Law’s future from finance’s past - ReinventLaw Silicon Valley

Law’s future from finance’s past
Michael Bommarito
ReinventLaw Silicon Valley 2013

Transcript

1. Law’s future from finance’s past Michael J. Bommarito II Quantitative Legal Solutions, LLP Reinvent Law: Silicon Valley 2013-03-08
2. GOAL Motivate two questions: • Where can we go? • Who can we learn from? Analogy from broad strokes characterizations. Devil-in-the-details. Still valuable as a thought experiment. Quantitative Legal Solutions, LLP; www.qlsllp.com
3. RISK • From 10k’, law and finance are just two risk management strategies (finance ⊂ law?). • Tools for entities as large as U.N. or as small as an individual. • (Hammers are hammers; can be used for good and bad.) Quantitative Legal Solutions, LLP; www.qlsllp.com
4. HOW? (FINANCE) Incentives Creativity Adoption Formalization Feedback Quantitative Legal Solutions, LLP; www.qlsllp.com
5. HOW? (FINANCE) Incentives • Exogenous – Macroeconomic environment (end of post-war boom, globalization) – Regulatory environment (de-peg in ‘71) • Endogenous – Labor/process bottlenecks as transaction volumes grow
6. HOW? (FINANCE) Creativity • Create new “products” – Commoditized, non-commodity derivatives • FX and interest rate futures • Stock and index futures and options • Volatility futures and options • Create new service delivery models – Integrated exchanges and clearinghouses – Online/electronic brokerage Quantitative Legal Solutions, LLP; www.qlsllp.com
7. HOW? (FINANCE) Adoption 0.00 50,000.00 100,000.00 150,000.00 200,000.00 250,000.00 300,000.00 350,000.00 400,000.00 1960 1970 1980 1990 2000 2010 Reported share volume (mils.) Reported share volume (mils.) Quantitative Legal Solutions, LLP; www.qlsllp.com
8. HOW? (FINANCE) Feedback & Formalization • Trillions of recorded actions. • Thousands of derivative/securitized products. • Hundreds of theories and models. Quantitative Legal Solutions, LLP; www.qlsllp.com
9. RESULT (FINANCE) • Centralized clearing • ETFs and mutual funds • Global, automated, near-24/7 markets • Online individual brokerages • Derivatives products and exchanges • Structured products, e.g., ABS, ILS Quantitative Legal Solutions, LLP; www.qlsllp.com
10. HOW? (LAW) Incentives • Exogenous – Supply-demand mismatch post-2008 – Mostly-fixed-cost business models – “Demand destruction” due to sustained high price level • Endogenous – Unauthorized practice laws (CPAs?) – Ownership interest rules (GCs?) Quantitative Legal Solutions, LLP; www.qlsllp.com
11. HOW? (LAW) Creativity • Why we’re here - look around! – Regulatory policy proposals (ABA, state legislatures) – Technology-enabled delivery models – Technology-enabled decision models – Frameworks for safe commoditization w.r.t. fact pattern variation – … Quantitative Legal Solutions, LLP; www.qlsllp.com
12. RESULTS (LAW) • Expansion in market demand – Undo “demand destruction” – Segment and profitably service low-cost market – Educate consumers w.r.t. legal needs • Improve lawyer efficiency – More risk management per unit of labor – Opportunities for engaged firms on buy and sell side Quantitative Legal Solutions, LLP; www.qlsllp.com
13. RESULTS (LAW) • Net societal effects – Better overall access to legal remedy – Less unmanaged risk as a society – Increased inequality intra-lawyers Quantitative Legal Solutions, LLP; www.qlsllp.com
14. ASIDE ON COMPUTING N.B.: Computers necessary but not sufficient. • Real change are: – Conception of process, value, and role – Formalization from art to science - measurement Quantitative Legal Solutions, LLP; www.qlsllp.com
15. WHEN? So why not yet? What can we work on? • Data, data, data; formalize, collect, clean • Commoditization and creativity • De- or re-regulation; • Old dogs, old tricks; Kuhnian labor replacement Quantitative Legal Solutions, LLP; www.qlsllp.com
16. Thanks! Michael J. Bommarito II Quantitative Legal Solutions, LLP http://www.qlsllp.com/