Lawyers: ChatGPT is taking your clients

Lawyers, your business is being impacted by ChatGPT . At 2nd Chair – we’ve blogged about this before. We identified how your clients may have been making wrongful disclosures to ChatGPT – we were thinking about trade secrets being revealed and disclosure of privileged information to their AI bots in the same way clients make inadvertent disclosure through social media or emails. We also wrote about client’s data being used in inappropriate ways by the tools. After we wrote our post, it was revealed that many conversations on ChatGPT were inadvertently made indexable by Google. Even as Google took them down, they continue to exist in the internet archive’s Wayback Machine, and have been duplicated and reviewed. Also, we’ve heard from lawyers who delivered legal advice, but whose clients ran it through ChatGPT and became confused based on their conversation with the AI. In total, that article was about the way that consumer - facing, everyday , AI tools were causing problems to the attorney-client relationship. This article, instead, describes the way that ChatGPT is denaturing the business environment of the legal practice.

Changing legal demand – next best alternative

If you’re in a negotiation, you know that both parties explicitly or implicitly are aware of each parties next best alternative. If the deal doesn’t close, what happens? What would they do instead? It helps frame the value of the current proposed negotiation. In economics, the next best alternative serves to inform the opportunity cost of a good or service.

Clients are keenly aware of the next best alternative to a lawyer. From their perspective, lawyers are expensive (maybe even perceived as over-priced), lawyers are slow, and lawyers say “no” too much. Whether these perceptions are true, or whether they are good instead of bad, is a marketing problem for the legal profession. In the meantime, I’ve met an unfortunately large number of people who ask ChatGPT or Claude or Gemini whatever they would ask a lawyer. Sometimes it’s to draft a contract that they deliver to their lawyer, happily exclaiming to us that instead of a $3,000 - $4,000 bill, they paid for 15 minutes of billable review, few to minor changes to the contract, and a much faster experience.

Today – public facing consumer AI tools reduce the gap between a lawyer and the next best alternative. That is, the perception that everyday people have of publicly available AI tools is closer to their perception of what a lawyer does than ever before.

Pricing expectations – lower prices, faster turn around

In the UK, over half of in-house teams are expecting bills to reduce as AI produces time savings on tasks that used to take longer. Only 40% of UK lawyers on the other hand, expected decreases in price. In the US, for instance, a report by Lexis estimated that current AI tools , if scaled appropriately, could reduce the volume of work sent to outside counsel by 13%. Time spent on internal legal inquiries declined by 25%, and paralegals achieved a 50% time savings on administrative tasks. We’ve been told privately about industry association meetings where Chief Legal Officers or Chief Executive Officers have openly said to outside law firms that they intend to distribute less work out of the company. Others companies have indicated that they expect pricing to drop and/or speed to increase because of AI tools. In any case, everyday people and private companies all seem to think legal service should be faster and cheaper. Whether this accurately describes how lawyers should behave, it is none-the-less a changing expectation among legal service consumers.

More or new value – what do you do as a lawyer that isn’t captured by asking these bots?

Writing this from a legal perspective is hard. I know, and you know, that being a lawyer is more than drafting an email or writing a contract. But our clients don’t always know that. So when a person asks ChatGPT to write a contract for them, that person might think that a lawyer’s value has been fully replaced. They don’t realize that a collection of legal value exists in the insurance a lawyer carries, the experience a lawyer has in solving issues before they manifest in the contract, and the wisdom to recognize missing but necessary components. As a metaphor: if I only speak English, and I get google to translate something into German, I don’t have the expertise to know whether the translation is good or bad. Even if the words are their correct German analogs, I certainly don’t know whether the meaning of my sentence has been captured in the new language. Similarly, an every-day person might think an AI-generated description of a legal issue is sufficient, because they don’t have the knowledge to identify errors.

The problem for lawyers is to obviously communicate the value that a lawyer provides over these tools. From our experience, this is particularly true for lawyers who do things like draft contracts for their clients.

In total, people are using publicly facing chatbots for legal purposes. Sometimes they are trying to search case law so that they don’t need a lawyer. Others are getting contracts drafted that will replace their lawyer’s work, or substantially reduce the amount of time their lawyer will spend with it. Some people are disclosing privileged communication and obviating protections. In any case, lawyers are losing mindshare to ChatGPT. We are losing the perception of value, we are losing awareness of the troubles of our clients, and we are losing the speed game to AI.

2nd Chair has a new product coming to help lawyers deliver value faster better service their clients. Stay tuned.