (AI) on the legal industry. Featuring special guest Joel Wertheimer, a seasoned civil rights attorney, the discussion navigates the evolving landscape of legal practice and the integration of AI tools that are reshaping how lawyers operate.

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AI Tools Revolutionizing Legal Research

Joel Wertheimer provides an in-depth look at how AI is streamlining legal research and document management. He highlights the emergence of sophisticated AI programs like BriefPoint AI, which automate the tedious aspects of legal work, such as converting PDFs to editable documents and managing repetitive formatting tasks.

"[AI tools] could make junior lawyers' lives easier by automating document formatting and research summaries." ([18:49])

Joel emphasizes the significance of ChatGPT's O3 Pro in legal research, noting its ability to accurately answer complex legal questions and identify pertinent case law, thereby enhancing the efficiency and quality of legal work.

"When you run a case through O3, it can point you to the five cases you need to dig into, vastly improving research speed and accuracy." ([20:23])

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Impact on Law Firm Structures and Billing Practices

A major focus of the conversation centers on the traditional billable hour model prevalent in big law firms and how AI threatens to disrupt this longstanding practice. Joel explains the economic structure of large firms, where junior associates generate significant revenue through billable hours, which in turn supports partner profits.

"Associates are expected to bill about 2,000 hours a year, generating $1.4 million in revenue for the firm while earning $500,000 themselves. Partners make $900,000 for every extra associate." ([08:36])

With AI automating tasks previously handled by junior lawyers, there is potential for firms to reassess their billing structures. Joel speculates that firms might shift towards alternative fee arrangements like flat fees, thereby reducing reliance on the billable hour model.

"Alternate fee arrangements are going to become more popular, incentivizing firms to complete cases with fewer billable hours." ([27:50])

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Effects on Training and the Development of Junior Lawyers

Tracy raises concerns about how AI's role in handling foundational legal tasks might impact the training and skill development of junior associates. Joel agrees that while AI can enhance efficiency, it may also limit the hands-on experience that junior lawyers traditionally gain through meticulous document review and discovery processes.

"AI might make junior lawyers' lives easier, but it also raises questions about how they develop essential skills without the same level of grunt work." ([17:42])

Joel elaborates that while AI can handle repetitive tasks, the interpersonal skills and strategic thinking required in higher-level legal practice remain irreplaceable, suggesting a future where the value lies more in client management and courtroom prowess.

"The skills valued in lawyers will shift towards interpersonal client management and oral argument, rather than just legal research and brief writing." ([34:29])

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Client Perspectives and Privacy Concerns

The integration of AI in legal practice also raises important questions about client privacy and data security. Joel discusses how clients, particularly large corporations, may have reservations about AI tools handling sensitive documents and data.

"Clients are concerned about their medical privacy and the security of their sensitive documents when using AI tools." ([32:22])

He notes that while AI can significantly reduce legal costs by automating research and document management, trust and confidentiality remain paramount, necessitating robust security measures in AI implementations.

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Future Implications for Legal Services Market

The conversation explores how AI could democratize access to legal services, making them more affordable and widely available. Joel predicts an increase in pro se litigants—individuals who represent themselves due to the high costs of legal services—enabled by AI tools that simplify legal research and document preparation.

"AI will lower the barrier to filing lawsuits, allowing more individuals to seek legal recourse without the need for traditional representation." ([36:05])

Moreover, the ability of AI to handle large volumes of cases efficiently could lead to an expansion of the legal market, with law firms capable of managing a greater number of clients without proportional increases in staff.

"Law firms might escalate their case volumes dramatically, potentially turning single lawyers into mega firms handling thousands of cases annually." ([46:13])

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Advertising and Market Dynamics in a AI-Augmented Legal Landscape

Joel touches upon the evolving nature of legal advertising in the AI era, highlighting how firms might need to adapt their SEO strategies to remain visible in an AI-driven search environment.

"With AI becoming the primary interface for searches, law firms must rethink their SEO to ensure clients find them through AI platforms rather than traditional search engines." ([42:31])

He also discusses the rising costs of online advertising for legal services, driven by high competition and the effectiveness of AI in identifying and targeting potential clients.

"Legal search terms are among the most expensive online ads, reflecting the intense competition and the value associated with legal services." ([40:29])

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Predictions and Future Outlook for Lawyers

When asked about the future number of lawyers, Joel remains cautiously optimistic, suggesting a slight decrease but not an eradication of the profession due to AI's impact.

"I would bet on fewer lawyers, but not drastically fewer. Their roles will evolve rather than disappear entirely." ([45:27])

He foresees a legal industry where the emphasis shifts towards client relationships and strategic case management, with AI handling more of the technical and repetitive tasks.

"Interpersonal skills and client management will become more valuable as AI takes over the more mechanical aspects of legal work." ([34:29])

Joel also envisions AI enabling lawyers to better assess the expected value of cases, thereby facilitating quicker settlements and more informed decision-making processes.

"AI can make the valuation of cases more scientific, facilitating faster and more accurate settlements." ([47:46])

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Conclusion: The Dual-Edged Sword of Legal AI

As the episode wraps up, Joe and Tracy reflect on the dual nature of AI's impact on the legal industry. While AI presents opportunities for increased efficiency, cost reduction, and broader access to legal services, it also poses challenges related to training, job structures, and ethical considerations.

"AI clearly seems like ground zero for significant economic shifts, creating both opportunities and disruptions within the legal profession." ([54:16])

Joel concurs, emphasizing the need for the legal industry to adapt proactively to harness AI's benefits while mitigating its disruptive effects.

"The legal industry must navigate these changes thoughtfully to ensure that AI augments rather than undermines the profession." ([54:21])

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Notable Quotes:

• "ChatGPT's O3 Pro is doing legal research now. That is quite excellent." – Joel Wertheimer ([19:56])
• "AI is transforming the way we approach legal research, making it faster and more accurate." – Joel Wertheimer ([20:23])
• "The billable hour model is being challenged by AI, pushing firms towards alternative fee structures." – Joel Wertheimer ([27:50])

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Key Takeaways:

• AI Integration: AI is revolutionizing legal research and document management, making processes more efficient.
• Economic Shifts: The traditional billable hour model in law firms is under threat, potentially leading to alternative fee arrangements.
• Skill Evolution: The legal profession is shifting towards valuing interpersonal skills and strategic client management over repetitive tasks.
• Access and Affordability: AI has the potential to democratize legal services, making them more accessible and affordable to a broader population.
• Privacy and Security: As AI tools handle sensitive data, robust privacy and security measures are essential.
• Future Outlook: The legal industry will continue to evolve with AI, balancing efficiency gains with the preservation of critical human skills and ethical standards.

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This episode of Odd Lots provides a comprehensive exploration of AI's burgeoning role in the legal sector, offering valuable insights for both legal professionals and those interested in the intersection of technology and law.

Transcript

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[Joe Wiesenthal]

Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Wiesenthal.

[Tracy Alloway]

And I'm Tracy Alloway.

[Joe Wiesenthal]

Tracy, I was at my cousin's wedding this weekend and I have a lot of lawyers in my family and every.

[Tracy Alloway]

Time I know that yeah, yeah in.

[Joe Wiesenthal]

My extended family, a lot of lawyers in there and I'm always asking them like what they do and stuff. Within like five seconds of any conversation I'm like tell me about trials and like techniques like swayed the jury, et cetera, the stuff I see on tv. I am aware though that that is actually not that big of a part of many lawyers like day to day.

[Tracy Alloway]

Well I have a lawyer in my family too, an ex lawyer. My husband who did big law, big corporate law, absolutely hated it and got out of it luckily and so I Have a feeling in this particular episode, I'm just going to ask a lot of work life balance questions based on my own experience and my husband's experience. But it is a huge industry, and it's one of those industries that I think all financial journalism actually doesn't do a good job of covering along with accounting. So we should talk about it.

[Joe Wiesenthal]

We definitely should talk about it. We should talk about it way more than we do. Within the AI conversation specifically, you hear a lot about the prospects of this being either, like, a force multiplier or a labor reducer, because my understanding is that a lot of, like, especially, like, junior lawyers, they're. They're up all night. What are they looking for? Misplaced commas, because those could be a big deal in contracts. Right. And so in theory, and again, Tracy, I'm sure you know way more about this than I do, but in theory, that sort of seems like something AI might be good at. Like, oh, no, if the comma is not here and it's there, then that totally changes the definition of this clause or whatever.

[Tracy Alloway]

There's a famous case involving a comma that did exactly that. So many points to make here. First of all, I am vastly in favor of anything that makes corporate lawyers lives slightly more efficient and happier. So AI could be useful here. But I also wonder, you know, the lawyer profession, they have things like templates and standard forms and stuff like that. So I also wonder how much of an improvement AI will be here. So I'm excited to talk about it.

[Joe Wiesenthal]

You know that, Tracy, when they get the AI tools really in place, they're just going to give them more work.

[Tracy Alloway]

Because they're like, well, AI that's what I suspect.

[Joe Wiesenthal]

Yeah, yeah. No one's actually doing that, by the way.

[Tracy Alloway]

I have a lot of stories of, like, partners calling from their fishing boats on the weekend, demanding that junior lawyers go into the office and, like, fix a comma and things like that.

[Joe Wiesenthal]

All right, well, I'm really excited to say we do have the perfect guest. Someone that I've known for a very long time. Someone who just knows about a lot of stuff. Someone who is a lawyer. We are gonna be speaking with Joel Wertheimer. He's currently at Wertheimer Fleeter llp, a civil rights firm here in New York City. He is previously at the White House. He's done big law in the past. He knows a lot about a lot of stuff. He knows a lot about poker. He knows a lot about AI Someone I think we could just talk to about anything. He Knows a lot about elections. He just sort of knows everything. Joel, thank you so much for coming on. Odd lot. Thrilled to have you here.

[Joel Wertheimer]

Thank you for having me.

[Joe Wiesenthal]

Why don't you real quickly tell us like who you are? What do you do? Why are we talking to you?

[Joel Wertheimer]

I run my own civil rights law firm. I just partnered up and we sue the government mostly for violations of civil rights. Sometimes that's false arrest or wrongful convictions. Sometimes that's wrongful removals of K in, let's say child services for a shaken baby. That was a false accusation, that sort of thing. And we try to get people compensation for the wrongs of their constitutional rights. That's about 80% of what we do.

[Tracy Alloway]

Personal question. Are civil criminal lawyers, are they happier than corporate lawyers?

[Joel Wertheimer]

I would say on average, sure. But the distribution is probably pretty wide for each. Look, I do think the nice thing on the plaintiff side, and it's like I'm my own boss. I get to determine how much I work. And each extra case, it's just more money or less money if I decide not to take it. And so I can sort of set my own work life balance when I do that. And it's constantly a decision of sort of what's the expected value of a case and is it worth it to me in terms of the hours I have to put in.

[Joe Wiesenthal]

So let's talk about when you were at Big Law and I joked that people, they're up at 1am and they're looking at commas. I know that's a little bit of an exaggeration, but I.

[Tracy Alloway]

No, it's not. It really isn't.

[Joe Wiesenthal]

Yeah, I guess it's not. And I know that lawyers are really obsessed with billable hours. And I think they even like measure things in 10 minute increments. Like so six minutes. Six minute increments. If you're a junior associate or you enter a law firm, whatever. What is the modal use of your time? What are you mostly doing when you're clocking those six minute increments?

[Joel Wertheimer]

Right. So it's gonna. I can only really speak to litigation because corporate, you're, I think, just reviewing contracts and deal points constantly. For litigator, a lot of your time is in discovery. And that's true. Small law, Big law. But you are reviewing documents, synthesizing what they say. Maybe you're trying to do a privilege check and say, okay, this document we can't turn over. That's changed some, actually with machine learning, the predictive coding has shrunk the amount of Time that junior associates are spent doing that legal research, fights with opposing counsel. You need to give us these documents. You're saying they're privileged, they're not privileged, that sort of thing. And then there's the smaller section on taking depositions, you know, briefing things to court. So that's very broad overview of those six minute increments. And yes, editing and reviewing and looking for hanging commas, you know, hanging headers. That was always the bane of my existence, was forgetting that there was a hanging header and getting yell that for it.

[Joe Wiesenthal]

That sounds bad. The economics of a big law firm, it feels like this very big pyramid structure which I think is replicated in many industries around the world. Probably in finance to some extent and then I think even academia to some extent. But talk to us a little bit about how that value accrues to the entire firm and the partners and the distribution of the fees that the clients are paying.

[Joel Wertheimer]

Right. So you have what they call leverage in a law firm. So you have equity partners. Some firms have equity partners and income partners who don't actually own a share of the firm, but the partners are trying to get leverage on the associates. So one partner to say four associate ratio. All of the big law firms basically pay the exact same amount to their associates. This is called the Cravath scale. You can look it up and it'll say a third year associate makes $250,000 and gets this bonus each year. Let's just say for the average associate bills $700 an hour and is expected to bill about 2,000 hours a year. So they're generating 1.4 million for the firm in revenue in terms of build out. And they're getting paid, I'd say with taxes and everything, 500,000. So the partners are making $900,000 for every extra associate. So if you have a 4 to 1 leverage, 900,000 profits per partner, 3.6 million. And that's how they're trying to think of it. And the big partners, the rainmakers, are the ones who can generate enough work to support those associates.

[Joe Wiesenthal]

Got it.

[Joel Wertheimer]

And if you can't support those associates, your leverage goes down, your profits go down. You might have to lay people off, that sort of thing.

[Tracy Alloway]

It's nice to be a partner at big law. But on that note, so my understanding, at least in corporate law, is that it is harder to make partner nowadays than it used to. Used to be. And this is part of the reason why it's a miserable experience. Because it used to be in the past. You know, you work really, really hard. Basically give up your life for like two decades or whatever and then you get rewarded with a huge salary and you don't have to do as much of the grunt work. Your job is basically sourcing deals and making the intros and stuff like that. Do you get that impression as well on your side?

[Joel Wertheimer]

I definitely see from the outside that it seems harder to make partner. I think that's led to people, more people leaving earlier to do their own firms. I think it's easier than ever to start your own firm.

[Tracy Alloway]

Why is that?

[Joel Wertheimer]

I mean for one, I mean for me, for example, I didn't need an office when I started. I started in January of 2021. I had a desk at a, you know, at another law firm that collected mail. I think the number of services are just easier to access. Even things like now, if you really wanted to cut, you could start with a cheaper legal research service than Westlaw, things like that. And you've seen it in the business creation numbers. I think you see a lot of professional services splitting off from firms. But I definitely think it's harder to make partner. They've added this income partner level. So you make partner but you're not an equity member of the firm.

[Tracy Alloway]

Consolation prize.

[Joel Wertheimer]

That's right. And you get to shop the title, I think is the other reason. So let's say you want to go in house where now you're a partner at this firm. And you can say you're a partner at the firm even if you haven't bought in. But I think that structure has been around longer. Honestly, it feels like the same thing. It's in academia. It's harder to get tenure now. It's just the ladder's getting pulled up, I guess in these sort of industries.

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[Joe Wiesenthal]

Would anyone go into a big law firm if they knew in advance that they wouldn't make partner? Like the angel of the future comes to them in a dream and says, you know what? You're not gonna make partner. Would that still be worthwhile? Or is the prospect, even if it's declining, of making partner, is that crucial towards that decision? If you knew in advance you weren't gonna make it, would anyone make that decision?

[Joel Wertheimer]

So they do have staff attorneys at big law firms that are people who are not on partner track.

[Joe Wiesenthal]

Okay. And those are fine careers and they're.

[Joel Wertheimer]

Fine, I think people. But they also have less expectation of how much they're going to work. You typically wouldn't do it. And the reason they have this upper out sort of system at the big law firms is because the prospect of being partner drives you to 2,000, 2,500 hours. How many it is, you're showing how.

[Tracy Alloway]

Hard it's the light at the end of the tunnel, right?

[Joel Wertheimer]

That's right. So I think look the training is really good. The cases are really interesting. I actually quite enjoyed some of it. But that pressure to bill and work is. You probably wouldn't want that.

[Joe Wiesenthal]

When you say training, what's the deal? In law school, you don't even learn about any of the things you actually.

[Joel Wertheimer]

Do as a lawyer, you certainly learn how to think about the law, but you're not learning and you have a legal.

[Joe Wiesenthal]

Because I think this is actually important for the AI component of. Okay, how do you actually learn to be a lawyer if you don't really do it in law school? And then AI is going to take over more and more of these functions. Where do you learn? Right. So what is the learning?

[Joel Wertheimer]

So here's an example. You don't learn how to have a dispute about discovery. In law school, I sent out discovery demands. You owe me documents. Right. Under in the American system of law, you end up in a lawsuit and each side is obligated to exchange documents with each other. And you send out demands and you ask for a certain category of documents and they come back and say, we're not going to give them to you. That request was overly burdensome, or they're not relevant, or they say they lost them, or they say they lost them, and you have to have a fight about getting the documents. What keywords did you search, who did you collect documents from? All of those sorts of things. And how to have that dispute, how to make the request so you don't get the denial, those sorts of things. And what the writing looks like and feels like you just don't get in law school. And even writing a brief and what's a persuasive brief, the edits, those sorts of things. You learn how to do legal writing, but it's just you can't do it until you're doing it.

[Joe Wiesenthal]

Got it.

[Tracy Alloway]

Okay. So on that note, I mean, AI seems possibly most at home replicating the work done by, say, a mildly competent, maybe not too tired junior associate. And historically, you do that work for many years and you build foundational skills of being a lawyer, like attention to detail and issue spotting and I guess, risk triage and that sort of thing. If those tasks, those formational tasks, are now outsourced to AI, what do you see as the impact on junior lawyers?

[Joel Wertheimer]

That's a great question. I think it's going to be hard for junior lawyers at big law firms to get that training. On the other hand, it may just be that they are doing more work and so on the same things, but more efficiently. Maybe they're now going to have more fights about documents and less time spending reviewing the documents. Maybe they can increase the volume of things they demand, that sort of thing. I certainly think that the leverage model and the build hour model is going to run into some difficulty. It'll also make their lives easier. Just in terms of. As an example, you get discovery requests. I talk about discovery a lot because it's truly a lot of the work of being a lawyer. But the other side will send you a PDF with a bunch of demands, and then you've got to respond to the demands. And even just the moment where you have to convert the PDF into a Word document and start editing the Word document is like the true bane of my existence. And I've actually started using this AI program.

[Joe Wiesenthal]

Which one?

[Joel Wertheimer]

It's called briefpoint AI and it's also very templated. Right. So you're constantly trying to find templates. Hey, other associate in this law firm, can you send me a previous document? Now they have 80 different objections that you're used to making and they convert them and it's a lot more point and click. And of course you have to know what you're doing when you're. That these objections are valid. But just the document formatting and getting it through to look good and not have to fight with Microsoft Word for three hours is really valuable.

[Tracy Alloway]

I realize I should have asked this earlier, but when we say AI, what does that actually entail in the legal field? Because as you point out, I mean, templates, standard forms, those sort of things have been around forever. And a lot of law firms already use template software to quickly duplicate ORC or make document packages or whatever. So when we talk about AI in law, what exactly would that be?

[Joel Wertheimer]

I think it can be a lot of things. One, it can be making that template process a lot faster. And that will free up labor time for sure. ChatGPT's O3 Pro is doing legal research now. That is quite excellent.

[Joe Wiesenthal]

This is really important. People who think that O3 is dumb or is a hallucination machine or that ChatGPT is, have not used O3.

[Joel Wertheimer]

That's my view. And there's this professor at Georgetown, I think his name is Danny Welsh Townsend, who's just sort of every time a new model has been coming out, has been running sort of exam questions that he gives to his students, I think it's in his federal courts class about how they do on each of these questions. And when 03 came out, not even 03 Pro, when O3 came out, it answered them all. Some of them excellently and even got an issue spotter question. So it wasn't on the face of the question. It was an appellate jurisdiction question. If you really were thinking hard about it as a student, you would have noticed this issue that he wasn't asking about explicitly. But there might not have been jurisdiction to even bring the appeal that he prompted you about. And 03 caught that. And when I've used it, you hear a lot of these cases, lawyers getting sanctioned because they're submitting things with hallucinated cases.

[Tracy Alloway]

There's some funny examples of that.

[Joel Wertheimer]

They're amazing. And the thing I think to myself is you would never submit as a partner at a law firm, you'd never submit whatever the junior associate just turned over to you. Sometimes they didn't understand the case exactly right. And so that's the job is checking the cases. Shepardizing is, I think, the Lexis term for it, and making sure the cases stand for what they say, that there's still valid precedent. That's the job of being a lawyer. And now I can rely on O3 to start some of the research for me, even just to point me to the cases. And it's citing to the cases. And this is without access to Bloomberg Law or Thomson Reuters or anything like that. I assume it's coming. And once it's going to be integrated with those databases of cases, right now it's just trawling the Internet. I think it's going to do a fantastic job. And you spend so much time as a lawyer, as a litigator, thinking of the Boolean search terms for Lexis, the and. Or these sorts of things, and you don't know the exact term that's going to come up in the case, what all of the precedent used this term. And not having to think about that, I can run it in the background as I'm doing another task and for 20 minutes and something comes back from 03, it's got the five cases that I need to dig in and find the right language to then go on Lexis and then to chase it down.

[Joe Wiesenthal]

I've been using O3 more for just my own intellectual questions from time to time.

[Tracy Alloway]

Your own lawsuits?

[Joe Wiesenthal]

No, I haven't done any. I haven't started any lawsuits yet. But this is really the way that I've been using it, which is that it's a fantastic tool for just like discovering the existing research that's out there. I was looking at something I was curious about, like trade barriers within China between provinces. You know, something like that. There is a lot of research that's been done on the question of like, okay, if each of these provinces has some motivation and to promote their champions, is there any tension? This is something I would have it found all of this. It had the links to the academic research that's been about it. It had summaries of them. The summaries may have been wrong, but I'm not going to copy and paste summaries and present it as my work. I could click on it. Most of the time they are pretty correct. So what you say in terms of just even being able to find the relevant case law, et cetera, seems extremely powerful and time saving.

[Joel Wertheimer]

It's truly been life changing for me and I like doing legal research, I like getting into the cases. But just, you know, if there's a new issue and you just don't know where to start, you know, that's that was always, I think, for a junior associate, where do I start? And I think it will make their life easier in that regard, even if it might also make their lives, you know, hard.

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[Tracy Alloway]

Okay, time saving making associates lives easier. That sounds great from a personal perspective, but what does that actually mean for billable hours? Because of course, the whole business model seems to rely on eking out as much work, as many billable hours as possible. Right? And that includes grunt work, which theoretically could be done by AI now. And I'm not sure big law or any law is going to be necessarily incentivized to use AI if it means a reduction in billable hours. I suppose they could make it up in volume. Maybe that's the idea. They can take on more cases, but is that the expectation?

[Joel Wertheimer]

They might be able to make it up in volume? I do think things like they call them alternate fee arrangements are going to become more popular. We get a flat fee of, let's say $5 million to do this deal for you or something like that.

[Joe Wiesenthal]

Then you're incentivized to do it at the fewest hours possible.

[Joel Wertheimer]

That's right. So that's one possibility, that the model just changes. The billable hour stops being the model. The other thing is the way it works right now is it's been a while for me. So the big partners, let's say they're billing out at 2,000 DOL an hour or $1,500 an hour and the associates are $700 an hour. I think in a lot of ways what the client is paying for is really like $5,000 an hour for the partner and 400 or 300 for the associate. But it just gets billed out differently. And I think one thing is that partners might just accrue a lot more of the value with fewer associates. They still have the billed hours. They're just a lot more efficient. And in particular I think for general counsels who are hiring at the big law firms, they're hiring for safety. Nobody ever got fired for hiring Cravath. It's sort of like a way to think about this or a big law firm if something goes wrong, you want to have hired the best lawyer you could and say to your board or your CEO, look, I hired a great law firm and they just, they just missed it. But look, everybody agrees this is a great law firm. Which is all to just say that. I think one possibility here is the build hour remains but all the value accrues to the top, top lawyers.

[Joe Wiesenthal]

That seems like it'll have implications. We should talk about that further. Something I have done is I'll take episodes, transcripts of odd lots and afterwards I'll do a little self criticism session where I'll say where could we have pressed? Where were the weaknesses in the guest's answer? Where should we have pressed further and harder? What were some of the logical flaws? What would you have done differently? Et cetera. And sometimes I found that to be useful. Have you been able to use AI for essentially building better arguments or finding weaknesses in an argument or anything like that yet?

[Joel Wertheimer]

I haven't done that yet. I'm sure I will. I have used it for taking audio and making it into transcripts. I mean that's just like a foundational thing for me. A prison will produce an audio of a hearing or something like that and I need the transcript and I need to like just read it instead of listening to it for 40 minutes. But self criticism.

[Joe Wiesenthal]

Yeah, but it also, it does sound like you mentioned the issue spotter question. Like actually being able to identify real.

[Tracy Alloway]

Legal questions, not just identify precedent.

[Joe Wiesenthal]

Yeah, not just identify precedent, but actually logical sequences or where like it sounds like that's what you're getting at.

[Joel Wertheimer]

I'm sure it is coming and I think as I as the models get better and I have to produce a brief and maybe I can start running it through. Of course lawyers all have huge confidentiality concerns with everything they do. So I'm very careful about what I'm putting into GPT.

[Joe Wiesenthal]

You gotta run your own deepseek instance.

[Joel Wertheimer]

I think that that's right. And I think the big law firms are having sort of servers on site with their own models. But those models aren't as good as 03 yet. And so I think as you can start to have great models in house on your own servers, that's going to really be the thing that launches it. I can't do that because it's just me and I'm not going to host a server farm. But I do know the new Apple chips on these very nice. They can run things like Llama very well. And so it's coming. But I think for the top models, I'm sort of reluctant to put, put.

[Joe Wiesenthal]

Everything up there that makes sense.

[Tracy Alloway]

This is exactly what I was going to ask next, which is how do clients feel about AI in the legal industry? Because I imagine, you know, nobody ever got fired for hiring Kravath, as you mentioned, or some other magic circle law firm. But on the other hand, if Kravath is now using AI, I imagine on the client side, maybe there's some concern over having their material contracts or employee data or financing documents or whatever getting uploaded to off site servers. And then there's also the question of what if AI just makes a mistake? Although as you pointed out, no partner would ever submit something done by a junior associate without actually reviewing it first. So maybe that's not as much of an issue. But are there any qualms, I guess, coming from the client side that you see?

[Joel Wertheimer]

So I can't speak to the big law as much anymore. And it's very different, I think on my side, and I think my clients are, their qualms are much sort of bigger in terms of privacy and much more focused on the government and are wanting to get just the best representation they can. But for example, I'm getting medical records from my clients a lot. That's a lot of the job of a plaintiff side lawyer is documenting injuries, things like that. And they're certainly concerned about their medical privacy. And so I can't use AI yet to take the medical records and condense them into quick summaries. But those programs I'm sure are coming where there's privacy and security and all of the things, they probably exist already. I'm just not using them yet to make that part feasible. I am sure that if you are Goldman Sachs and you hire a big law firm and they've been doing your deals or your IPOs, such as they exist right now, and you don't want the law firm training on your documents to go use them in other deals, I'm sure this is an issue. On the other hand, it might reduce your legal costs by half and you can fight about that. And so what they're willing to do, I don't know.

[Joe Wiesenthal]

Let's extend forth some of these economic questions because allowing the senior partners to accrue more value by not needing to allocate as many hours to the junior lawyers, that makes total sense for this specific generation, right? Because okay, some people are lucky enough to have made partner before AI, and then other people are going to be in this situation, which their value maybe could be done more cheaply or for a few hours, but 10 years from now, whatever, a lot of those partners are going to be retired, etc. What is the downstream consequence, in your view of some of these shifts that are happening right now? Because eventually all the partners, you know, eventually everyone's gonna die and there's gonna be a new, like, where does this go? Like, what's the next. What are the consequences?

[Joel Wertheimer]

So I think that the skills that will be valued in lawyers are just going to change a lot. The interpersonal skills of client management, walking your client through the risks that they have. They're nervous, they're getting sued. These are the company litigations, the lawyers who can make them feel safe and let them understand what's happening to them and what their odds are, those sorts of things. The lawyers who are great at taking depositions and the lawyers who are great at oral argument, those skills are going to go up and up, I think, in skill, in value and the skill of legal research or just being great at writing a brief, I do think that that's going to get maybe not the 99th percentile brief writing. The people who are going to the Supreme Court and who are just truly excellent, maybe that will take time, but the sort of grunt work, you know, solid junior associate, mid level associate, senior associate who are writing the briefs, that I question whether that skill will have the same value. But there's a lot of interpersonal skill that matters a lot for being a lawyer, and that's gonna go up in value.

[Joe Wiesenthal]

Now the question with any new technology is, does it? Cause one argument is clear, okay, there's an X amount of demand for legal services and there's an X amount of people who supply them, and maybe you save some. Could the market for legal services grow such that if capacity to do legal research and some of this other stuff gets cheaper, that there are more areas, it's like, oh, you know what, maybe this is worth filing a lawsuit.

[Tracy Alloway]

Lawsuits everywhere. This was actually gonna be my question as well. But particularly for poor plaintiffs who normally can't afford a lawyer, what do they call them?

[Joel Wertheimer]

Indigent. And they sometimes will file pro se on their own behalf.

[Joe Wiesenthal]

Or maybe more lawyers like you take on cases, take other cases that five years ago the economics wouldn't have made sense. But today, the economics made sense. Like, could it just be Jevons paradox?

[Joel Wertheimer]

But for law, I think that's absolutely gonna happen. I can just sort of walk through the economics of one of my cases. Somebody comes in and they say they had a false arrest case against the NYPD and they spent, let's say, five hours in custody. We sort of know what the expected value of that case is you're doing. What chance do you have to win? And what are the damages you are gonna get when you win? And I can sort of. And then I. A contingency fee, typically a third in New York. And you can sort of do that math of the expected value of the case and then think about how many hours it's gonna take to win that case or get to a settlement. And if I'm using AI to make myself more productive in my research, the number of hours that I'm expecting to put into that case go, suddenly my hurdle rate for what it takes to take on that case has gone down. And I can take on more cases for the same number of hours. And so that I definitely think is coming. It's also the case that. Right. And because of that, because lawyers have to think in that term of how much is it gonna cost me to do this case in terms of labor. There are a lot of cases brought pro se in the court system right now. I think it's like 20, 25% of cases are from pro se litigants.

[Joe Wiesenthal]

These are the people who represent themselves.

[Joel Wertheimer]

Who represent themselves because they can't afford a lawyer. Or, you know, my case is our contingency people aren't paying out of pocket. But so I can't afford to take on the case because the damages aren't potentially high enough. That's how I have to sort of think about it. And so I think there's going to be a lot more representation of those people. It's also the case probably that pro se lawyers are going to start getting better, that, you know, you said you were doing research on your own. You know, with O3, it's possible that, you know, if it was just a little dispute with somebody over some amount of money, you might think, I can do this myself rather than trying to go find a lawyer. And so, you know, but for legal aid, for people who are criminal defense attorneys at Legal Aid, those attorneys, I think, are about to go on because of how overworked they are and underpaid they are, they might get a lot more efficient and be able to represent a lot more people.

[Joe Wiesenthal]

Tracey, I'M imagining a lot of very annoyed judges by, like pro se, frivolous lawsuits. No, I mean like someone who did their own research. Cause nothing's more annoying than someone who does their own research and then they're like citing all these cases that they learned about yesterday and stuff like that. It just seems like you have a high potential for obnoxious people who think they know.

[Tracy Alloway]

No, no, no. You're democratizing case law. That's what I say.

[Joel Wertheimer]

I want to be clear. They're already getting that. The judges are getting a lot of it, especially pro se prisoners who get to spend a lot of time in the legal library and are filing cases, and some of them are excellent. But sometimes they're. I clerked for a federal judge and we saw a lot of this litigation, a lot of it pro se. I don't know that they're providing AI access in prisons, unfortunately, in terms of litigation, but I actually think there are going to be a lot of annoyed judges because this is going to happen. It also might be the case that it raises the floor of. You see a lot of bad legal writing, even from lawyers. And I could see it actually getting a little bit easier to be a.

[Tracy Alloway]

Judge in a clerk if everything becomes more volume oriented or the business model becomes more about the volume rather than the billable hours. Do you see a situation where, I guess the emphasis on sourcing deals in corporate law or sourcing cases in plaintiff, does that become more important? Like that's the skill set that you actually need, that sort of like matchmaker process?

[Joel Wertheimer]

I think that there's. Yes, I think finding the deals, making the economics of the relationship work is going to go up a lot in value, I think is already the case. You all see legal advertisements for personal injury lawyers everywhere, all the time.

[Joe Wiesenthal]

Pain law, yo.

[Joel Wertheimer]

I mean, legal search terms on Google are the most expensive cost per click. I mean, these thousands of dollars for cost per click. Case acquisition I think might go up even more. Because if you can just get the case in and you're working less on the case, but you're still getting your third contingency fee, you might be willing to pay even more and more to just generate this volume. I mean, already mills exist. They call them plaintiff's mills. People who are doing 600 cases per every couple attorneys or something like that. The economics of that and just acquiring the case are gonna go, I think, way, way up until maybe they start competing on price because they can do so much more volume.

[Joe Wiesenthal]

I wanna talk about advertising. Tracy or Joel, have either of you Heard the radio ads for Top Dog Law?

[Tracy Alloway]

Yes, I have.

[Joe Wiesenthal]

Not every Listener go to YouTube and just type Top Dog Law ad. They're the most incredible, aren't they, Joel? Like they're really incredible.

[Joel Wertheimer]

Yes.

[Joe Wiesenthal]

Just go search right now or when the episode and listen to some of these. And do you buy ads on Google?

[Joel Wertheimer]

I've done some Google Ad campaigns. I haven't really.

[Joe Wiesenthal]

This is actually another topic we're interested in.

[Joel Wertheimer]

But a lot of, I mean a lot of plaintiff side civil rights lawyers are buying space. It's just not how I've chosen to compete. I do more referrals from defense lawyers, that sort of thing. But I mean I actually have started to think about. Right. We know this stuff about young people are Starting to use ChatGPT and other services as their sort of portal to the Internet. They're using it for search. And so all of these law firms spend a lot on SEO. But what is SEO in a generative AI world is sort of an interesting question. What are the engines turning up in terms of search terms? What do you have to have on your website in order to get people to find you through GPT rather than Google?

[Tracy Alloway]

Is LexisNexis doing anything with AI?

[Joel Wertheimer]

They are. I have not really used their AI products. Lexis and I know Westlaw is doing the same. I use Lexis. I assume Bloomberg Law, which is also is doing something similar. But right now the models that they're using just aren't as good as O3. It's basically. And so if you're still calling to a 4 era GPT or similar from Claude or whatever, that sort of quality, I just don't think that they're getting good enough research. I think it really was. Whatever that step change was to O3's level I think has made the research so much better that I just use it and then I'll go look at all the cases on Lexus.

[Joe Wiesenthal]

The difference in what you can actually learn from 4.0 or whatever. 4.0, the naming convention for O3, it really is a very big deal. And I think a lot of people formed impressions pre 03 impressions. What other tools are out there that are interesting or that come across your world? Whether it's like. I mean, yeah, we've been talking a lot about O3 and you mentioned that other one brief something. Is there anything else out there that's exciting or interesting or promising?

[Joel Wertheimer]

There's one I looked at that looked promising. It's like iqdis or iqidis, something like that. And they looked pretty Interesting. In terms of sort of being full Sweden wraparound. There's Harvey AI, but they're really focused on big law firms. But I know that they're working with a lot of big firms. But you know, technology, you know, for me that looks promising would be people where I can safely upload medical records and get instead of trawling through 200, 300 pages, just like what was each progress note, what did it say, what's the injury, that sort of thing. And I think that's coming. There are. I think it's maybe something from casetext that summarizes depositions. And of course that's another thing where I've tried to use it in the past and it wasn't very good. I think just the context windows that they were able to use haven't been sufficiently large. But I think with rag and with better models, I think that will get better and better. This is the Ben Thompson line of this is the worst they're ever gonna be is something that I'm constantly trying to think about because I've used these products in the past or tested them and they haven't been very impressive. But I also used 4.0 and wasn't very impressed at its legal research and have seen that jump. And so I assume in terms of taking depositions and getting concise summaries of the most important facts for your case, that's gonna get a lot better. I just think the products aren't there yet and maybe because the API calls for the LLMs just aren't to their newest models yet or it's too expensive, but I assume that's getting cheaper every. You know, Moore's law still applies.

[Tracy Alloway]

If you had to bet, if you had to put actual money on this question, would you say there will be more or less lawyers, say 10 years.

[Joe Wiesenthal]

From now as a percentage of the population?

[Joel Wertheimer]

Yeah, that's a great question.

[Tracy Alloway]

Thank you for the caveat, Jenna. That's important.

[Joel Wertheimer]

And I hadn't thought about this one. I would bet on fewer, but not that much. I would say I don't think this is gonna wipe out lawyers. I think fewer and what they do will change a lot.

[Joe Wiesenthal]

Could you imagine tech people are obsessed with the mythical. Who will be the first person to have a billion dollar startup with no employees? Could that be like, okay, you hung a shingle out, I think is a phrase that sometimes people use. Could you imagine a mega firm with one employee?

[Joel Wertheimer]

I could imagine a mega lawyer with. Right. You think of Salino and Barnes, those sorts of firms, these big, big Plaintiffs law firms, I think they have that I actually don't know, but it's a lot, and it's all across the country. But so much of what they do is make the discovery demand, respond to the demands, get the medical records, send out a settlement demand letter, negot with the opposing counsel or the carrier from the insurer. My client has a torn rotator cuff and a torn meniscus or something like that from this car accident. And they have an exact expected value of the case. And it's just negotiating that. And I think they could go from, let's say 100 cases per attorney to 1,000 or to 2,000, because they could set up an automated workflow a lot easier. And so that person could start making 50 million or 100 million a year per one lawyer than the already 5 million that they're making or something like that. These top firms.

[Joe Wiesenthal]

One last little question I mentioned. You're a poker player in poker, big thing has been the emergence of solvers. And you go back and you look at that. Did you play it very well? But it's all about what you described of calculate your EV right? And did you play it right? And you don't always win. And you may have calculated EV right and you took on the case, but you don't get the outcome. How scientific is that, the calculating EV on a given case? And is there technology that's working on that?

[Joel Wertheimer]

So it's not very scientific at all. You can assess liability, I think, pretty reasonably. Is this going to be something where we're definitely gonna win? Personal injury, car accident, lawyers who say the police report says this person made an illegal left turn, perfect liability. I'm gonna win instantly. And then you're just evaluating the damages. One thing I've actually explored is, is looking into whether LLMs can estimate the damages based on the injuries that you describe pretty well. Go through the case law where there's cases, this is called remeditor cases, where you might hear like, this person got $100 million for their hot coffee or whatever, these sort of classic cases. And a judge will knock it down. They'll say, this case with this injury is only worth this much. But you could take all that language and start to estimate, you know, quantify, because words are numbers. With these programs, you could start to quantify what are the injuries worth in the case law and then multiply that by. So I think that sort of thing is gonna get a lot more scientific and they're gonna use it on the carrier side. So GEICO is gonna Be able to say, you know, you've described these injuries, we have a database of 1,000 cases is just like this. And this was what we. And then you could haggle. Oh, well, this is a great plaintiff or something like that. And they're super sympathetic and have that negotiation. But I think that process of evaluating the exact value of an injury or of a case is going to get a lot more scientific and facilitate settlements to happen quicker.

[Tracy Alloway]

I imagine AI might be especially useful in class action lawsuits as well, where you're dealing with finding thousands of people potentially to attach to a case and then actually contacting them and getting information from them.

[Joel Wertheimer]

That seems reasonable to me. Also in the class action cases, you just got a volume of data that you have to do discovery on. But it hadn't occurred to me. But I do know that sometimes class action start because somebody finds a Reddit thread and they see on Reddit people are all complaining about the same issue with this product or, or something like that. And the lawyers reach out to them. And so it is entirely plausible.

[Tracy Alloway]

I could see that that's another thing where you could have AI just trawling the Internet for possible cases.

[Joel Wertheimer]

I think so. Or what are people posting about on Twitter? What are they all getting harmed by? I don't know. So it seems entirely plausible.

[Joe Wiesenthal]

Since you mentioned it, I just wanna say you mentioned illegal lefts and Tracy and listeners. I had a issue last year where I. I'm not going to get into it, but it involved taking an illegal left turn.

[Tracy Alloway]

Joe's a criminal.

[Joe Wiesenthal]

I'm not.

[Tracy Alloway]

Were you found innocent?

[Joe Wiesenthal]

I am not a criminal. Thanks to a referral that our guest here, Joel, helped make for me. I'm not going to say it. We're not going to talk any more about the case. It was super annoying. I'm not going to say anything more, but I just want to. It's my disclosure for this episode. So. Joel Wertheimer, thank you so much for coming on Odd Lust. That was fantastic.

[Joel Wertheimer]

Thank you for having me.

[Joe Wiesenthal]

Tracy. Before we talk about conclusions, I must press upon listeners again to search for Top Dog law Firm ads. In fact, after we do this episode, we walk back to our desk. Tracy, I'm going to insist that you watch a few of them.

[Tracy Alloway]

I love that your priority for this episode. The one thing you must get out of this episode is listening to Top Dog ads.

[Joe Wiesenthal]

No, I swear I was driving. I was in an Uber home several months ago and this ad came on the radio and there's like nothing I had ever heard in my Entire life, nothing will prepare you for this law firm's ads.

[Tracy Alloway]

Anyway, I am very intrigued.

[Joe Wiesenthal]

Yeah.

[Tracy Alloway]

All right. Well, that was a fantastic conversation. One thing I am wondering is, you know, in the US There's a lot of talk about an overly litigious society. And I kind of wonder if AI is potentially just going to make it worse.

[Joe Wiesenthal]

It sounds very plausible to me that it will make it worse or better or worse. But I think, like, you know, it does. My guess is that there's going to be some sort of, you know, Jevons paradox thing where, like, some existing labor will get really cheap or maybe completely unnecessary. And then other, you know, the optimistic version is that defendants or people without a lot of money get better quality representation. I get, you know, it feels like it's not going to just. It's going to probably have very big distributional and qualitative shifts on the industry.

[Tracy Alloway]

Yeah. And this is the thing I'm also wondering. So, okay, junior associates, maybe they're doing less work, maybe they're slightly happier, but I guess the idea that more of the value just accrues to the partners at a time when it's harder to become partner, that seems to be the downside if you're going into the legal profession.

[Joe Wiesenthal]

Right? Yeah, no, totally. It feels like we're at this moment, and this applies to a lot of actually AI economics questions, and we should definitely do more on them. Where people imagine, or people maybe even rightly surmise that there'll be a lot of benefits for existing holders of wealth, or companies can do layoffs. I don't know the degree to that which is really happening, but at least in theory, there's going to be firing of junior workers, et cetera. But that's a temporary condition because, first of all, okay, a company saves a bunch of money by firing what eventually becomes characterized as grunt work. Well, what do they spend that money on? Because that's savings, and so do they invest it? Does that turn into consumption for the partners? There are a lot of people like, oh, it's going to be mass layoffs. But I never find these questions really satisfying because the money doesn't disappear. It's someone's savings. And someone's savings either becomes someone's consumption or someone's investment, and anyone's consumption or investment becomes someone else's income. So therefore, thinking through some of these next level things I think is really important. And AI clearly seems like ground zero. And I do think O3 is really good. No, seriously, everyone needs to check it out and update their views if they haven't yet on the quality of the research you can do.

[Tracy Alloway]

It does sound like it's maybe solved the hallucination problem that everyone was making fun of earlier.

[Joe Wiesenthal]

Yeah, I mean, they're still there for sure, but because you can actually find links to documents and stuff like that, the speed with which you can get up to speed on anything is very impressive.

[Tracy Alloway]

All right, I'm gonna go test it. Shall we leave it there?

[Joe Wiesenthal]

Let's leave it there.

[Tracy Alloway]

This has been another episode of the allthoughts podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

[Joe Wiesenthal]

And I'm Jill Wiesenthal. You can follow me at the Stalwart. Follow our guest on Bluesky, Joel Wertheimer. He's Earthwhile. Follow our producers Carmen Rodriguez ermenarman, Dashiell, Bennett at Dashbot and Cale Brooks at Kalebrooks. For more Odd Lots content, go to bloomberg.com oddlots where we have a daily newsletter every and all of our episodes. You can chat about all of these topics 24. 7 in our Discord. We even have an AI channel on there.

[Tracy Alloway]

And if you enjoy odd lots, if you like it when we talk about the impact of AI on various professions, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad free. All you need to do is find the Bloomberg Channel on Apple Podcasts and follow the instructions there. Thanks for listening.

[Lisa Mateo]

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[Tracy Alloway]

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