The Law Firm of the Future: Distributed, AI-Augmented, and Built for Texas

Transcript

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Brian Elliott: The practice of law is going to change dramatically in the next five years, and I'm just excited to be sort of in the thick of that. Hello, and welcome to another episode of the Y'all Street Law Podcast. I'm Brian Elliott. My co-host, Chuck Krause, is here, and we've got a very special episode in store.

Chuck Kraus: We're at the annual retreat of the firm, Scale, and we've got a special guest here in Adam Forrest, the founder of Scale, to talk a bit about the vision behind Scale, the market, and where we see things going. Let's talk about Texas first, grounded in where we are. Although we're sitting physically in Denver, Colorado today, there's a lot that's happening in Texas where we are. I'm in Austin, and Chuck, you're up by Fort Worth, and the legal market in Texas is really just booming.

Brian Elliott: It is. There's all sorts of firms rushing to open offices in the state, driven by a bunch of the company locations, driven by all the activity there. We've got large financial institutions moving thousands of people. I read an article that JP Morgan has more people working in Texas than in New York now.

Chuck Kraus: Wow, it's a staggering statistic. You're seeing a lot of secondary businesses come as a result of that, a lot of capital flowing in. Just as a result of that, service providers, including the law firms, are all clamoring in as well. Yeah, we certainly see that with the law firm expansions.

Brian Elliott: If you don't already have an office in Texas, they're moving aggressively, right? Taking up real estate, loosing out major floors of class A office buildings, and really aggressively recruiting not just individual lawyers, but entire teams into Texas. So it's clearly an aggressive expansion market for a lot of the MLM 100, and we're seeing more and more activity all the time. I think one of the things we want to speak about is the profile of the firm of the future.

Chuck Kraus: I don't know, you know, we're going to talk about AI, I think we talk about AI in every podcast, and just how, Adam, you think about how we're going to be able to leverage those technology tools, what practices are going to look like in the future. It's also massive. The data centers have been built in Texas, they're able to power a lot of nuclear in, in Texas already. There's, uh, lots of natural gas, which is an efficient way to power data centers as well.

Brian Elliott: So let's, uh, let's send it over to Adam. Uh, let's introduce Adam. We'll let you introduce yourself, uh, founder of scale LLP and, um, welcome to the podcast. Thanks for having me.

Chuck Kraus: Um, yeah, I mean, I, so I'm the founder of the law firm scale LLP, started the firm about eight years ago. Um, before that I was a tech lawyer in San Francisco. And before that I was a regular big law lawyer, um, practiced there in commercial litigation and the, and the pellet work. Um, the idea behind scale really is to build the first top tier remote law firm.

Brian Elliott: And we're, I'd say a fair ways into that project. We have 80 lawyers today in about 20 States. We are a full service firm. Um, most of our lawyers come from big law or, um, interesting, you know, public companies, tech companies that you've heard of.

Chuck Kraus: Um, so we compete with sort of ordinary law firms every day for, you know, for work from sort of blue chip clients. Um, but we deliver it in a slightly different way. And the principal difference is that we don't have office space. Uh, we don't have dedicated office space in any of our markets.

Brian Elliott: Um, and so we have to leverage technology and it also allows us to think about just how you build, how you build a firm sort of differently. Um, and, and what that gets you in the end, right? There's obvious things and points, you know, there about cost structures, et cetera, we could talk about, but, you know, committing to a remote first platform was a key sort of tenet of the business and it's unlocked a whole bunch of different things that, that we could talk about. But I, like you, I've seen a lot of, of what's happening in Texas and sort of, it's interesting to say the least, how much is being invested in brick and mortar down there.

Chuck Kraus: Um, not just in law firms, but in other businesses. So I think it's an interesting topic. Yeah, for sure. I mean, the, the, the idea of, you know, getting a foothold in the Texas market by leasing space is sort of, you know, it's incongruent with what we're building at scale, right?

Brian Elliott: And it's, it's a little bit incongruent with the direction that the, that the overall, you know, tech development is taking where you don't need to be, have all the people in the same place anymore. And that's really what we've built the firm on is the idea of finding the best lawyers anywhere, and then, uh, practicing, you know, across the country. So maybe, uh, Adam, you can speak to that a little bit. Like what's, what's driving the, the, the need for office space in, in key markets.

Chuck Kraus: And, uh, why do you, what do you think is driving, you know, firms, you know, expansion by getting, you know, by acquiring leases first. and then adding partners. That's a good question. I don't think it's being driven by the sort of demand from workers, that's for sure.

Brian Elliott: I don't think lawyers and other professionals are clamoring for office space. Even before the pandemic, that was true. I mean, one of the reasons I started Scale was I read a study before the pandemic about the way that knowledge workers like lawyers want to work and the way they work. And even then, pre-pandemic, most knowledge workers wanted to work remotely at least some of the time, a couple of days a week, but less than 10% of them did.

Chuck Kraus: So even before the pandemic, there was this huge gap between the way that people sort of want to be in a physical space for work and their everyday reality. And then, of course, the pandemic hit and accelerated sort of an existing trend of sort of more Zoom calls, more remote interactions professionally with your colleagues, with your clients. But it's interesting to see that some of that is now sort of ebbing backwards. I saw a study from Cushman and Wakefield this year, the commercial real estate brokerage, that said that in Q1 of 2025, law firms in the United States leased more office space than they have ever done in history, which is a pretty staggering statistic when you think about that.

Brian Elliott: You know, higher than pre-pandemic levels, higher than any levels ever. And you have to wonder why. There's 1.3 million lawyers in the United States. That number isn't growing.

Chuck Kraus: It's not that there's like a demand for an extra million lawyers. It's that law firms largely are doubling down on this strategy of brick and mortar. I think in the case of Texas, you know, the idea is that this is a fresh market. There's a ton of movement there.

Brian Elliott: They want to be, you know, part of that party. Um, and I think that there's, there's logic to that for sure. Um, you get things from having real estate in a particular place. You know, you get the camaraderie of being around, you know, your colleagues, proximity to clients makes it easier to have a lunch meeting or, you know, to establish those relationships.

Chuck Kraus: Um, but it also comes with a cost, right? It comes with the cost of the lease and it has implications for your culture and from how you build out your, your firm. Um, but it's, you know, to answer your question more directly, Brian, you know, I don't think that what's driving it is that lawyers in Texas want to work in an office five days a week, because if you look at the data, you know, it's become even more true since the pandemic that people want to work remotely some of the time. But I think the idea is that you sort of need to have an office and a presence, you know, a physical presence in a new market to be relevant in that market.

Brian Elliott: And I, you know, I'm not sure I agree with that thesis, but certainly a lot of people do. Let's pivot it back to, you know, your, your vision for one of the key tenants of scale being we're going to be fully distributed. How do you, how do you think about that in terms of a competitive advantage, not just a difference, like, Hey, we're different. that's unique, but how do you view it as an advantage?

Chuck Kraus: Well, law firms are a recruiting and retention business, right? That's what we do at the business side of law firms. It's about talent. How do you get the best people here who do the best client work?

Brian Elliott: And how do you keep them here? And when you commit to a remote first structure, it unlocks a whole bunch of things. For one thing, we're able to deliver double the value to our attorneys economically that they would get from a salary at a traditional firm. We can pay them twice as much because our cost structure is so much lower.

Chuck Kraus: We can pass on some of those savings to our clients. That makes us very competitive, both in attracting talent and also in attracting work for that talent. So that's one piece of it. The other piece is that when you commit to a physical space, you have a very significant limitation, which is a commute in terms of who you can recruit, right?

Brian Elliott: If you want to open an office in Dallas and you're trying to fill it with great lawyers, the universe of lawyers who can meet that need are the universe of lawyers who are willing to commute to Dallas. And that's a very significant limiting factor. If you're a remote business or remote firm, you can recruit the best people anywhere. And that's a hugely freeing concept.

Chuck Kraus: And so we've been on this mission to build the best remote firm in the United States, to build a remote firm that competes with the AMLA 100. We've been able to leverage that advantage to put together a really interesting team. And we've said no,, to a lot of people. We've had over 10,000 lawyers apply to the firm since the pandemic.

Brian Elliott: And we're still a little less than 100 lawyers today. So we've certainly seen that this model affords sort of a different approach to building a law firm that I think is a bit apples and oranges when you think about the legal market generally. It's hard to distinguish big firm A from big firm B often, besides the name on the door. We are trying to do something different here that unlocks very significant economics and a different kind of culture.

Chuck Kraus: It resonates with me and my practice. I say Fort Worth, I'm outside by about 30 minutes. There's lots of businesses that are located similarly. I think previously the option was if you needed sophisticated legal advice, you were driving in or you were trying to contact you know, a lawyer in Dallas.

Brian Elliott: Um, I can think of at least four conversations in the last few months where people are shocked, surprised. I had no idea, uh, that lawyers who do that, that type, that type of work were in my neighbor, uh, finding, finding them out to be really successful. So it's advertising. We are a national law firm, but I'm right here in the neighborhood.

Chuck Kraus: So you This podcast is brought to you by SCALE LLP, a distributed national law firm that's been called the wave of the future by Reuters. SCALE is a revolutionary distributed law firm that offers a fresh alternative to traditional practices. That's not what I lead with, right? I don't advertise myself as an Austin-based lawyer.

Brian Elliott: But they find out that I'm in Austin, and they love it because they're local, and they want a local lawyer. But then I never meet them, right? Then it's all remote anyway. And we're doing everything over Zoom and that.

Chuck Kraus: So, it's a funny dynamic. But our structure allows us to practice anywhere, and we take full advantage of them. Yeah, I would say that my clients, who are primarily startups, never cared where I was. They did not want to see me in their office.

Brian Elliott: They definitely didn't want to come to my office. And I think the more sort of technologically savvy your client base is, the more you see a willingness to work remotely. I mean, Slack, which changed the way people work, famously came out of, it was just a side hustle of a couple of engineers who wanted a better way to work with each other remotely, even though they were in the same building. Right.

Chuck Kraus: That's what Slack was. It was just this chat engine where you had engineers working in rows who didn't want to keep their shouting over each other. They needed a way to organize their communications and their work. And to do that sort of in a, you know, on a cloud, even though they could have walked, you know, five desks down and had the same conversations.

Brian Elliott: And so, you know, the sort of cutting edge companies who are, you know, are sort of leading the way on some of the stuff. You don't see them leaning into brick and mortar, by and large. You know, lots of great startups have been built on entirely distributed platforms. Zapier, Shopify, these are companies that you've heard of that don't have office space.

Chuck Kraus: One of my observations early on being a startup lawyer was just watching these companies build this stuff and think to myself, like, wait a minute, like if they can build an amazing business and culture on a completely distributed platform, why can't we do that? That, you know, the practice of law is very complicated. The business of law is pretty simple. We have one product and it's time.

Brian Elliott: In order to sell that, you need a computer and a phone and a desk somewhere. It doesn't really matter where you want. are. So I don't think that there are no benefits to being in person.

Chuck Kraus: We're sitting here at our retreat, our annual firm-wide retreat, because there are huge benefits to being in person. I'm just not sure that those benefits are enough to justify class A office space at the levels that firms are committing to today, which I bet my house are by and large empty. Most big firm lawyers are not in the office five days a week. And so they've spent all this money on presents they're not utilizing that.

Brian Elliott: And you've got to wonder when that waste catches up to them. Let's talk about the technology a little bit. I know one of us at the table would take and debate the other side of what you just said. We're not selling an hour.

Chuck Kraus: We're selling an understanding of the law. We're selling compliance. We're selling a solution, regardless of how long it takes. So let's talk about technology and sort of how you're thinking about that with scale and how you're thinking about it impacting traditional firms.

Brian Elliott: Yeah. And I know exactly who you're talking about, the person who would disagree with that statement. So let me revise. I mean, it's true.

Chuck Kraus: We're not just selling an hour. We're selling a service. But that service can be sold really from anywhere. And the way that we deliver those services is being massively disrupted now.

Brian Elliott: It's interesting because, you know, there are lawyers who really get that. And then there are lawyers who either don't want to get that or are afraid by that. I think a lot of people in a lot of sort of white collar jobs are not used to having their jobs threatened, right? Like that sort of happens to blue collar workers when, you know, the washing machine makes the washerwomen irrelevant, right?

Chuck Kraus: Like, well, it's coming for us too. I think there's going to be, you know, writ large, I think there's absolutely going to be contraction in the legal services market that's going to be replaced by automation. But within that overall contraction, there will be individual winners. And I think those winners are the firms and the attorneys who understand the technology, who understand the value that it can deliver to clients, and who importantly figure out how to deploy that technology for clients and to be the mechanics that sort of assist the deployment of, you know, AI through legal services.

Brian Elliott: And there will be firms just like there are lawyers who will be late to that party. And there will be firms who are cutting edge. And I think you guys know where I want us to be on this. And so we spend a lot of time thinking about it.

Chuck Kraus: In fact, we're developing some of our own AI tools in partnership with some very early stage tech companies that, that want to work with us. So I'm, I'm a big proponent as well. So let, let me, let me, you know, frame it this way, right? What, what I see is, you know, AI is, is, you know, lifting the curtain a little bit on the idea of lawyers selling hours as the primary economy.

Brian Elliott: Back. economic driver of a law firm, right? And it's saying that if we can do something more efficiently and what used to take us four hours now takes us, you know, 40 minutes, right? What does that, what does that, how does that change how we interact with our clients and what the billing statement looks like at the end of the month, right?

Chuck Kraus: And where you see, you know, you used the term earlier, Adam, ordinary law firm, right? What you see in an ordinary law firm is that they're set up really on a model that, that survives based on leveraging human hours and selling those hours, right? And with the more, the more technology advances, we're seeing that like the, the, what we should be selling is not the hour that it takes us to produce the product, but the outcome that we produce, right? So the shift toward value-based billing or outcome-based billing, I think is, is one of the, uh, one of the key, you know, results of what we're seeing in the technology.

Brian Elliott: So yeah, the tools make lawyers more efficient or maybe make us faster, but that's not the real revolution. The real revolution is the, is going to be the, this, this shift to outcome-based billing. Oh yeah, I, I agree with that a hundred percent. Um, and I would, I guess, go even a step further that, you know, so we're shifting to outcome, we're going to have to shift to outcome-based billing because it's going to be hard to justify saying, oh, you reviewed your commercial agreement eight hours, you know, like that's just not going to be happening, you know, a year from now or it shouldn't be.

Chuck Kraus: Um, but I think there's, there's yet another step beyond that, which is what happens when the clients can access this themselves sufficiently well, where they don't need us. And I think that's, I think that's coming sooner than people think. But let me say, I don't think that that's going to happen across all practice areas, you know, in the next 12 months, but I do think, I like this analogy of lawyers going, becoming blue collar workers in a way like mechanics, whose jobs are to train, intelligently train and implement AI systems that clients then can access themselves. And then they're paying the lawyers a fee to do that because that's, they're delivering a real value.

Brian Elliott: Let's say you have a commercial agreement that you need reviewed. Maybe your business that needs to do that on repeat today, you send that to your lawyer who understands your business and they bill you two, three, four, five hours to negotiate that agreement with your counterparty. Um, and the actual practice of that is reviewing it, thinking about, you know, for the lawyer, thinking about the client's particular playbook, what they're comfortable with, what their risk tolerance is, and then conforming the agreement to that playbook by redlining it. We don't like this provision.

Chuck Kraus: We're going to add in some, you know, different language here. And then that goes back and forth, of course, between the counterparties. And eventually there's a meeting of the minds. That's all very automatable.

Brian Elliott: And in fact, we've developed a tool where we can codify a playbook in an AI engine that can then take in a contract and produce a redline. And that playbook can be customized. So you can imagine a world where you have different clients who have different types of commercial contracts and have different types of risk tolerances. And my job becomes instead of redlining each one of these myself and, you know, reading the whole contract and thinking about their risk tolerance, I've codified that with different playbooks for each client for the right contract.

Chuck Kraus: And then you're just feeding these things into the system and coming out quick review back over to the client is going to have a lot faster and allow you to do the work of 10 attorneys, you know, in a shorter period of time. You're watching the output, making sure the output is correct and making tweaks along the way. Right. Probably totally, totally different situation in litigation.

Brian Elliott: Absolutely. You know, we're going to need to stand up in court for a while and argue our client's position and appeal to, you know, the equities or the fairness of, you know, the particular motion on calendar that day. I agree that stuff is not going to go away for a long time, but there are areas of the law that are susceptible to automation where we haven't really seen the disruption, you know, the tools at their most disruptive yet. I mean, they're, they haven't, I think, reached an inflection point yet where they've threatened the practice, but, you know, I would, I would stand here today and say, you know, in the next 12 months, there will be a commercial tool.

Chuck Kraus: Like I've described, it's going to make it harder for people to justify, harder for lawyers to justify doing that work manually when there are systems that everybody knows can do it a lot faster and just as well. Well, what I'd like to do there, it's just focus for a minute because you touched on this, Adam, on, on the shift of, of who does the work, right? So one of the things that we see in, in development of these new technologies is that the lawyers aren't, may not forever be the gatekeepers of legal information and knowledge and implementation, right? And, and we could, we could, we see a shift toward, and we do see this in other technologies for sure, right?

Brian Elliott: Where, you know, the, we, we, it, the, the person who does the work changes, right? And we can see that the, in the future, the client may be armed with this automated tool that can run a playbook against their own contracts and do 80% of what they would normally outsource to a law firm themselves. And then maybe only outsource that 20% that requires this, you know, you know, bespoke, you know, higher level judgment call that doesn't get fully automated. I think that's right.

Chuck Kraus: I think that's happening. And if you'll let me, you know, nerd out about this for a second, I think there's this really interesting potential shift that we'll see in the next, maybe not 12 months, but maybe the next 24, 36 months where law firms for the first time realized that they're sitting on a ton of intellectual property. Law firms are not, by and large, you know, IP companies. We don't have, you know, a self-driving car, you know, algorithm that we've developed with hundreds of engineers over the last decade that, you know, is worth billions of dollars.

Brian Elliott: We have expertise and we, you know, we deploy that expertise in service of particular client goal. But, if you think about, you know, sizable firms, they have, you know, decades, sometimes many decades of that knowledge instantiated in document systems that have, you know, all the motions and email systems that have all the emails, right, in all the memos, all the research, it lives at the law firm. And nobody really has ever thought about that, I think, as an asset before. But in today's world where AI can use that data to improve the quality of the output, it's a huge asset.

Chuck Kraus: So one of the things that I've been thinking about is how do we deploy our firm's data to allow clients to get, say, better answers? Like, everybody knows, you can go to ChatGPT and get some legal advice, but there are... You don't know where it's coming from. You don't know where it's coming from.

Brian Elliott: There are a bunch of hallucinations. It may not be, you know, it may not be high quality. If you could augment that with the knowledge, decades of knowledge of, you know, a law firm who has worked on basically any issue over the sun and has thoughtful responses that can train an AI model, all of a sudden you have a tool that is going to produce a way better outcome in a way. It's like, not all lawyers are equal today and not all sort of agentic lawyers are going to be equal tomorrow because they're going to be trained on different data that's proprietary to those law firms.

Chuck Kraus: So I think there's this interesting shift coming to sort of like, yeah, who's doing the work? It's going to be increasingly automated and less lawyers, but then also like those automated, you know, the systems, what have they been trained on? And I think that's a huge way that law firms can position themselves, you know, to extract value. I've thought about not talking about this because there are firms who've been around for a lot longer than we have, right?

Brian Elliott: They'll have a competitive advantage, you know, against us for this. It turns out you don't need, you know, 10 million files to train a good algorithm. So I think there's this, this interesting question of if you have a critical mass of data, how can you deploy that in a way as an intellectual property asset to produce a better, you know, service for your clients, even if that service is automated? Does that make sense?

Chuck Kraus: Yes. It's fascinating. It's a, you know, unlocking the, the intellectual basis of what we do every day, right? And deploying it in, in tool-based formats that not only lawyers can use, but clients can access directly, they can sell us.

Brian Elliott: Right. And that's a way you could monetize it, right? Like if you and I aren't sitting around redlining contracts, but the last three decades of our work has trained our model to be. being really good at redlining contracts, well, clients would be willing to pay for that.

Chuck Kraus: Yeah, and there's, I think, huge opportunities for firms like ours to be the individual winners in an overall contraction because we figure out how to deploy those tools intelligently early. What are the two or three things that I've been most excited about in the future, practice, technology, our platform? Oh man, that's a hard question. And I think it's just on a general level, I think it's a really interesting time to be alive.

Brian Elliott: I think it's a really interesting time to be a lawyer. I mean, law firms have not changed that much in the last hundred years. They've grown a lot. They used to be smaller.

Chuck Kraus: Now they're huge. But lawyers by and large do the same job they've been doing and law firms move very slowly. I mean, I've only been practicing for 15 years, but I had a secretary when I started and he had a typewriter. I mean, it's just crazy to think about that.

Brian Elliott: In 15 years, we've gone from that to where we are now. And I hope to be around for the next 15 years. And I think the changes we see during that time are gonna be even more acute, even more extreme. And I just wanna be a part of that.

Chuck Kraus: I mean, I think it's fascinating. I think it's also a unique position to be in as a law firm. We're the right size to be innovative. We don't have a ton of red tape, but we're also large enough and we have the right people here that we could really make an impact by developing some new tools, by testing some of these ideas, by working with some of our close clients that think it's cool that we're iterating and innovating on this kind of stuff.

Brian Elliott: So lawyers sit around a lot and sort of wish they were more innovative. They see their friends building tech companies or we're the service provider, we're the cost center, we're the break in the system. You can find ways to be creative as a lawyer, but it's often hard to do. Your job is often, you're the advocate, you're in court, you're redlining the contract, you're closing the deal.

Chuck Kraus: But the deal terms and the product that you're selling is often made by or negotiated by somebody else. But here we are at this intersection where you've got really, things are changing incredibly quickly. All of a sudden, law firms are sitting on a mountain of intellectual property. Clients are very dissatisfied with the market and the rates they have to pay, the service that they get from lawyers.

Brian Elliott: There's a huge opportunity to disrupt the way that legal services are provided. I don't know that we're going to necessarily do that all by ourselves. I think we are taking steps in the right direction, but the practice of law is going to change dramatically in the next five years. And I'm just excited to be sort of in the thick of that.

Chuck Kraus: Particularly unshackled with a P&L that has large lease payments. That makes things easier. Yeah. Bring it at full source.

Brian Elliott: full circle there. Yeah. Great conversation, Adam. Thanks for joining us.

Chuck Kraus: It really is, I agree with you 100%. It's a very exciting time to be in the practice of law, especially when we are in a position where we can be innovators and bring new solutions to our clients, test them out, see what works, but really be meeting our clients where they are. And with the demands that they have, it's quite satisfying. We've got the whole team behind us here.

Brian Elliott: We're getting ready to kick off the day full of meetings and plan the future. So let's go do that. Thanks for your time, Adam. Thanks for having me, guys.

Chuck Kraus: Great. Thank you. Thanks for having me. Thanks for having me.