A trailblazer in the legal technology space has forecasted the demise of the traditional billable hour model in the era of artificial intelligence. During a visit to the UK, Canadian entrepreneur Jack Newton, founder and CEO of lawtech company Clio, spoke to the Law Gazette about the growing mismatch between AI-driven productivity and time-based billing.

“There’s a structural incompatibility between the productivity gains of AI and the billable hour,” Newton explained. He emphasized that while the legal profession should embrace AI, lawyers must adopt an entrepreneurial mindset to unlock its full potential. “You can’t have the benefits and time savings that AI is delivering co-exist with the billable hour model,” he said. “It has become increasingly out of date and at risk for decades. The model creates an incentive for inefficiencies and the legal profession is almost the only one that explicitly rewards inefficiency. Something that used to take you five hours will now take five minutes, and you need to justify those four hours and 55 minutes you have given up because it is no longer reflective of the value lawyers are giving to clients.”

According to Newton, Clio’s research indicates that clients favor predictable pricing, and leading firms are already positioning themselves accordingly. He sees AI as a gateway for firms to serve unmet legal needs—a market long acknowledged by regulators. 

“There is enormous demand but the paradox is that the number one thing we hear from lawyers is they need to grow their firms through more clients, while 77% of legal needs are not met,” Newton said. “It’s exciting that AI can address these challenges – it will be a tectonic shift in the industry driving down costs and making legal services more accessible.”

However, Newton cautioned against relying blindly on tools like ChatGPT for legal work.

“Generative AI can be an extremely convincing liar. It doesn’t know that it’s necessarily telling you something incorrect and it’s trying to please the person making the enquiry, which makes it the most dangerous type of liar,” he warned. “You have to treat AI tools like a first-year associate and check their work. Except an associate would never make up cases and URLs unless they are trying to get fired as soon as possible. AI is utterly convincing in its presentation of completely incorrect information but it is trying so hard to please you and to predict an outcome it hopes exists. The associate would never state that something is true with so much confidence.” 

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Source: John Hyde, The Law Society Gazette