Latent Space: The AI Engineer Podcast
00:14:22 · Jacob Lauritzen
[00:14:22] S0: I gave this... I actually gave this a lot of thought just like last week. Yeah. Just the partnership model... I don't wanna get into too much of the details, but like the partnership model kind of exists because the only type of capital that these companies have is human capital. So, like, it's not like, you know, us or, like, a software engineering firm or, like, a manufacturing or whatever. You you have physical assets or, like, some sort of intangible assets that that you accrue over time, and and they pay dividends to the shareholders. But if you work in an industry like professional services, and it's the same for, like, consultancies and and whatever else, all of your value is in your people, and you can't really own human capital. You know, you you can't... You know, slavery is abolished. You can't own people, but you can rent them. You can pay them money. And so partnerships essentially is a structure where you make the human capital the owners of the company so that they stay. Yeah. Will that change? Like, I don't... It doesn't have to, but I think what we really want to do with Legora is we actually want lawyers to be able, law firms, be able to build some sort of intangible capital, some durable capital, and you can build a system that learns of how you work. A lot of firms right now think about, well, there's the ex law firm way of doing things, and we can codify that, I think, and we can build a system, and whether that's like a self improving knowledge graph or whatever it is, and precedent files and documents, where there's like a way of working that produces a really good output, and that can be their IP. So it's like a way to codify the human expertise and judgment into a system. That I think is... Now I'm just rambling completely, but like that's something that we want to help empower. And does that change the partnership model then? Because the incentives are different. In the partnership model, you just gotta bring more clients, and you don't wanna take away time from bringing in clients to codify your information, basically. Because, like, you get rewarded from, you know, eat what you kill or make this luck step, whatever. That needs to change a little bit. We need to figure out an incentive structure where partnerships... Partners are incentivized to codify things for...
00:16:24 · Jacob Lauritzen, Alessio Fanelli, Shawn Wang
To build an asset for the company, but right now, there aren't, because as soon as they leave the partnership, they don't get any dividends from the assets that they built. Yeah. So, there's like a... Yep. I think the the whole business model is is... We'll see. [00:16:38] S2: Yeah. Yeah. It's all in question right now. [00:16:40] S1: My actual other take, know, so on the partnership level, that's like the top end of the industry. Actually, my take is more on the bottom end. Right? Yeah. What happened there? Paralegal's gone. Yeah. Right? Like, junior lawyer's gone. Don't need them. Like, it's [00:16:56] S0: That's actually not what we're seeing. So I think it's... I don't know. Would you would you say that we're seeing that in engineering? [00:17:01] S1: Yeah. So junior engineers are really kind of cooked. Cooked. Like, you kinda have to [00:17:06] S0: come out of drop out [00:17:08] S1: of university fully baked or else you're Yeah. You're not gonna make it. I feel like I'm not... I'm being a bit dramatic for for a comedic purpose. But, like, yeah, I know a lot of lawyers, they started as paralegal. They go to law school, all these things. Right? And now they don't... They're not needed. They're they're seriously just not needed.
00:17:08 · Shawn Wang, Jacob Lauritzen, Alessio Fanelli
[00:17:08] S1: of university fully baked or else you're Yeah. You're not gonna make it. I feel like I'm not... I'm being a bit dramatic for for a comedic purpose. But, like, yeah, I know a lot of lawyers, they started as paralegal. They go to law school, all these things. Right? And now they don't... They're not needed. They're they're seriously just not needed. [00:17:27] S0: Yep. Yep. Yeah. It is... It's interesting what happens to the partnership model, like, pyramid. I think, generally, a lot of lawyers, you still need your... You need the next generation, and at least for engineering, the way I think about it is you have a good engineer today, they're worth a lot more even than they were two years ago, because they can produce so much more stuff, like, if they're good. I think it's the same thing in legal, where they can actually do a lot of really good work if they're good. So, I think it's more that, like, really good lawyers or junior lawyers are worth a lot more. [00:17:55] S1: Yeah. It's been the case. Right? Yeah. It's more so. But it's, [00:17:58] S0: yeah, it's polarizing even more so. Yeah. [00:18:00] S2: I'm actually curious about that. So, like, the whole, like, law business is basically, like, charging per hour. [00:18:07] S1: Mhmm. [00:18:07] S2: So Yep. You know, if each project now can be Yeah. Done a lot faster is it going to be, like, way cheaper?
00:18:07 · Alessio Fanelli, Jacob Lauritzen, Shawn Wang
[00:18:07] S2: So Yep. You know, if each project now can be Yeah. Done a lot faster is it going to be, like, way cheaper? [00:18:13] S0: Like This was actually Yeah. So, fun story. I was I was reading Max's YC application, and, like, helping him getting into YC, get Leia as it was called back then, it's YC. And this was my one thing, was like... [00:18:24] S1: And curious, Leia is a Danish thing for something? [00:18:26] S0: No, a Swedish. Swedish? No. Also, it means nothing. There's this really funny story, I think it was a Spanish newspaper that wrote about us in the early days, Leia, and then they they explained that the abbreviation was legally efficient Yoda assistant. Why Yoda? [00:18:44] S1: Yeah. I don't know. So I was like, why why is it See, hallucinations are not just from LLDs. [00:18:49] S0: No. I think journalists hallucinate. But, no, it doesn't mean anything. [00:18:53] S1: So he wrote the application.
00:18:53 · Shawn Wang, Jacob Lauritzen, Alessio Fanelli
[00:18:53] S1: So he wrote the application. [00:18:54] S0: He he wrote... Yeah. And my feedback to him was, people you have tried this a million times. Legal tech has never been a thing, because, like, there's no incentive for lawyers to to... Why would they be more efficient? They earn less money. Like, it doesn't make any sense. But I think the reason that lawyers do wanna adopt this is that they understand the gravity of the situation. They know that, like, the business model and everything is under pressure, and it's like they need to change because the competitive pressures are high. The billing model itself, I think, is also gonna change. We've we've already seen that, particularly in The US, that a bunch of stuff is actually being priced on, like, a project fee and not on an hours fee, particularly these sort of lower end stuff on the spectrum, like whatever it is, like small reviews and whatever. Some of it, honestly, is being done for free, and some of it is just being priced on a flat rate. [00:19:39] S2: So where is the money being made then? [00:19:41] S1: Is it Because [00:19:41] S0: of In the that strategic work. [00:19:43] S2: Yeah. I feel like a lot of what you guys talk about is M and A specifically, like, that's where all the money [00:19:47] S1: is That's
00:19:47 · Shawn Wang, Jacob Lauritzen
[00:19:47] S1: is That's [00:19:47] S0: just a very easy example. Oh, okay. Litigation is also... The big work still is there, and it's very valuable. And so, they'll spend lawyers will spend more of their time there. Client relationships also super important. Like a CRM? No. Just like spending more time with the client. Like, a lot of law firms will... Or historically have basically done stuff for free just to have that relationship with the client. [00:20:08] S1: Yeah. [00:20:08] S0: Yeah. And so now they can do that, but they don't have to lose a lot of [00:20:10] S1: money [00:20:11] S0: on [00:20:11] S1: doing it. I thought I thought I just... I have to pay the lawyer money just to be my friend. Like, in this... Like, isn't that the retainer thing? Yeah. Yeah. That's... You told me I can do it for free? [00:20:20] S0: Like... Yeah. You just have to find the right lawyers. Yeah. Okay. Cool. Or Latent Space has to grow much bigger. I don't know.