Law’s future from finance’s past        Michael J. Bommarito II     Quantitative Legal Solutions, LLP       Reinvent Law: ...
GOAL Motivate two questions:• Where can we go?• Who can we learn from?Analogy from broad strokes characterizations.Devil-i...
RISK• From 10k’, law and finance are just two risk  management strategies (finance ⊂ law?).• Tools for entities as large a...
HOW? (FINANCE)    Incentives     Creativity     Adoption   Formalization     Feedback               Quantitative Legal Sol...
HOW? (FINANCE)Incentives• Exogenous   – Macroeconomic environment (end of post-war boom,     globalization)   – Regulatory...
HOW? (FINANCE)Creativity• Create new “products”   – Commoditized, non-commodity derivatives      • FX and interest rate fu...
HOW? (FINANCE)Adoption                        Reported share volume (mils.)400,000.00350,000.00300,000.00250,000.00200,000...
HOW? (FINANCE)Feedback & Formalization• Trillions of recorded actions.• Thousands of derivative/securitized products.• Hun...
RESULT (FINANCE)•   Centralized clearing•   ETFs and mutual funds•   Global, automated, near-24/7 markets•   Online indivi...
HOW? (LAW)Incentives• Exogenous   – Supply-demand mismatch post-2008   – Mostly-fixed-cost business models   – “Demand des...
HOW? (LAW)Creativity• Why we’re here - look around!   –   Regulatory policy proposals (ABA, state legislatures)   –   Tech...
RESULTS (LAW)• Expansion in market demand   – Undo “demand destruction”   – Segment and profitably service low-cost market...
RESULTS (LAW)• Net societal effects   – Better overall access to legal remedy   – Less unmanaged risk as a society   – Inc...
ASIDE ON COMPUTINGN.B.: Computers necessary but not sufficient.• Real change are:   – Conception of process, value, and ro...
WHEN?So why not yet? What can we work on?•   Data, data, data; formalize, collect, clean•   Commoditization and creativity...
Thanks!   Michael J. Bommarito IIQuantitative Legal Solutions, LLP   http://www.qlsllp.com/
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Law's Future from Finance's Past - ReInvent Law, Silicon Valley

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Law's Future from Finance's Past - ReInvent Law, Silicon Valley

Quantitative Legal Solutions, LLP
Reinvent Law: Silicon Valley

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Law's Future from Finance's Past - ReInvent Law, Silicon Valley

  1. 1. Law’s future from finance’s past Michael J. Bommarito II Quantitative Legal Solutions, LLP Reinvent Law: Silicon Valley 2013-03-08
  2. 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. 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. 4. HOW? (FINANCE) Incentives Creativity Adoption Formalization Feedback Quantitative Legal Solutions, LLP; www.qlsllp.com
  5. 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. 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. 7. HOW? (FINANCE)Adoption Reported share volume (mils.)400,000.00350,000.00300,000.00250,000.00200,000.00 Reported share volume150,000.00 (mils.)100,000.00 50,000.00 0.00 1960 1970 1980 1990 2000 2010 Quantitative Legal Solutions, LLP; www.qlsllp.com
  8. 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. 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. 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. 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. 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. 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. 14. ASIDE ON COMPUTINGN.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. 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. 16. Thanks! Michael J. Bommarito IIQuantitative Legal Solutions, LLP http://www.qlsllp.com/
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