To corporations, perhaps the biggest appeal of artificial intelligence is its ability to cut down on busy work and the expensive humans who do it.
Morgan Stanley and Citigroup are reportedly pushing their law firms to pass on cost savings from AI, the Financial Times reports. These Wall Street banks pay law firms an hourly rate for time spent reviewing deals or defending them from lawsuits, which can rack up fast.
And it’s not just Wall Street. Another FT story details how businesses large and small are demanding lower fees from consulting firms that use AI tools. If they have to pay less people to make a power point explaining how to reduce costs and increase revenue, shouldn’t the services be cheaper?
This resparks debate about the billable hour, an unpopular but stubborn fee system used by BigLaw and the Big Four consulting firms. They charge clients for time spent completing tasks, a system critics say incentivises them to drag their feet on work rather than finish tasks efficiently.
"Now we've got a technology that's going to eliminate the sorts of things that allow people to become wealthy off of tedious work," Jeff Bleich, the former top lawyer at Anthropic, said earlier this year.
To be clear: “clients pushing back on big law billable hours” is effectively an evergreen story. Part of the reason billable hour bloat has been difficult to kill is because it's woven into these firms’ compensation and performance structures. It’s not clear yet if AI will be the straw that breaks the camel’s back — and that’s not really the point. The more interesting question is: When AI makes something cheaper, who gets to pocket the difference? Morgan Stanely and Citigroup are certainly not slashing their M&A advisory fees because making a pitch deck is cheaper.
