Latest / Wealthy Woman Lawyer Podcast, Helping you create a profitable, sustainable law firm you love / Episode 348 | Why Focus on Your Firm’s Reputation Is Your Best Strategy in the Face of an AI Takeover

Transcript

Episode 348 | Why Focus on Your Firm’s Reputation Is Your Best Strategy in the Face of an AI Takeover · Wealthy Woman Lawyer Podcast, Helping you create a profitable, sustainable law firm you love

• 0:01
  Intro: Welcome to the Wealthy Woman Lawyer Podcast. What if you could hang out with successful women lawyers, ask them about growing their firms, managing resources like time, team, and systems, mastering money issues, and more. Then take an insight or two to help you build a wealth generating law firm. Each week, your host, Devina Frederick, takes an in-depth look at how to think like a CEO, attract clients who you love to serve and will pay you on time, and create a profitable, sustainable firm you love. Devina is founder and CEO of Wealthy Woman Lawyer, and her goal is to give you the information you need to scale your law firm business from 6 to 7 figures in gross annual revenue so you can fully fund and still have time to enjoy the lifestyle of your dreams.
• 0:47
  Now here's Davina.
• 0:49
  Davina: It is a Tuesday night around 11PM. A woman is sitting at her kitchen table with her laptop open. Her mother died six weeks ago. There is a house involved and a brother who has opinions, and she has been meaning to call a lawyer for about a month now. Instead, she types the whole mess into a chat window and asks what she should do, and she gets an answer.
• 1:13
  A decent one, she thinks, organized, calm, reasonably accurate, considering what she knows about the laws in her state. It does not ask her for a retainer. It does not put her on hold. It does not make her feel foolish for not knowing what a small estate affidavit is. She reads it twice, closes the laptop, and goes to bed feeling a little better.
• 1:34
  That woman was going to call you on Monday. Maybe she still will, but something has shifted in the legal market in the last year or two, and you've probably felt it. Perhaps more clients are coming in with advice from Claude printed out. Or perhaps it feels like everyone is using AI more and better than you. It's probably why you are listening to this episode.
• 1:57
  So let's talk about it. Right now, it seems to me that there are two conversations happening about lawyers and artificial intelligence, and both tend to leave people more confused than ever. In one camp, everything is about to change, every task automated, every paralegal replaced. And if you are not adopting a new tool every quarter, you are already behind and should be panicking accordingly. In the other camp, it is all hype.
• 2:27
  The machines make things up. They cannot be trusted, And any serious lawyer should keep a skeptical distance until this blows over. You know, like the metaverse did, neither camp is 100% correct. And more to the point, neither one is asking the question you probably are asking in your head, How will AI affect me and my law firm business? Welcome back to the Wealthy Woman Lawyer Podcast.
• 2:51
  I am your host, Attorney Davina Frederick, two time author of books on law firm marketing and management and founder of Wealthy Woman Lawyer, a company that guides women law firm owners in cultivating the mindset, the strategies, and the systems to build wealth generating law firms without burning out in the process. I am so glad you are here with me today because I think you are going to like this topic. Let me say upfront that I am not an AI expert. I am not here to give you a tool list. I use AI in my own business almost every day, and I have opinions about it.
• 3:29
  Quite frankly, I think anyone who, at this point, claims they are an expert in AI for the legal industry probably only knows a little more than you do. AI is evolving quickly, and what some people taught a few months ago may be old news by now. Let me give you an example. In a recent interview with the creator of Claude Code, Boris Cherny, he stated that you should delete your MD file about every six months. That's basically all the info you put into Claude about your law firm so that it produces better results for you when you ask it to draft something.
• 4:03
  The reason, and I'm putting this in my own words, when a new model is released, it's much more capable and it does not need all those old instructions. In fact, those old instructions cause more confusion and create poorer output. So, no, I'm no expert. Like you, I'm learning something new about AI every day. What I am, though, is someone who has spent years studying what makes a law firm valuable and watching what happens to firms faced with challenging changes, whether brought about by economic forces, technological upgrades, or something else.
• 4:36
  I remember when personal computers were first introduced to the workforce, when the fax machine was innovative, and when the most anyone understood about the Internet was that they needed a website. I started my own law firm about three years after Mark Zuckerberg founded Facebook and before Instagram was even born. New technology has always shaped and reshaped how we work and how our society functions. What's different this time is that AI, if the creators of it are to be believed, is designed to replace the human workforce, not just increase our capacity for productivity as prior innovations did. AI is not just about easier access to information.
• 5:18
  Easy access to unlimited information has been available for decades, thanks to the Internet and Google. The new thing is that AI can think and think about how it thinks, which was once only the purview of human beings. AI can compare a set of facts against a body of law and produce something that looks a great deal like counsel. It analyzes and produces a remarkably human like outcome at the end. You may be thinking right now, but Devina, it is not really analysis.
• 5:51
  You need someone who actually thinks like a lawyer so they can ask AI the right questions to get the right analysis. You and I know that. Your prospective client at her kitchen table does not know that, and honestly, she does not much care. She got an answer that made sense to her, and she went to bed and went soundly to sleep. And if you haven't noticed yet, non lawyers are producing contracts, estate plans, and marital settlement agreements with these tools.
• 6:20
  If your instinct is that your family, friends, and neighbors would never do such a thing, you'd likely be wrong. They are simply not telling you about it. I recently had a conversation with a CPA who used Claude to draft a contract, even though she has a close relative who is an attorney and probably would do it for her for free. And if your next thought is, Well, then they will have to hire me to fix it, I'd say maybe. That could be true today.
• 6:46
  I do not think it will be true forever or even for very long because AI is improving by quantum leaps every day. Now, a lot of lawyers work their way through all of that and land in the same place. They decide the answer is to become better at using the tools than their clients are, learn the right prompts, be the expert operator. That feels valid now. But I want to save you some time.
• 7:09
  Prompting is a real skill worth having. Way being good at computer research instead of library research was worth having in 1998, but it is not a strategy. Anything you can learn about operating a tool, your competitor can learn by Friday. Plus, these systems are deliberately built so that you need less skill to use them every year, which means you would be staking your position on something the creators of AI are working to make unnecessary. Before I get to what I do think you should do, I want to spend a few minutes on something almost nobody in the legal world is discussing, and it's critical.
• 7:48
  There are real physical constraints on AI, and nobody yet knows how these constraints will ultimately be resolved. The first constraint is electricity. The analysts who track this expect global data center electricity used to be up about 26% this year, with AI servers accounting for roughly a third of the total. That is one year. Those same forecasters say that by 2030, the grid simply will not be able to supply what the industry is currently planning to build.
• 8:20
  The second constraint, it water, because these facilities run hot and most are cooled with water. Lawrence Berkeley National Laboratory puts direct cooling use at around 17,000,000,000 gallons a year plus another two eleven billion gallons consumed indirectly to generate the power they run on. In fairness, that is still under 1% of this country's water consumption. Newer cooling designs use far less or none at all. But they are costly.
• 8:50
  So many investors in these data centers are not choosing to use the new technology that uses less water. I'm looking at you, Kevin O'Leary, not so Mr. Wonderful. In fact, I recently learned that some data center investors and developers are deliberately seeking out aquifers to build data centers over them. Many of these facilities are going up in exactly the places that can least afford it, which is why there is now organized and increasingly successful opposition to data center construction from New Jersey to Nevada to Colorado, with zoning fights and moratoriums becoming more common.
• 9:27
  It turns out almost nobody wants one of these things in their own neighborhoods, not only because they suck up electricity and water, but because they also are very loud. Add to that that residential electricity in this country is up about 42% over five years. In Maryland, it is up roughly 74%. In Washington DC, about 94%. PJM, which runs the grid for a large stretch of the East Coast, has said that data center growth is the primary reason its capacity cost jumped 174% in a single year.
• 10:04
  Putting aside all the negative environmental impacts, which will have real ramifications on our world and how we live in it if this continues, let's look at the money side of the equation. People who invest millions or billions in data centers for AI don't do it out of the goodness of their cold, black hearts. They do it for the anticipated financial returns. This leads to the third constraint, which is the cost of AI tools. The free version will not stay free.
• 10:34
  Everything you are using right now is priced below what it costs to provide AI because these companies are buying market position. At some point, that will end. It always does. And when the real cost of power and hardware works its way into the price, the $20 a month tool that drafts your client's contract for her is going to cost a good deal more than $20 a month. So while AI becomes more capable, there's still the potential that everything stalls on power contracts and permits and lawsuits.
• 11:04
  And the cost of using AI, particularly the more dependent you are on it, will reflect that. The fourth constraint is garbage in garbage out. Did you know there is a researcher who maintains a public database of court cases involving fabricated citations from AI tools. As of this recording, it holds more than 1,800 cases, about 1,200 of them American. In over 700, the person who filed the bad material was not a self represented litigant.
• 11:37
  It was a lawyer. It goes without saying that right now your best defense against this if you are using AI for drafting is to triple check your citations. The takeaway for me is that every one of those cases is a story about a lawyer who was accountable and could accept responsibility. There was a name on the filing. There was a judge who could impose a sanction.
• 12:00
  There was a bar with jurisdiction. Nobody is accountable for the answer your prospective client got at her kitchen table at 11:00 at night. If it is wrong, there is no one to call, no one to be angry with, and no one to sue. Whether you're a lawyer or a layperson, you are susceptible to publishing content with AI's mistakes in it. So with these constraints in mind, let's consider where that leaves you and your law firm.
• 12:25
  The real question is not to use AI or not. The real question every good law firm owner should be asking is, if AI can provide all the information and analysis a prospective legal client requires, where does our true value as lawyers lie? In any market, in any era, value collects around whatever is hard to get and devalues whatever is easy to get, that is just economics, supply and demand. Which means the question that decides your firm's future is not whether the machines can do the work. It is, when legal information becomes cheap and instant, what is left that is still hard to get?
• 13:05
  I think there are three answers. The first is discernment. Knowing which of three perfectly defensible paths is right for a particular client with her particular facts, her tolerance for risk, and the things she has not told you yet but will in about twenty minutes once she trusts you enough. It is the ability to answer the questions she did not even think to ask. If you have been practicing for any length of time, you know exactly what I mean.
• 13:34
  The client tells you what she thinks the solution to her problem is. Your job in the first twenty minutes is to find out what it actually is. AI tools answer the question they are handed. You know which questions to ask because you have discernment based on your training and experience. The second is accountability.
• 13:54
  When you advise a client, you are putting your license, insurance, your name, and you're standing in your community behind that advice. If you are wrong, you and your firm bear the responsibility. That makes you much more careful about what you say and do. The value of a professional is not only what she knows, it is that she is accountable for her advice. When dealing with legal issues, that's important.
• 14:21
  It's why we, as a society, require attorneys to be licensed to practice law. Any old joke can give advice, but is it the correct advice considering all the various factors at play? The third is trust. As the volume of plausible sounding information goes up, the reliability of any single piece of it will be called more into question. You have probably felt this yourself in the last year.
• 14:46
  The more answers there are, the less any one of them seems to be worth, and the more people want a person who will look them in the eye and tell them what's real and what's not. Let's consider for a moment the concept of fake news. As a society in The U. S, we used to all be operating from the same set of facts. Now, depending on your source of information, facts seem to vary.
• 15:11
  Throw in a siloed social media feed and the issue compounds. No matter the source of information, everyone is seeking someone they can trust to tell them the truth. As a licensed attorney and law firm owner, when it comes to legal issues the firm most at risk is the one whose entire value proposition is volume, commodity documents, minimal relationship, cheaper and faster than the next provider. If that is your business, you are now competing head on with something that will always be faster and cheaper than you. However, the law firm built on relationship, reputation, referral, and discernment will continue to excel.
• 15:54
  A client comes to you because a friend said you were a lifesaver during the worst year of her life. She stays because the advice fit her, not just her file. Soon, she sends her sister. Which part of that is a machine competing with? The drafting, that's it.
• 16:10
  It is not competing with the reason that client walked through the door. As the simple work gets cheaper, clients get better at telling the difference between simple and not simple. When the free option handles the easy thing perfectly well, the moment a matter stops being easy stands out much more than it used to. Your work is likely to become more clearly differentiated in this market, not less so. Which is why I encourage you to focus on how you will position your firm when AI feels inevitable.
• 16:40
  Do not waste time fighting against AI with words like, My clients brought me something drafted by AI. I'm so offended. Do they think that what they wrote and my law degree are the same? Or, They used AI to draft X. That's okay because they'll be back trying to hire me to fix it.
• 16:58
  Or, I put it in my contract that my clients can never use AI. I know AI in a client's hands can feel threatening, but consider for a moment the last time you were sick. Did you Google your symptoms or ask chat GPT? Did you go to your doctor and tell them, I think I have X, Y, and Z, and I just need a prescription for A, B, and C? Tell me I'm not the only one.
• 17:23
  Your clients are going to do the same thing before they come to you. And quite frankly, you likely will use AI as soon as they leave. My advice is to embrace it and then show them what AI missed that you know because this is your field of study and practice. Lean into the relationship aspect and be a help, not a hindrance. Defending yourself against AI assumes you are protecting something fragile when in reality, you and your law firm are holding the scarce thing.
• 17:54
  So what exactly do I recommend you focus on building over the next twelve months? Number one, your law firm's reputation, not just your personal reputation. Most of the women I work with have built a wonderful reputation. Unfortunately, they don't do the best job capturing it. Instead, it lives in the heads of a few dozen grateful clients and referral sources when it should be working for you.
• 18:18
  The even bigger mistake is that they don't extend that reputation to cover their whole law firm and their team. They consider it only their personal reputation. Hoarding your good name is a missed opportunity. In this market, it's more important than ever to get the word out to prospective clients that you and your firm are the resource they've been seeking. You and I both know that more people are finding professionals by asking AI rather than scrolling a page of search results or even asking people in real life.
• 18:49
  Those systems tend to promote people who are specific, credible, well reviewed, and clearly identifiable as a real expert with a real name attached. Your job as the law firm owner is not only to do good work, but to build up your excellent team and make sure your firm is clearly visible to your prospects and best referrers. You want to put a human face on your brand and let them hear your voice long before they ever walk in to hire your firm. Number two, build a system to cultivate and deepen relationships. And this is where many firms struggle.
• 19:28
  The client from four years ago who adored you and has not heard a word since, the referral source you meant to call back in March, All those people who heard you speak at their event, but then never heard from you again. Relationships are assets, and like every asset, they depreciate without intentional cultivation and maintenance. Professional relationship building requires a system, not just a good intention. A newsletter you actually send instead of one you keep meaning to start. A written list of the 20 relationships that you are ready to invest in, and a real plan of execution.
• 20:06
  It's unglamorous work and also where meaningful growth happens. Again, this is a law firm project, not a you only project. Everyone on your team can be involved in cultivating professional relationships, from the person who greets every client when they call, to the paralegal who is always eager to help, to the associates who show up early and prepared. Number three, designate human versus AI activities. Decide explicitly which moments in your client experience will always involve a person.
• 20:39
  It could be every initial call delivering hard news by phone or in person or celebrating a big win with their lawyer over lunch. Write them down, train your team, and hold that line even when it is inconvenient. Then put that message in your marketing. Every competitor you have is announcing their technology initiatives right now. There is going to be enormous room to be the firm that announces its humanity.
• 21:04
  Now, I do not want anyone leaving this episode thinking I have argued for opting out of incorporating AI into your law firm business because that is far from the truth. Excellent law firms embrace innovation and technology. In fact, many bar associations demand we do so for the sake of the consumer. We just must use it for the right tasks, activities, and systems. Use AI to eliminate administrative drag of any kind and buy back yours and your team's time and energy.
• 21:36
  Every hour you take back from that pile of administrative tasks is an hour available for relationship building, team building, and for the work of owning a business instead of just working inside one. And then guard two things carefully. Number one, never automate discernment. Do not let a machine decide what you as the expert recommend. And number two, never automate the relationship.
• 22:03
  Do not let a machine be the voice that greets an upset person or delivers hard news. Efficiency is the wrong thing to optimize at exactly those moments. Before we wrap up, I want to leave you with this thought every technology that has ever swept through a profession has made some part of the work cheap and thrown the rest into sharper relief. As a society, we've moved from farmers to factory workers to knowledge workers. Our job now is to decide who we want to be in a world full of AI agents.
• 22:38
  If you've ever had the experience of calling customer service and getting caught in an automated loop for an hour before you finally got to speak with a human, then you know how important human to human communication, contact, and connection can be. Keep that in mind as you grow your law firm. If you have spent your career being the lawyer that people call when they are worried about a serious legal issue, the one who remembers the names of their children, the one whose advice transformed the direction of their life, then you have been building a lasting legacy this entire time. I encourage you to see new technology as a tool for expansion, not as competition. Imagine your firm three years from now.
• 23:23
  The routine work costs a fraction of what it used to and takes a fraction of the time, and you have led it gladly. That recovered time went into your clients, your team, your creativity, and your own life. And when a woman is sitting up at midnight with a problem she cannot solve, she does not want an answer. She has answers. She wants you and your team.
• 23:47
  And that is not a firm defending itself against a market shift. That is a firm the market shift is making more valuable. If you are listening to this and you are not sure where to start positioning your own firm for the future, I invite you to book a call with us at Wealthy Woman Lawyer. Go to wealthywomanlawyer.com and click the apply now button in the top right corner. You will fill out a brief application so we can understand where you are and where you wanna go, And then you can schedule a Zoom call with me or one of my team members.
• 24:19
  Yes. Actually, humans, this is not a sales pitch. It is a conversation about your firm, your vision, and the right next step for you. Positioning your firm around what is genuinely valuable and then building the marketing and systems that make that position visible is exactly the work we do inside the Mastery Program. If that is the conversation you are ready to have, now is the time to book the call.
• 24:47
  And if you have not yet left a review for The Wealthy Woman Lawyer Podcast, I would be so grateful if you would take a moment to do it. Your reviews help us reach more women law firm owners excited about building wealth generating law firm businesses that they love. See you next
• 25:10
  Intro: us at wealthywomanlawyer.com to learn more about how we help our clients create wealth generating law firms with ease.