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Research shows that lawyers lack intelligence

November 1, 2017

I think most people would agree that lawyers are in general very intelligent people. But that doesn’t mean they are always equipped with the right or the best intelligence – and recent research suggests that they are ignoring changes that could equip them to deliver better results.

Lawyers today base many of their decisions on opinions, rather than facts. That is because their access to data is inevitably limited – there are a finite number of precedents or examples that can realistically be accessed. It is also because some key aspects of legal work are based on personal taste and judgment – for example, what clauses to include in a contract or what words to use in its drafting.

An element of personal judgment is always valuable in any professional discipline, but the more that this judgment has a sound base of analytical data, the more likely it is that the right outcome will be achieved. It is in this context that lawyers are facing a remarkable opportunity – but it is an opportunity that many consider to be a threat. It’s time to think differently.

Awakening to a new world

According to a recent report published by Thomson Reuters (“Ready or Not: Artificial Intelligence and Corporate Legal Departments”), less than 5% of in-house counsel are actively using or considering the use of artificial intelligence. Less than 10% see artificial intelligence having a role in identifying risk or predicting outcomes. For most, any real impact from this technology is viewed as being at least five years away – and even then, they think it will largely affect costs and efficiency. So it is perhaps not surprisig that few feel any great sense of urgency to understand more.

I think they are wrong – very wrong. And I will explain why with an example.

AI is fast coming of age

Last week, I sat through a demonstration of an artificial intelligence system, developed by an in-house lawyer and in enterprise-wide operation at a US$33 billion corporation. Drawing from a database of multiple past contracts, with some 30,000 terms and term variants, the system undertakes automated analysis of any incoming customer contract (about 80% of the corporation’s business is undertaken on customer terms). The output from this analysis is a color-coded report on the extent of individual term variation from accepted business ‘norms’. More than this, the system also suggests pricing actions based on those variations.

At present, if the report identifies significant departures from the norm, it then goes to a qualified contract management or legal reviewer. They undertake a risk and mitigation analysis, using a pre-formatted approach which then feeds back into the system. Behind the scenes, that system is quietly storing and learning, readying itself for the day when much of the mitigation work can also be undertaken by the machine.

Intelligent … but redundant?

So does this mean artificial intellligence will soon replace the need for lawyers? As the example illustrates, an AI-based system can indeed make better use of data because it is not limited in terms of volume or speed. Therefore it will offer not only more fact-based information, but it will also be far more astute at assessing probability and consequence.

However, what all that data offers us is the chance to use human intelligence in different ways. Our work will increasingly be focused on interpreting the ‘facts’ that AI offers – for example, in identifying where a change of policy, process or practice might give us a source of cost reduction or competitive advantage. We will also be able to undertake risk scenario planning, not just on an individual agreement, but across entire portfolios (for example, a business unit, a geographic region, a customer set or contract type). And of course, an AI system cannot anticipate or deal with change or unexpected events (though it can help us quanify their consequence – often within minutes).

Artificial intelligence will rapidly become pervasive. Successful businesses will be those that are most effective in marrying AI with human intelligence – in other words, equipping intelligent people with intelligence. It is time for the 95% who believe that change is somewhere in the distant future to awaken, prepare and ensure they are ready for these exciting, though challenging, changes. At IACCM, that is certainly the support we are providing to our members.

 

 

 

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