The Robots Are Coming!

by Andres Oppenheimer

  There will also be a need for humans to both interpret new laws and to anticipate changes in the law. Smart machines operate on existing information, and they’re more effective than people when it comes to predicting trends based on past cases, but they’re not so good with present or future events, where there’s less data to analyze. Algorithms are only as good as the data they’re fed. And while artificial intelligence will grow its intuitive capacities with time, it’s the human lawyers who gather for drinks with government officials, fellow lawyers, or other parties and hear the latest rumors about things that may not yet be public.

  In areas in which regulations change constantly, like banking, attorneys who are more aware of which rules are being drafted will always be able to offer better advice to clients than computer programs that rely only on public materials. And lawyers will survive because of the personal relationships they develop not only with their sources but also with their clients.

  “Lawyers do more than undertake legal analysis,” McGinnis and Pearce write. “They bond with their clients, thereby fostering relationships of trust, which allow the lawyer to facilitate clients to see their long-term legal self-interest, even when clients’ passions and confusions cloud that interest. Machines are unlikely to perform this bonding function and, thus, will be unlikely to substantially affect this important aspect of the lawyer-client relationship.”

  They add, “The overall effect of the machine invasion thus will be quite mixed for lawyers, but particularly difficult for nonspecialized lawyers of average or worse than average ability. For consumers at every level, the progress of machine intelligence is excellent news, offering lower prices and more transparency. It is especially good for the underserved middle class and even the poor who are more likely to access legal services at prices they can afford.” There will always be legal superstars, or attorneys who continue providing services that cannot be Uberized: the ones who “practice in highly specialized areas of law subject to rapid change, appear in court, or provide services where human relationships are central to their quality,” predict the two professors. “Otherwise, no effective barriers to the advance of machine lawyering in legal practices exist….Ultimately, therefore, the disruptive effect of machine intelligence will trigger the end of lawyers’ monopoly and provide a benefit to society and clients as legal services become more transparent and affordable to consumers, and access to justice thereby becomes more widely available,” they conclude.

  THE ACCOUNTANTS ARE COMING

  Large accounting firms like Deloitte, EY, KPMG, and PwC—which are now referring to themselves as multidisciplinary professional services companies, or even more pompously, integrated global services for business solutions firms—are jumping rapidly into the legal field. While these companies are not yet authorized to offer legal services in the United States, they are already doing so in England, Australia, and Mexico, and to a lesser extent in China, Japan, Germany, France, Spain, Italy, and Canada.

  “LAWYERS BEWARE: The Accountants Are Coming After Your Business” read a headline in the British magazine The Economist. According to the article, the four largest accounting firms have combined annual revenues of $120 billion, which easily exceeds the $89 billion generated by the hundred largest law firms in the world. Once upon a time, attorneys and accountants competed for advice on tax services, but not much else. Now, though, the area between the two professions is becoming increasingly gray.

  The “Big Four”—as Deloitte, EY, KPMG, and PwC are known in the business world—are adding legal departments and even buying up law firms across the globe. PwC, for example, is now the tenth largest law firm on the planet based on the number of attorneys and paralegals. And in a three-year span, between 2013 and 2016, EY’s legal arm expanded from twenty-three to sixty-four countries.

  In the United States and other countries in which they can’t act as attorneys, accounting firms are increasingly offering legal services that complement their primary business, such as drafting boilerplate business contracts or processing immigration papers for their foreign clients. It’s only a matter of time, though, before they expand into other areas, such as litigation, that are currently exclusive to law firms. Eventually the accounting firms will go head-to-head with law firms.

  THE ACCOUNTANTS’ COMPETITIVE ADVANTAGE

  Do accounting firms have a competitive advantage over law firms? In more than one way, they do. They can offer cheaper legal services to their corporate clients, since they don’t bill by the hour as do most lawyers in America, Great Britain, and many other countries. These multidisciplinary accounting firms charge a fixed flat rate for the services they provide, including legal services. For clients who are tired of spending fortunes to pay their legal bills, that’s a powerful incentive that isn’t likely to go away anytime soon.

  Faced with this onslaught from accountants, the lawyers are pushing back and expanding their own practice areas. Throughout the United States and Europe, law firms are buying up subsidiaries that can offer insurance, investment advice, public relations strategies, and consulting services of all kinds. For lawyers, “there’s good news and bad news,” Mark L. Silow, chair of the firm Fox Rothschild, told me. “The bad news is that there will be more competition for what lawyers have historically done, but there may also be more business opportunities for areas where lawyers have not been active. Right now, it’s unclear whether the pluses or minuses will prevail.”

  THE RISE OF THE ROBO-ACCOUNTANTS

  There is a powerful reason why accounting firms are diversifying their services and jumping into the legal field as fast as they can: they know that their traditional accounting business—preparing tax returns—will be nearly fully automated. According to Vasant Dhar, professor at the Stern School of Business and the Center for Data Science at New York University, websites that offer automated tax returns are putting the jobs of roughly two million accountants, bookkeepers, and auditors at risk in the United States alone.

  The millions of people who watched the 2017 Super Bowl saw revealing commercials by two big accounting companies—H&R Block and TurboTax—that essentially conceded the victory of intelligent machines over human accountants. The two companies’ ads boasted of having computers that were more efficient than humans to prepare tax returns. The ads heralded an inevitable automation of the accounting profession. “Robots Will Soon Do Your Taxes. Bye-Bye, Accounting Jobs,” read a Wired magazine headline. The story said that, as is the case with lawyers, the accountants who will survive will be those who specialize in complex cases, or have clients with very particular needs, or who supervise the work of the intelligent machines that will do most of the traditional accountants’ work.

  No matter how good accountants may be, they will never have the knowledge acquired by a robot like IBM’s Watson. As Bill Cobb, former CEO of H&R Block, explained, robots are able to absorb millions upon millions of bytes of data previously processed by the firm, which no human accountant could even begin to digest. With that massive amount of data, an intelligent machine can find tax deductions and loopholes that most human accountants would miss. “If you’re a journalist in California, married, filing jointly, [IBM’s Watson is] going to know what other journalists in California, filing jointly or not, have been able to find as deductions or credits,” Cobb said. He added that “even the best tax pro can’t know the ins and outs of how the tax code applies to every profession, but Watson can.”

  And it won’t be too long before even robo-accounting firms will be in trouble, because the Internal Revenue Service will be sending you its automated tax bill directly, bypassing accountants altogether. The government tax agency’s database will have all the information it will need about the payments you made and deductible expenditures you are entitled to, and will send you a letter or an email saying how much you owe. And you will call an accountant only if you believe there was a mistake and want to dispute that bill. Whether they
belong to big automated private firms or to the government, robots are going to do your taxes.

  INSURANCE AGENTS UNDERMINED BY ALGORITHMS

  The same phenomenon that is affecting attorneys and accountants—the growing competition from automated platforms such as RocketLawyer.com and TurboTax.com—is also taking a toll on insurance brokers. A New York website called Lemonade.com is offering property insurance at a much lower rate than traditional insurance companies, and claims to have sold more than two thousand policies in its first three months. Lemonade.com can offer cheap insurance policies because it’s almost completely automated—algorithms, rather than people, calculate insurance premiums—and competes with companies that have a huge overhead.

  Lemonade.com promises you “90 seconds to get insured. 3 minutes to get paid,” instead of having to negotiate for hours with a traditional insurance agent.

  When a customer named Brandon filed a claim about a stolen coat, for instance, all he had to do was answer a few questions on his phone, and in three seconds he was reimbursed, the company said. That’s a world record for the insurance industry, it said. According to Jim Hageman, Lemonade’s chief claims officer, during those three seconds the company’s algorithm “reviewed the claim, cross-checked it with the policy, ran 18 anti-fraud algorithms, approved it, sent payment instructions to the bank and informed Brandon.” All that in just three seconds.

  According to The Economist, “The industry is still astonishingly reliant on human labor. Underwriters look at data but plenty still rely on human judgment to evaluate risks and set premiums.” Insurers got their first wake-up call when websites started offering customers the opportunity to compare industry prices. Now, with the emergence of fully automated and much cheaper services, the industry will have to get up to speed, or many traditional companies will disappear.

  MANY INSURANCE AGENTS WILL BECOME DATA ANALYSTS

  Instead of relying on professional experience, intuition, or past data, insurance companies will need more data analysts to get ahead of the facts and anticipate future trends. These analysts will mine data that people make public in their social networks or on their cell phone apps, and use that information to offer them tailor-made insurance policies. The industry’s data analysts might, for instance, send an email to a potential client who uses the FitBit app to measure physical exercise, saying something like: “We’ve noticed that you spend an hour a day on the treadmill. We’d like to offer you a special rate normally available only to star athletes!”

  An insurance company may want to offer clients a smartwatch or a free virtual assistant like Alexa in exchange for access to their information. The insurance company may then learn, for instance, that a particular client goes on a trip the third weekend of every month. Acting on that information, the company may offer a specialized insurance policy to cover every risk during the homeowner’s absence. Why pay a full month’s worth of insurance, if you really need coverage only for a week? Or if the insurance company’s data miners learn that a client walks ten thousand steps a day or brushes his teeth three times a day, they will be able to offer reduced rates for health or dental coverage, thus winning over clients from competitors. Conversely, data analysts will be on the lookout for clients engaging in dangerous activities: if a client describes himself as a yoga instructor or church choir singer in his insurance application but posts pictures of himself on Facebook bungee jumping in Tanzania or paragliding off the top of a mountain in the Alps, the insurance company’s data analysts will recommend increasing that person’s premium once it comes up for renewal. Like bankers, many insurance agents will become explorers in the wild world of social media.

  LAWYERS, ACCOUNTANTS, AND PSYCHOLOGISTS WILL BE WORKING TOGETHER

  Judging by what I learned from interviewing innovation chiefs at law and accounting firms, I wouldn’t be surprised if professional offices devoted exclusively to one specific line of work—such as providing legal or accounting services—will soon be extinct. Instead, we will have multidisciplinary practice offices, in which lawyers will work together under the same roof with bankers, accountants, insurers, doctors, psychologists, data analysts, public relations specialists, and perhaps even spiritual gurus. And they will jointly evaluate the best strategies for each client.

  Does it make sense for divorce cases to be handled exclusively by attorneys, without the presence of a psychologist who can advise divorcing parents on how to do things in a way that will do the least harm to their children? Or does it make sense for lawyers to draw up a will without the help of an accountant who can help evaluate the document’s tax ramifications? And when a law office represents a company in a lawsuit, wouldn’t it be wise to involve a public relations expert in the whole process, so as to prepare for the media reaction? Soon enough, multidisciplinary practice offices will have all these professionals sitting at the same table. Gone are the days when people would say, “I need to check with my attorney” or “Let me talk to my accountant.” Instead, we’ll be saying, “I’m going to meet with my team of professional advisers.”

  In fact, this is already starting to take place, with multidisciplinary consulting firms like MSI Global Alliance, World Services Group (WSG), and the Geneva Group International (GGI), all of which are international alliances between law firms, accounting offices, financial advisers, lobbyists, and public relations agencies. GGI, for example, claims to consist of more than 538 independent professional law, consulting, and auditing firms in more than 120 countries across the globe, which collectively employ some 26,000 people.

  These international alliances will soon be mirrored at the national and local level through the spread of multidisciplinary practices. For example, in 2010, Eversheds Sutherland, a multinational law firm with headquarters in London, opened a subsidiary called ES Consulting, which offers services in corporate strategies, technology, and human resources. And in 2015, the giant law firm DLA Piper announced the launch of a subsidiary called Noble Street, which focuses on financing, corporate, and mergers and acquisitions activities in the media, entertainment, technology, and sports industries. The consolidation of professional service firms has already begun.

  MULTIDISCIPLINARY PRACTICES ARE THE FUTURE

  Multidisciplinary practices, or MDPs, as they’re known—joint operations between attorneys, accountants, and other related professionals—are expanding rapidly in the United Kingdom, Australia, and parts of Canada. Within the next decade, we are likely to see Ross and other robots like it handling the routine work that today is done by young professionals or paralegals, while the lawyers, accountants, and insurers will become members of multidisciplinary consulting teams that look to solve our problems in a comprehensive way. We might meet with our team of professional consultants once or twice a year for a routine checkup, even if we’re not having any problems, the way many of us currently do with our doctors.

  “The bottom line is, we can make certain predictions about what the future of the legal profession will be like,” Mark Silow, chair of Fox Rothschild, told me, “but the one thing we can agree on is that it’s going to be different, and the lawyers and law firm leaders that are simply saying that we have to keep doing whatever we’re doing now will not succeed in the long run. Change is inevitable. You can’t freeze time, and you have to be open to everything.”

  6

  THEY’RE COMING FOR DOCTORS!

  THE FUTURE OF HEALTH CARE

  CAESAREA, ISRAEL

  Moshe Shoham, the robotics lab director at the Israel Institute of Technology, better known as the Technion, is one of the people who are quietly reinventing modern medicine. I didn’t even know he existed until someone told me about how he was developing a micro-robot the size of a grain of rice that will soon be able to clean human arteries the same way larger robots vacuum homes and swimming pools. When I heard about what he’s doing, it sounded like something out of a sci-fi film. But after reading his bio, I
realized he wasn’t someone to be taken lightly: when I first met him in December 2016, Shoham had registered more than thirty international patents in robotic medicine and smart machines, and one of the companies he had cofounded, Mazor Robotics, was listed on the New York Stock Exchange with an estimated market value of $550 million.

  Shoham agreed to meet with me at the Mazor Robotics headquarters in Caesarea, about an hour’s drive north of Tel Aviv. The company was located in a nondescript industrial park along with pharmaceutical, engineering, and computer technology companies. Its offices were anything but flashy. On the contrary, they were located in an unembellished building that didn’t even have a reception desk in the lobby. When I walked in the building’s front door, the only other person there was a woman sweeping the floor, who led me to the elevators.

  But the Mazor Robotics offices on the second floor were a hive buzzing with activity. While I waited for Shoham, I saw more than a dozen engineers and scientists—many of them in jeans or shorts and sandals—walking swiftly up and down the hallways. Most of them appeared to be in their thirties, and went in and out of cubicles where they seemed to be holding intense meetings. The cubicles’ walls were covered with whiteboards filled with notes that, as they explained to me later, were due dates for pending assignments. Despite their casual attire, they seemed to be a fairly structured group.

  The interview with Shoham didn’t exactly get off to a great start. The scientist, in his midsixties, was a shy man who seemed somewhat uncomfortable talking with a journalist. He was dressed in a rather wrinkled white shirt and wore a knitted kippah on his head. His small office seemed the very definition of austerity: there was just one table surrounded by a number of plastic chairs, and posters of the human spine and limbs plastered across the walls. When I asked him about his personal life, he told me that he studied aeronautical and mechanical engineering at the Technion, and that he later founded a robotics laboratory at Columbia University in New York, where he had been a professor for a number of years before deciding to go back to Israel. He had returned because he wanted his children to grow up in his home country, he said. It was there that he cofounded Mazor Robotics, whose automated surgeon, known as Renaissance, had already performed more than 25,000 spinal surgeries in over 150 hospitals across the United States.