By Adam Smith Esg. Commentary by Jonathan Selvadoray
Another excellent article by Adam Smith Esq. that highlights that while the legal market stagnates the best US law firms metrics are growing across the board (worked” rate and “fees worked” rate growth, productivity and lawyer headcount growth).
Will we be witnessing consolidation of the market at its top?
Another interesting scenario mapping by the author, citing the Annual State of the US Legal Market (2024) ” is around the impact of Gen. AI:
- The Rising Tide: Everybody wins: Clients get better advice faster and cheaper, law firms make more money from enhanced operational efficiencies and (they don’t say this but I take it as implicit) smarter “portfolio pricing.”
- A Lopsided Landscape: Clients win “at the expense of firms,” relegating outside counsel to rubber-stamp “final validation,” and substantially displacing/replacing law firms with software vendors and consultancies.
- No Big Thing: Generative A.I. in real-world deployment serves as KM with a college education and finds “utility in operations” but “does not notably change client benefits or firm costs.”
My take is that scenario 2 is wishful thinking without an unlikely radical collective mindset change at clients backed by strong C-Suite support. Scenario 1 becomes the default most likely scenario with a caveat: without a significant (not radical) collective mindset change at clients, law firms will be the only real winners.
Read the full article: https://adamsmithesq.com/2024/05/if-supply-grows-faster-than-demand/
