Law firms and legal departments that embrace artificial intelligence strategically are likely to see increased demand for legal services and legal talent rather than widespread workforce replacement, according to Tanguy Catlin, senior partner at McKinsey & Company and director of the McKinsey Global Institute, who spoke at the IBA’s 23rd annual International Mergers and Acquisitions Conference in New York last week.
Speaking during a keynote discussion moderated by Mark Pflug of Simpson Thacher & Bartlett, Catlin outlined the scale of investment flowing into AI infrastructure, the pace of technological development and the organisational changes that he believes will define the next decade for legal professionals.
His message to legal leaders was clear: AI is transforming how legal work is performed, but the firms that benefit most will be those that redesign their operations, develop new skills and invest in technological expertise.
Trillions flowing into AI infrastructure
Catlin began by highlighting the unprecedented level of investment currently being directed towards AI.
Between January 2026 and January 2029, approximately $7trn is expected to be invested globally in AI infrastructure, he said, with technology giants including Amazon, Google and Apple among the principal investors.
The build-out is expected to be accompanied by a dramatic expansion of data-centre capacity. According to Catlin, around 2,600 data centres are projected to be built in the United States alone, consuming approximately 12% of the nation’s electricity supply.
Against that backdrop, he argued that business leaders should prepare for technological advances that will significantly exceed current expectations.
Referring to recent developments in AI-assisted software engineering, Catlin noted that systems can already produce substantial amounts of high-quality code from a single prompt.
“What’s coming is infinitely more powerful than anything we have seen before,” he said.
Yet despite the rapid pace of innovation, Catlin cautioned that businesses will not immediately realise the full benefits of AI. Organisations must first adapt their systems, processes and operating models to take advantage of the technology.
“The systems need to adapt to capture the advances in technology,” he said. “It will take some time for the systems to deploy to activate the full power.”
Three challenges facing leaders
According to Catlin, senior executives across industries are increasingly focused on three fundamental questions.
The first concerns strategy: understanding where AI can create a competitive advantage and determining which operating models organisations should adopt.
The second involves building secure and trusted AI systems that can be deployed responsibly while managing cyber and operational risks.
The third centres on organisations and human capital.
“What will the organisation of the future look like?” Catlin asked.
Historically, companies have organised themselves around knowledge, he said. However, AI’s ability to generate, process and retrieve information is forcing organisations to reconsider how work is structured and where human value is created.
While concerns about job displacement dominate many public discussions, Catlin predicted that the long-term impact of AI would be substantial job creation and workforce transformation.
“There has not been one technology tool that has not created new job consumption,” he said.
The more pressing challenge, he argued, is identifying the skills that will be required in the future and preparing workers to acquire them.
Human judgement remains indispensable
A central theme of the discussion was the relationship between human intelligence and machine intelligence. Asked whether AI could ultimately replace human capabilities, Catlin rejected what he described as a common misconception.
“The first mindset that all of us need to stop using is this idea that technology replacing activities is somehow new,” he said.
He compared AI to earlier technological revolutions that transformed agriculture, manufacturing and computing.
“Robots transformed farms,” he said. “Computers can do math better than humans. So, where should we spend our time? Networking, inspiration and creativity are the skills that will be in greater demand for us.”
Although AI systems are becoming increasingly sophisticated, Catlin argued that their core function remains probabilistic prediction.
“The marginal cost of making predictions will come down to close to zero,” he said.
As prediction becomes inexpensive and ubiquitous, he believes two assets will become increasingly valuable: data and judgement. Of the two, judgement is likely to command the highest premium.
“When I play chess against AI, it’s not using judgement; it’s mathematics,” Catlin said. “Technology will not replace judgement.”
AI is increasing access to legal services
Catlin challenged the widely reported story that AI is already causing large-scale legal job losses.
“We read in the press that jobs are being cut because of AI,” he said. “That’s [not true]. They are cutting jobs because of productivity declines after Covid, not AI.”
Research into AI deployments across industries suggests that the greatest value is generated when technology augments human professionals rather than replaces them. As an example, Catlin described work involving the American Arbitration Association (AAA), which sought to expand access to dispute resolution services through AI. The project involved analysing approximately 10,000 prior arbitration decisions to develop a framework to assist lawyers in reviewing incoming matters.
Historically, large case files consisting of hundreds of pages of documents and images required substantial manual processing by paralegals. AI systems can now structure and organise much of that information automatically. The technology helped reduce case-processing times from months to weeks while significantly lowering costs.
However, Catlin said the result was not reduced demand for lawyers. Instead, lower costs expanded access to legal services, increasing overall demand and requiring more legal professionals to handle the growing volume of work.
“More lawyers were needed because volume increased,” he said.
The example illustrates what Catlin sees as a broader trend across professional services.
“Productivity gains lead to increased demand for legal talent,” he said.
Pflug agreed, observing that if AI increases productivity while lowering barriers to access, demand for legal expertise is likely to grow rather than contract.
A changing model for legal careers
One of the most difficult questions facing law firms and legal departments concerns the development of future legal talent. If technology automates substantial portions of junior-level work, firms may need to rethink traditional apprenticeship models where lawyers acquire experience and judgement.
“If I no longer need the entry-level lawyer, then how do we create the judgement?” Catlin asked. “No one knows the answer to that.”
He suggested that firms must begin to transform their organisations by reassessing their structures rather than focusing solely on individual tasks.
According to Catlin, technology is already capable of performing more than half of the activities undertaken in many organisations. Capturing productivity gains, therefore, requires redesigning roles themselves.
“The only way to capture the productivity gain is to change the roles of the professionals,” he said.
Future workforce planning will increasingly revolve around specific skills rather than job descriptions, he added. Firms must determine which capabilities can be developed internally through training and which must be acquired through recruitment. That analysis should guide long-term talent strategies.
Pflug noted that law schools are producing graduates who are generally comfortable with technology, although AI remains a relatively new area of expertise. Over time, he suggested, educational institutions will adapt and produce graduates with stronger AI-related capabilities.
Lawyers, engineers and the future firm
The AI transformation may require law firms to recruit talent traditionally associated with technology companies.
“You might need to hire many more engineers than lawyers if you use AI to accelerate the way you do your jobs,” Catlin said.
Engineers will play an increasingly important role in building and managing the systems, workflows and infrastructure required to support AI-enabled legal services.
Pflug observed that many firms have already increased investment in non-legal and non-technical expertise in recent years, reflecting the growing complexity of modern legal operations.
The economic implications could also reshape legal pricing models.
Catlin predicted that commodity legal work will become even less expensive as AI reduces production costs, while high-value advisory work driven by judgement and expertise will command premium pricing.
“If what you offer is a commodity, the price will go down,” he said. “In the future, I think lawyers will be hired for outcomes and paid for outcomes.”
Premium legal services, he argued, are unlikely to disappear.
Drawing a comparison with luxury brands, Catlin noted that clients who value elite expertise will continue to seek premium providers.
“Remember that luxury goods are never on sale,” he said, reminding attendees of the value of premium brands and providers.
Three priorities for law firm leaders
Asked what advice he would give to legal leaders today, Catlin identified three priorities.
First, firms should undertake a rigorous assessment of the talent and organisational structures they will need in the future.
Second, they should examine their existing operations and redesign them from the ground up to maximise value from currently available AI tools.
Finally, firms must ensure they have strong technological leadership and expertise.
“You are at an inflexion point,” Catlin said. “You can create more technological debt if you don’t know what you are doing.”
For legal leaders navigating the evolution of AI, the challenge is no longer deciding whether the technology will reshape the profession. The challenge is determining how quickly they can adapt their firms, workforces and business models to take advantage of it.
Those who do, Catlin suggested, will be positioned to benefit from an expanding legal market in which technology amplifies human expertise rather than replaces it.
Email your news and story ideas to: [email protected]
