Tel Aviv, Israel is undeniably the closest thing to a Silicon Valley of the Middle East you can get - a progressive hipster-hub with a warm climate, a flourishing tech industry, and an impressive flair for entrepreneurship. Fixie bikes, gay bars and tech startups are everywhere here.
Even though Israel is a country of just 7.7 million people, and despite being in an almost constant state of war since its founding, the country produces more startup companies than Japan, India and the UK. In fact, Israel has the second-largest concentration of startups in the world - only exceeded by Silicon Valley itself. Also, Israelis have founded more unicorns per capita than any other country in the world, and the country has thirty times as much venture capital investing per person than Europe. As Dan Senor and Saul Singer pointed out in their famous book Start-up Nation - this is an economic miracle.
The hi-tech industry plays a significant role in this trend. Bill Gates has called Israel a “tech superpower”, and according to the Israeli Ministry of Foreign Affairs hi-tech contributes 17.3 percent of the business sector GDP, employs 204,000 people, and exports close to $16 billion. Now, Israel is also becoming a centre for innovation in legal tech. Last year, Tel Aviv hosted its first Global Legal Hackathon, Tech&Law Israel frequently organises events, and there are now 29 active legal tech companies operating in Israel. No company represents this legal tech trend better than LawGeex - a Tel Aviv-based legal tech company that last year raised $12 million for its AI-powered contract review tool.
On a sunny spring day, Legal Tech Weekly visited their headquarters to meet their Director of Marketing and Communications, Yehoshua Oz, for a chat about the innovative spirit of the Israeli people, the role of artificial intelligence in the legal industry, and how to brand a legal tech company.
Chutzpah and cyberwar
“Necessity is the mother of invention. In a country that famously did not have many resources, we had to rely on developing so many solutions on our own. That forces people to think outside of the box. We are used to being given a situation where limitations are finite and defined, so truthfully, part of the Israeli nature is to burst through those whenever possible. And to ignore the precedent, the limitations and the rules. In breaking those you often make a lot of fabulous things, and I think this quality is something innate in the Israeli nature,” Oz says when asked about what he thinks is the reason for Israel's success.
The Israeli's entrepreneurial spirit is sometimes ascribed to their “Chutzpah”-mentality (a Hebrew word that can be translated as cheek or audacity) that makes Israelis more prone to take risks and find innovative solutions. Yehoshua Oz agrees that there is some truth to it. “Israelis don't follow all the norms and social conventions that perhaps others do. For example, in many places where I have worked here, it was normal for a junior employee to speak up in a meeting with senior employees. At least in my experience working in America, they are much more hesitant and they wait to be questioned. Junior employees don't think it is appropriate to speak at the same time as a vice president. Israelis have much less hesitation and the social hierarchy is much flatter. That allows different people to share their ideas, which I think is beneficial,” Oz explains.
In addition, Oz mentions the Israeli Defence Forces as an important factor. Since the foundation of the country in 1948, Israel has been in a constant state of war which has forced Israel to invest large sums in their military technology and conscript most young Israelis for 32 months. Many technologies that were originally developed for the military have since been transferred into products. Oz also believes that the experience forms and fashions young minds to entrepreneurship. “You have young people being given commands by other young people, being given budgets and presented with problems that do not necessarily have solutions mapped out so they have to be creative. Also, we have units that specialise in technology and other types of cyber warfare. There are not a lot of other similar places where 18-year-olds are given that much freedom, responsibility and resources,” says Oz. All these factors reinforce each other since so many tech companies gravitate towards the same locus which has made Tel Aviv a corridor of tech expertise.
Robot vs. human
LawGeex broke into the mainstream when they published a landmark study that gave tangible proof of how artificial intelligence is disrupting the legal industry: “The purpose was to test our platform against the lawyers. We wanted to show how they could perform head-to-head - in terms of their quality, accuracy and speed,” says Oz. The lawyers and LawGeex's algorithm were asked to spot issues in five standard non-disclosure agreements, and it is safe to conclude that the lawyers were outperformed.
LawGeex's artificial intelligence achieved an average 94% accuracy rate, ahead of the lawyers who achieved an average rate of 85%. Furthermore, it took an average of 92 minutes for the lawyers to review all NDAs, while it took the artificial intelligence only 26 seconds. The highest accuracy rating on an individual test was 100 percent for the robot, while a human lawyer achieved 97 % accuracy rating on a single contract.
Recently, LawGeex repeated the result in a competition officiated by Vice News for a special report on "The Future of Work” that was broadcast on HBO. The broadcast refers to McKinsey's estimate that 22% of a lawyer's job and 35% of a paralegal's job can now be automated. And Co-Director of the MIT Initiative on the Digital Economy Andrew McAfee comments, "What we're seeing is that computers are better at pattern-matching than we are, even the expert human beings."
“It shows the power of AI when it comes to routine everyday contracts,” says Oz. However, he does not think that the study is proof that lawyers will become obsolete. “The point of the study was to show the efficiency of the solution and to remind people that tools like LawGeex are not here to replace lawyers but to enhance their work. We see ourselves as allies and partners as we take work off their plate that, not only they shouldn't be doing, they don't want to be doing. No lawyer goes into law school saying, “I wanna sit in a room all day reviewing NDAs.” They want to be doing high-level work, reviewing challenging contracts and doing things that push the business forward and add value. They do not want to go line by line in often highly similar NDAs, day-in, day-out. So the study showed that lawyers don't need to,” Oz explains.
But I guess you somehow showed that fewer lawyers would be needed?
“Think about it in terms of how other tools have changed industries. Until the 1970s, an accountant had to work with giant sheets of papers to do his calculations. Today, when an accountant wants to change a line in a budget, he changes a number in a cell and everything is re-calculated immediately. Back then, the accountant literally had to erase, rewrite, and do calculations by hand when he had to change an expense. Was that a good use of the accountant’s time? Probably not. These people were educated, experienced experts who had something more to deliver to the business than just re-writing numbers. We think of LawGeex as a tool like that. The lawyers are going to put their legal expertise into the machine, through building playbooks where we capture their legal policy; what are they going to decline, accept, reject and also their fallback positions. The machine can do the vast majority of the work, but when human intervention is necessary, it will be quick, efficient and consistent. We are trying to make lawyers’ lives better, and let them focus on what they want to focus on,” Oz answers.
AI as a team member
To support the claim that their AI is meant to enhance lawyers’ work rather than replace them, LawGeex has branded their platform with an original message: Let your lawyers be lawstars.
“We know from our own research that many lawyers feel they are doing work that is not at their level, that is repetitive. So the idea is to show and remind lawyers that they are not just functionaries. They shouldn't be drones, reviewing the same contracts day-in-day-out. They are some of the most valuable resources in many companies, and they should be allowed to shine. So, LawGeex are like the roadies. We prepare the stage and give them the tools to take the stage,” Oz explains.
For now, their message is directed towards legal counsels rather than law firms. While legal counsels are being judged and measured by key performance indicators and return on investment, law firms are usually judged on how many hours they can bill. Because of this, shorter review time may not be to their advantage. In the long run, that might change.
“We have seen that the last 10-20 years have completely changed the face of so many industries, and the companies that are successful today are those who were open to change and realised that they could harness these technologies and become partners with the implementers. We are finding that in the legal world as well. I think when we are looking at the legal world in 10-20 years, it will be hard to remember what it looked like until recently,” he says.
While there is no doubt that the robots can perform, the question is if we are ready to trust artificial intelligence with the legal work?
“There are some clients that work in parallel to make sure they have read every contract side by side for the first week. But after you have sent 20 contracts through the system and you realise that it is working at the same level as you, then you understand that the artificial intelligence can be a member of your legal team,” Oz concludes.