Bob Simon (00:00:00):
What did you major in?
Jack Newton (00:00:00):
So I majored in computer science, seeing [inaudible 00:00:02].
Bob Simon (00:00:02):
Should we do this episode in binary code?
Jack Newton (00:00:04):
Well, you could do it in binary code, but we could talk ChatGPT and some of the neural network related stuff.
Bob Simon (00:00:10):
This episode might already be an algorithm.
Jack Newton (00:00:12):
Yeah, we're deep fakes of each other.
(00:00:14):
If we're a year or two earlier, I don't think it would've been successful. And if we're a year or two later, we wouldn't have been the first.
Bob Simon (00:00:20):
Right.
Jack Newton (00:00:21):
Two people. We raised a total of about $100,000.
Bob Simon (00:00:24):
So your valuation's in the Bs.
Jack Newton (00:00:26):
Last round we did with Series E, 1.6 billion.
Bob Simon (00:00:46):
Wow.
(00:00:50):
Welcome to this episode of Bourbon of Proof, where we talk to those who have succeeded at law and life, and we do it over very fine spirits with a great conversation. And today we're very honored to have the co-hosts Mr. Charles Lew, who was on episode one of Bourbon of Proof, it's been some time.
Jack Newton (00:01:04):
Was that episode one?
Bob Simon (00:01:05):
Yeah. We're actually live today at his location called The Firm. So The Firm is a members only whiskey bar. Charles, tell us what we're doing here today. What is this spot?
Charles Lew (00:01:17):
What we're doing here today is drinking. We're drinking.
Bob Simon (00:01:20):
There we go, and there we have it. So it's leading to our esteemed guest. This is our guest today. We have Mr. Jack Newton on it. For those of you don't know, Jack, look him up. So Jack is the founder of a legal technology case manager platform known as Clio. And it is, I think, the biggest case management platform, at least-
Jack Newton (00:01:38):
That's right.
Bob Simon (00:01:39):
... on users, on-
Jack Newton (00:01:41):
Everything.
Bob Simon (00:01:41):
... everything. The biggest. Do you like things big?
Jack Newton (00:01:43):
That's the biggest in the world.
Bob Simon (00:01:45):
Biggest in the world. So some 800, 900 employees now?
Jack Newton (00:01:49):
Yeah. Pushing 1,000.
Bob Simon (00:01:51):
Imagine that overhead. Speaking of overheads, let's get to our first drink. So Jack, I bought for you, brought for you... I bought it too... but something that is going to bring you back some, but this is Alberta Premium. This is a cask-strength rye. This is from your homeland, which we're going to talk about Canada and Alberta. But this is one of the whiskeys of the year, maybe two or three years ago, a limited edition. I'm going to pour this. I think I know why they had to make it cask strength.
Jack Newton (00:02:23):
It's a great whiskey.
Charles Lew (00:02:25):
And it's a screw top.
Bob Simon (00:02:26):
Oh, shit. I should have only done about one ounce of this because it'll... Do you know how you start a meal with a good base?
Charles Lew (00:02:34):
Yeah, that's a good base.
Bob Simon (00:02:36):
This is fucking good base.
Charles Lew (00:02:37):
I think they generally mean the food base.
Bob Simon (00:02:39):
No, no.
Charles Lew (00:02:41):
We're going to just cast. Cheers.
Bob Simon (00:02:42):
Cheers. Thank you for coming on board [inaudible 00:02:44].
Jack Newton (00:02:44):
Thank you for having me. Cheers. Cheers.
Bob Simon (00:02:46):
Careful with this one. I think this will actually fuel the flux capacitor.
Jack Newton (00:02:55):
Ooh.
Bob Simon (00:02:56):
Wow. It's actually better than I remember. It must have been breathing for a year.
Jack Newton (00:02:59):
That's great.
Bob Simon (00:03:02):
So this is 66% alcohol.
Jack Newton (00:03:03):
Wow.
Charles Lew (00:03:05):
Nice. First call.
Bob Simon (00:03:06):
Jack, bring us back to Alberta. Why are they making whiskey that hot?
Jack Newton (00:03:11):
Well, it gets down to minus 40 in Edmonton, Alberta, which is where I grew up, and that'll warm you up quick.
Bob Simon (00:03:21):
I already feel it.
Jack Newton (00:03:22):
Minus 40 is that magic number where Celsius and Fahrenheit are the same, by the way, so it's fucking cold in either measure. And really we've got Edmonton, Alberta to thank for Clio, by the way.
Bob Simon (00:03:36):
Why is that?
Jack Newton (00:03:38):
It's where me and my co-founder Ryan Gauvreau, met each other when we were eight years old, grade three, Rio Terrace Elementary School in Edmonton, Alberta. We hit it off immediately, became best friends through elementary and junior high school, high school. Played tons of video games, we loved Doom, Doom 2, StarCraft back when you had to do a dial-up modem to play those kind of online games.
Bob Simon (00:04:08):
Did you ever get into RPGs?
Jack Newton (00:04:10):
We got into RPGs. Baldur's Gate was one of the first ones we got into.
Charles Lew (00:04:13):
That's a good one.
Jack Newton (00:04:15):
Which, by the way, is also created in Edmonton with BioWare one of the bigger software companies that in Edmonton. And cut to when we were graduating from university, we started talking about one-
Bob Simon (00:04:32):
What did you major in?
Jack Newton (00:04:32):
So I majored in computer science, specialized in machine learning, ended up getting my master's degree in machine learning.
Bob Simon (00:04:40):
Should we do this episode of binary code?
Jack Newton (00:04:41):
Well, we could do it in binary code, we could talk ChatGPT, it's really cool to see some of the neural network related stuff.
Bob Simon (00:04:50):
This episode might already be an algorithm.
Jack Newton (00:04:52):
Yeah, we're deep fakes of each other. Exactly.
Bob Simon (00:04:56):
He's not even wearing a hat, it's his avatar.
Jack Newton (00:04:58):
It's not far off. It's not far off. But yeah, I specialized in computer science.
Bob Simon (00:05:02):
Because it's far out.
Jack Newton (00:05:04):
My co-founder Ryan ended up going out to Vancouver for university, got his MBA at University of British Columbia, and then became the IT manager at one of the biggest law firms in Canada called Gowling. And it was through his experience at Gowling that we saw there was an opportunity to really bring technology to law firms, and the law firms big or small.
Bob Simon (00:05:28):
So what years are these?
Jack Newton (00:05:30):
So this would be around 2005 to 2007. We started thinking about, "What opportunity is there out there for really redefining and revolutionizing and disrupting an industry?" Around 2005, 2007, in that time span, we saw the cloud emerging as-
Bob Simon (00:05:52):
It's crazy to think as I sit here today, I always feel like Clio's always been around. I just feel like this has always just been there. But going back, I mean 2005 I was just starting law school. Well, I finished law school in 2005.
Jack Newton (00:06:01):
And what we were shocked by when we saw the emergence of the cloud, and Salesforce was becoming really successful, there was 37signals and Basecamp and what they were doing for smaller businesses. When we saw this huge transformative impact that the cloud was having on almost every industry, we looked to legal and said, "Would this be an interesting place to apply cloud computing to?" And we were shocked by the fact there was nothing. And to your point, in 2005 there was a bunch of frankly pretty shitty on-premise software, lawyers did not adopt it. And especially SMB, small to medium size-
Bob Simon (00:06:41):
What's SMB mean?
Jack Newton (00:06:42):
Small to medium size law firms, which we kind of define as the one to hundred segment that we really play in most strongly.
Bob Simon (00:06:48):
What is most of the users in law firms are using? Is it those small medium businesses or the huge ones on Clio? What's that like for you?
Jack Newton (00:06:55):
So it's interesting. We really started out with the solos, focused on the solos because we saw them as the most overlooked segment in legal. And all those on-prem vendors were really focused on the Am Law 100 because it's the only place that-
Bob Simon (00:07:10):
What's crazy to me is we do a lot of stuff with solos, that's what we call it. But I think that solos are the most gifted lawyers because they have the entrepreneurial spirit.
Jack Newton (00:07:17):
Absolutely. And it's especially as an outsider to legal, my concept of what the average law firm was basically shaped by network TV and movies, so I thought the average lawyer practiced in a 500,000-person law firm in a big expensive AAA office based downtown. And then you look at the data and it's actually shocking for anyone that's coming from outside the industry. It's shocking for a lot of people inside the industry. 80% of lawyers practice in firms of 10 lawyers or less.
Bob Simon (00:07:45):
Really?
Jack Newton (00:07:46):
50% of all lawyers practice as solos. They're just hanging a shingle and they're the entrepreneurs of the legal space.
Bob Simon (00:07:53):
And it's getting easier and easier for them to do. By the way, this is burning my lips. If you put it on your lips, it actually burns.
Jack Newton (00:07:58):
It's tasty, but boy, it's...
Charles Lew (00:07:59):
Delicious. I actually started with Clio as a solo with the assistant.
Jack Newton (00:08:04):
Oh, is that right?
Charles Lew (00:08:04):
Yeah.
Jack Newton (00:08:04):
Awesome.
Charles Lew (00:08:09):
So I'm going to not do it, but I wanted to fanboy with [inaudible 00:08:12]
Bob Simon (00:08:11):
Do you want his autograph?
Charles Lew (00:08:14):
I've got it already.
Bob Simon (00:08:15):
That's fantastic.
Jack Newton (00:08:16):
Well, thank you.
Charles Lew (00:08:17):
[inaudible 00:08:17] pen on my shoe.
Jack Newton (00:08:18):
Nice.
Bob Simon (00:08:19):
Is that why you bought two pairs of shoes.
Charles Lew (00:08:19):
I bought two pairs, yeah. But-
Bob Simon (00:08:20):
I thought That was just your thing.
Charles Lew (00:08:22):
... I'm a big fan of... Shoes are kind of my thing. Wait, before we get into that, let's talk about your shoes.
Bob Simon (00:08:30):
Oh, well I'm going to-
Charles Lew (00:08:30):
I hear that's the second part?
Bob Simon (00:08:31):
No, this is going to be... this pairs with the whiskey. These boots pair with the whiskey.
Charles Lew (00:08:35):
I don't want to mess it up. But big fan of Clio and always was.
Jack Newton (00:08:38):
Thank you.
Charles Lew (00:08:39):
I have got actually a question, take it back and kind of jumped ahead, but take it back, when you jumped into AI and machine learning, that was really just the thing of science fiction. It was just no one was really doing that, there was people talking about it. What inspired you? Was that science fiction inspiration, or were you just one of those tech kids that said, "AI is going somewhere and I want to be ahead of it"?
Bob Simon (00:09:01):
Were you just doing the [inaudible 00:09:02] in grade school?
Jack Newton (00:09:05):
You're absolutely right about the timing, by the way. This was before AI and machine learning were cool. This was before Google or Amazon or any of those companies started pouring money into machine learning.
Charles Lew (00:09:17):
You were science fiction back when you went to school for it.
Jack Newton (00:09:20):
Yeah, it was science fiction and what I was really inspired to go and study machine learning more closely was actually my first job out of school. So I got my bachelor's degree in computer science, got hired to be software developer number one at this University of Alberta spinoff company called Chenomx. And they hired me to code this software. And the platform they were building was really cool. I'll describe it really briefly. They were using a nuclear magnetic resonance spectrometer, which is-
Bob Simon (00:09:53):
What the fuck does that mean?
Jack Newton (00:09:54):
So it sounds complicated.
Bob Simon (00:09:54):
It sounds like a Homer Simpson thing.
Jack Newton (00:09:57):
So what it is is a very high field, powerful version of an MRI scanner. So you think about an MRI scanner, you're applying that to your whole body and it reorients the water molecules in your body. And then when they release the magnetic field, energy comes out, and they're able to see the energy that comes from the water density in your body and do all sorts of diagnostics. The NMR machine is basically the same concept except a very strong magnetic field applied to a 50 microliter biofluid sample, so that could be urine, blood-
Bob Simon (00:10:30):
You almost said semen.
Jack Newton (00:10:31):
Semen, you name it. Cerebral spinal fluid is another one of the fluids we studied quite a bit. And then with this one scan you could potentially see 250-plus compounds with just a six-second scan. And my job was, "Well, write the software that figures out what 250 compounds are in that spectrum."
Bob Simon (00:10:59):
Wow. Geez.
Charles Lew (00:10:59):
So it's like [inaudible 00:11:00]?
Jack Newton (00:11:00):
Yeah, but it was real. It was real. And what I discovered very quickly in this job was that I was vastly under qualified to solve this problem. There's a very interesting numerical optimization but also machine learning problem embedded in there. And I was also so captivated by the problem, I actually stood up a software development team and then went back to school and got my master's degree studying machine learning.
Charles Lew (00:11:22):
So you were early twenties when this happened?
Jack Newton (00:11:23):
Yeah, that's right. I was in my early twenties. This was in the early 2000s. Now I came back to Chenomx when I was done with my master's degree where I actually acquired a bunch of cool new skills to go and work on this. A very interesting fork in the road in my life, by the way, was deciding... I was being recruited at the end of my master's degree to go work at the University of Toronto, get my PhD with Jeff Hinton, who is the father of neural networks and is the father of all this amazing stuff that's happening with DeepMind. So yeah, it was very like, go into academia or go into industry was one of the major life choices for me early in my career, and I obviously chose the industry path.
Bob Simon (00:12:03):
Well, don't you feel like you can change more going the industry path because you're actually there doing it rather than in academia?
Jack Newton (00:12:08):
And the other thing is with a PhD and going into academia, and again this was before any of the cool industry around AI and machine learning existed. So if you got a PhD in machine learning, you were really saying, "I'm going into academia." And going into academia is really about choosing a narrow slice of some discipline and spending your whole life becoming the world expert in that narrow slice of that discipline. And I just worried, "What if I get bored?" And I remember going to the UFT and interviewing, and Jeff Hinton talked about the fact that over half of his PhD students dropped out, never finishing a thesis, sometimes five or six years into their studies, not finding a thesis topic to attach to.
Charles Lew (00:12:51):
And then what do they do?
Jack Newton (00:12:52):
Well then they maybe go into industry, sometimes they teach, sessional instructors. But it's a really expensive mistake to make almost, and you can't be guaranteed you're going to find the right thesis topic.
Bob Simon (00:13:05):
Life problem too.
Jack Newton (00:13:06):
So I saw the industry path is I get to choose my own destiny if I get bored anytime I can change my job. And what's been really cool about my journey with Clio is I'm 15 years into this journey now, actually, next month-
Bob Simon (00:13:18):
Well, let's talk about the whiskey that you brought then.
Jack Newton (00:13:20):
So yeah, this is a good segue. But I'll be celebrating 15 years of Clio, but every quarter my job is changing. It's a new job. I've learned how to grow a company from a two-person company in 2008 to an almost thousand-person organization today. So that journey's been fun, that journey's been accomplished with the help of some great bourbon along the way.
(00:13:50):
This is my contribution to our session today, which is the WhistlePig 15. And you can see-
Bob Simon (00:13:56):
It's as old as Clio.
Jack Newton (00:13:58):
It's as old as Clio. We're making some good progress, they're both aging pretty well.
Bob Simon (00:14:02):
Yeah, it seems like you started early with this one.
Charles Lew (00:14:04):
Exactly, yeah.
Jack Newton (00:14:05):
Opened it in January to celebrate the year.
Bob Simon (00:14:08):
This is good. This is also one of my favorites. They do this one in Vermont. I think it's the only distiller I know that is in Vermont.
Charles Lew (00:14:14):
We've drank that before.
Bob Simon (00:14:16):
Oh yeah, we've had many. This is one of my most consistent favorite ryes. I'm not going to do as heavy as a pour, gentleman, just because I want Charles to be able to stand up after this.
Charles Lew (00:14:27):
Yeah, let's do that.
Bob Simon (00:14:28):
Or not, actually.
Charles Lew (00:14:29):
Keep me standing.
Bob Simon (00:14:31):
That's fine.
Jack Newton (00:14:33):
So yeah, that experience at Chenomx was really formative for me. It's where I caught the startup bug as well and I realized I love building, I love the process of taking-
Bob Simon (00:14:44):
Isn't that the most exciting shit ever? I feel like it's-
Jack Newton (00:14:46):
It is. The whole zero to one journey is just so-
Bob Simon (00:14:48):
Peter Thiel, right?
Jack Newton (00:14:49):
Fun.
Charles Lew (00:14:49):
Zero to one?
Bob Simon (00:14:50):
It is.
Jack Newton (00:14:50):
Yeah. Peter Thiel talked about that and it's such a amazing thing to create something out of nothing. And it's what I loved about programming as well when I got into computer science, this idea you can sit down at a computer and create something like Clio out of nothing.
Bob Simon (00:15:06):
So a lot of people, they probably surmise founder, CEO, biggest case manager platform and is like, "This guy, he's just a businessman. He don't code."
Jack Newton (00:15:14):
Yeah. I wrote the first versions of Clio.
Bob Simon (00:15:16):
That's crazy. I didn't even know that.
Jack Newton (00:15:18):
Alongside Ryan, he and I were the sole software developers. You know what it's like in the early days of building something, you're wearing every hat, first salesperson, first customer support agent, first software developers. And amazingly there's still some of my code in production, so that's really battle-tested code at this point.
Bob Simon (00:15:41):
Law firms are all startups too, and the best lawyers I know, we started solos. You do everything, man, from filing your own complaints, make your own copies and-
Charles Lew (00:15:49):
At the inflow at your law firm [inaudible 00:15:52].
Jack Newton (00:15:54):
Pick up the phone with a different voice.
Bob Simon (00:15:55):
Yep. Exactly. Burner phones. No, but we used to... my brother and I, he's my little brother when he graduated college, and this was 2007 or '08, so right when Clio was starting in 2009, we just had a big copier there, man, and we were scanning... this is before people were... a lot papers are like... we're going paperless now. So we were just scanning in every piece of mail, putting into just little folders. We had no case management platform, we were just trying to wing it. We weren't on the cloud. If a server went down, we were totally fucked.
Jack Newton (00:16:23):
But you see the value of paperless though. You're early in adopting that. And we were just mean thinking about when we launched the company is a very interesting time. Steve Jobs had just announced the first iPhone. The cloud.
Bob Simon (00:16:36):
Wow. To think this was only 15 years ago.
Jack Newton (00:16:38):
The cloud was just something people were starting to talk about. We didn't even have a word for it, it was application service provider or web apps.
Charles Lew (00:16:45):
Was Clio a success out the gate or did you go through that? I-
Bob Simon (00:16:49):
Let's have a little... Let's taste the 15 years of success of Clio.
Jack Newton (00:16:52):
Hey. Cheers to that.
Bob Simon (00:16:52):
Cheers to your company, man.
Jack Newton (00:16:53):
Thank you.
Bob Simon (00:16:54):
It's a journey and it's a lot of war wounds, very likely.
Jack Newton (00:16:58):
It's a lot, yeah, but also a lot of fun. A lot of fun. But yeah, it was interesting, Charlie, we got, I think, the timing right. And if we were a year or two earlier, I don't think it would've been successful. And if we were a year or two later, we wouldn't have been the first. So I think that's a good amount of luck that goes into that. But for me, one of the biggest risks we ever had with Clio, and everyone we pitched the business plan to was like, "This seems like a great idea, but are you going to be able to get lawyers to wrap their heads around the idea of putting their data in the cloud and trusting a third party with their data?"
(00:17:40):
And again, we had what seemed like a pretty audacious perspective on that in 2008, which is I think now a generally accepted truth, but we said, "We can manage your data and secure it better than the average solo small firm can. Look at what the average solo small firm is doing, they've got one server in a broom closet. You're lucky if there's a backup, you're lucky if there's a good firewall-"
Bob Simon (00:18:02):
Now there's security breaches. It's a high piracy rate these days.
Jack Newton (00:18:05):
And the data breaches, by the way, are almost exclusively data breaches of on-premise systems.
Bob Simon (00:18:10):
So really?
Jack Newton (00:18:11):
If you look at HIPAA for example, where large scale data breaches have mandatory data reporting requirements around what the root cause of the data breach was, 10 of the top 10 last year were physical data breaches in the sense that... what I mean by that is somebody leaving a USB key with 10,000 patient records behind a security terminal. My favorite was there was something like 150,000 records. The second-largest breach of the year was a hard drive being stolen out of the back of a truck on its way to a data destruction facility. So the hard drive's on its way to get shredded and gets stolen with 150,00-
Bob Simon (00:18:52):
So what's the value? I was wondering where these... I see people ransoming like, "Pay us X, Y, Z or we'll steal your data." What is their use for all that data? What is that worth?
Jack Newton (00:19:01):
I think it's all around identity theft. You're getting SINs in there. You're getting all the key data that's going to... mailing address, social insurance numbers-
Charles Lew (00:19:16):
Some are on the dark web of identities.
Jack Newton (00:19:16):
Yeah, it's probably being used for insurance fraud. So there's value in that data. And again, all the major data breaches were rooted in physical data. So that was the one bet we had to make in 2008 when we launched Clio is-
Charles Lew (00:19:31):
So you never had a struggle sleeping on your brothers-
Jack Newton (00:19:34):
Oh, we struggled. It was not a hit. We saw enough success, but here's what made it tough. Even though the investors we were pitching to thought this was a great idea, the fundraising environment in 2008, 2009 was not an amazing time to be raising money, we were in the depths of the Global Financial Crisis. We had investors. You rewind the clock, it even makes what we're going through today seem relatively tame by comparison. Remember people were worried the financial system as we know it was going to collapse and-
Bob Simon (00:20:10):
It's crazy on our end, the legal profession's almost insulated from these types of recessions.
Jack Newton (00:20:13):
It is.
Bob Simon (00:20:13):
It's crazy. It's like we add value. Every time you look at it. That's why I invest, mostly everything that I have goes right back into either real estate brick where I am, but more importantly into legal tech or my firm because it's recession proof.
Jack Newton (00:20:26):
It is. And we thrived through that recession, but we could not raise money. We grew nicely as a company and we saw that early adopters jump on. We had solos. I remember launching Clio, we launched our beta at ABA Techshow in March of 2008.
Bob Simon (00:20:41):
Wow. The ABA Techshow?
Jack Newton (00:20:42):
In Chicago. So it was the first conference. It was funny, we were about to throw in the towel because we initially had started trying to sell-
Bob Simon (00:20:49):
How big is your company at this point?
Jack Newton (00:20:50):
Two people. Me and Ryan.
Bob Simon (00:20:51):
Oh, god.
Jack Newton (00:20:52):
Me and Ryan. And we'd spent the better part of the year.
Bob Simon (00:20:54):
That's bananas.
Jack Newton (00:20:56):
Two people. We'd raised a total of about $100,000, friends and family round valued the company at a million dollars, by the way, so everyone's done well.
Charles Lew (00:21:06):
It's a typical number.
Bob Simon (00:21:07):
But just, your valuation is in the Bs
Jack Newton (00:21:10):
Last round we did a series E, 1.6 billion.
Bob Simon (00:21:14):
So they've done well.
Jack Newton (00:21:17):
They've done well. And we saw this amazing response to the ABA Techshow where some people came up to us and were almost hugging us saying, "We've been..." The solos I was talking about, that were waiting for somebody to solve their problems.
Charles Lew (00:21:32):
Do you think it was a generational thing too? I assumed those were almost-
Jack Newton (00:21:35):
Well, it was a very polarized response. And it was partially generational, but not entirely, where there was what Ryan and I called, at that time, the Facebook generational lawyers that grew up using the web, grew up with Gmail, and they knew that the web was the future. And they, again, came up to us and said, "Thank you for building this."
(00:21:54):
And then we also had people coming up verbally attacking us saying, "You guys are irresponsible to be offering a platform like this and inviting lawyers just to trust a third party. Who do you think you are?" And again, it was this very polarized response. And it was honestly about 50-50 in 2008.
Bob Simon (00:22:13):
That's when you know you're onto something, if people [inaudible 00:22:15].
Jack Newton (00:22:15):
Well, exactly. If you don't make somebody angry, it's probably not an interesting idea. And so what we realized, what was very interesting by the way, was all the on-prem vendors, the Amicuses, and the Abacuses, and the Time Matters' of the world, that LexisNexis', they started seeding this fear, uncertainty and doubt or FUD campaign about the cloud too with all their consultants saying, "What if these guys go belly up? You're going to lose all your data. What if they get hacked?" And they-
Charles Lew (00:22:43):
Was that in response to you?
Jack Newton (00:22:44):
In response to us? So that was also where we knew we were onto something. We've got a billion-dollar company in the form of LexisNexis and these big established companies like Amicus attacking us because they're afraid, and they know they can't innovate anymore. And we realized at that point that we'd either get dragged along by this conversation about security and is it ethical and so on, or we can lead that conversation. So that's very much what we did, we-
Bob Simon (00:23:14):
And it's hard to do that with $100,000.
Jack Newton (00:23:16):
Right.
Bob Simon (00:23:16):
Because if you can't control the microphone at that point.
Jack Newton (00:23:18):
So here's one of my favorite Clio founding stories is we're pounding the pavement, pitching every VC and angel we can find back in 2008. And again getting this kind of heartbreaking feedback, which is, "This is one of the best decks we've ever seen, we love the business plan, we're just not writing checks right now."
Bob Simon (00:23:38):
Yeah, "We just have money."
Jack Newton (00:23:39):
"We're putting our heads in the sand, check back..." It's more like raising money right now, frankly.
Bob Simon (00:23:44):
I've heard the saying, if you're not in this legal world, people are... they're not going to do it.
Jack Newton (00:23:50):
They're not. They're just not just putting their heads down and saying let's-
Bob Simon (00:23:52):
Which I think is a shame because I think this is the time where you actually [inaudible 00:23:55].
Jack Newton (00:23:55):
It's a great time to build. With the benefit of hindsight, I realize there's still scrappiness in our DNA from being founded in a recession that is helping us today.
Bob Simon (00:24:05):
When did you found your firm? When did the Lew firms start?
Jack Newton (00:24:07):
I went through a couple of iterations. I went through an original one in about 2006-07, and then we kind of postponed everything as we grew the restaurant group up to about 2014-15. And then somewhat to your point, and we've talked about this multiple times, well, right around 2014-15, we just noticed this vacuum for entrepreneurial lawyers or lawyers who were business lawyers who had actually owned a business. So rather than sitting with the lawyer who said, "I'm a business lawyer," and they had never went through the payroll crisis, I was joking say, "If you've never not had money for payroll, then you shouldn't be giving business advice."
Bob Simon (00:24:50):
I want to make payroll next month.
Jack Newton (00:24:51):
How do you make... Well, that's-
Bob Simon (00:24:53):
We started by firm in 2010, started 2009, and same thing about the obsession. If you don't know those hard docs, man, my brother would be like, "Shit." We didn't take a salary for a couple of years. We took no money because we had [inaudible 00:25:05].
Jack Newton (00:25:05):
You look at that bank account balance and wonder how you're going to make payroll in two weeks.
Charles Lew (00:25:11):
People would say, "Why don't you advertise more?" And you'd say, "I don't." And I used to always get that question and I'd kind of laugh and kind of smirk to myself and say, "Well, we're barely... the literal lights are barely on, so advertising, it's a luxury [inaudible 00:25:26]."
Bob Simon (00:25:25):
Well, then let's talk about a little bit of marketing and advertising. This is where we're going to go with this one.
Charles Lew (00:25:29):
All right.
Bob Simon (00:25:35):
The next whiskey I selected, this is from Sonoma Distilling Company. And this is the California one, so we're taking you from Alberta, Canada-
Jack Newton (00:25:41):
I don't think I've ever had a whiskey from Sonoma.
Bob Simon (00:25:43):
Because I don't think they do a lot of them. But this one we actually did for the Law-Di-Gras edition. We gave this at a Law-Di-Gras, it has a little thing on so you can see where it came from. But let's talk about legal conferences because Jack also has been one of the pioneers in community building. I mean, you're community building within Clio and within Clio users they have their own conference called ClioCon, which I'm a big... Charles and I are both big Comic Con guys, we like comics a lot, Dungeon Dragons and all the weird shit.
(00:26:13):
And the other reason is I wore those boots, which we'll talk about because they do it in Nashville. And I'm very excited to get up there with my Simon Landry [inaudible 00:26:23]. So this is what happens when you get drunk at your sister's wedding in Austin, you come home with some branded boots which show up in the mail six weeks later. And I love them.
Charles Lew (00:26:36):
They're incredible.
Bob Simon (00:26:37):
So tell us about ClioCon, the vision, how long you've been doing it, and how many people are coming now to Nashville? I was there last year, I fucking loved it, going back again this year.
Jack Newton (00:26:45):
Yeah, we're really proud of what it's become. And like Clio, it had some pretty scrappy origins as well. We back, 10 years ago, looked at the legal conference landscape and felt like there was something lacking, there was-
Bob Simon (00:27:00):
It's funny we've had the same conversations because you were in Vancouver, we are in LA having the same conversation.
Jack Newton (00:27:06):
Yeah. We thought there's shows like the ABA Techshow, which I love. I'm having a keynote panel there this year. We launched Clio there, so it's a special place in my heart.
Bob Simon (00:27:17):
That's the Sunday night event. Is that the one, the ABA Techshow?
Jack Newton (00:27:19):
That's right. That's right. Well, that's Startup Alley is the Monday night I believe. And then we're doing a keynote panel on the Wednesday. Bob Ambrosio hosted that. We launched Clio at ABA Techshow, and it's a great technology conference about technology for lawyers. What we felt though was there's room for a conference focused less on the technology, almost as an end to itself, and more on how do you enable a new way of interacting with clients and running a law firm? And how do you think entrepreneurially about building a law firm? The business of law was something we felt [inaudible 00:27:54].
Bob Simon (00:27:54):
But why don't we teach this in law school. And I know you're-
Jack Newton (00:27:55):
Well, why don't they teach it in law school?
Bob Simon (00:27:57):
So he's on the board of Loyola [inaudible 00:27:59] and we've been pushing this. I know you come back and teach and talk on it, but you have to be an adjunct or do some other... I think it's a big miss [inaudible 00:28:06].
Jack Newton (00:28:05):
It's a missing opportunity, and nevermind the business of law, but even something like learning how to use a legal practice management system like Clio is something we think should be in the curriculum. And how are lawyers that are graduating and not going to work at a big firm going to be equipped for the real world where they need to hang [inaudible 00:28:25] run a business.
Bob Simon (00:28:26):
They should actually train, to your point, law students. Because I always thought the best classes I had with the adjuncts that were actually practicing and they were teaching the night classes, the real stuff, like how to practice trial, trial tech and trial advocacy and then discovery and things like this. Imagine you'd be like, "Here's how you operate your firm."
Jack Newton (00:28:42):
Yeah, "Here's how you operate your firm."
Bob Simon (00:28:44):
Why don't they do this?
Charles Lew (00:28:45):
And also just being a brand, I just taught Metaverse and the Law and Web3 at Loyola, and the class was fairly equally divided between students who wanted obviously to speak about Metaverse, AI, and Web3. But a huge portion of the class also was very, very interested in the entrepreneurial aspects of a practice and brand building. They'd say, "How do we get business?" And something you and I have talked about extensively, you really are only as good as your brand at the end of the day. We can't market to the extent that the massive firms do. So how do we all differentiate ourselves? We do that by brand building, which no one teaches you in law school.
Jack Newton (00:29:24):
No one teaches you. So that's exactly the opportunity we saw, which was can we have a different kind of conference focused around brand building, focused around running a great business, focused around building a client-centered law firm, the client experience. And again, very modest beginnings, it was 200 people in Chicago at the Hotel Sax, I think it's a different hotel name now. We then moved on to the Radisson Blu in Chicago, which is a beautiful building. We had it for a couple of years in San Diego and then New Orleans, and now we're in Nashville. And the conference has grown to 3,000 people last year, and it's regarded as one of the best conferences in legal now, and one of the biggest. And-
Charles Lew (00:30:14):
What I love about what you do is you also do the wellness.
Jack Newton (00:30:18):
Wellness is a big part of it. It's something we really care about as a company that we're trying to influence lawyer mental health, which is a big issue. We think there's a way that you can achieve a better life for lawyers, create better outcomes for clients, and increase access to justice if you execute on things well. And then we try to-
Charles Lew (00:30:40):
This is about mental health [inaudible 00:30:41].
Jack Newton (00:30:42):
Oh, it's huge
Charles Lew (00:30:43):
Statistically, and these numbers vary, I'm on the board of Mental Health America, Los Angeles, and we've spoken about mental health even to the point where we've talked about doing one day mental health conferences just for lawyers.
Bob Simon (00:30:55):
We're actually trying to do [inaudible 00:30:56] this year we'll do a tech and wellness, like a mental wellness quality life. Because you're right, I think lawyers are the number one for alcoholism, substance abuse by multiple [inaudible 00:31:07].
Jack Newton (00:31:06):
It's a sad list.
Charles Lew (00:31:11):
Yeah, it's a bad list that we aspire to.
Jack Newton (00:31:15):
And we think there's real opportunity for change. And we don't think technology's a panacea, but we do believe that it can have a really profound impact on just improving the work-life balance lawyers can achieve
Charles Lew (00:31:28):
Unless technology's governed, which you're doing a good job and Bob and I have spoken about it, but I think unless it's governed correctly, not only is it not a panacea, I think it actually makes it worse. I think there's a potential-
Bob Simon (00:31:40):
What's a panacea?
Charles Lew (00:31:40):
A cure.
Bob Simon (00:31:44):
I'm not as verbose as you. I'm not a linguist.
Jack Newton (00:31:46):
No silver bullets.
Charles Lew (00:31:48):
Exactly.
Jack Newton (00:31:49):
Though we think technology can be a big part of that and help, for example, make you more responsive to clients without being, you're picking up your phone. You can have a distributed team text messaging your clients being responsible-
Bob Simon (00:32:03):
I also said I just never understood, I call communication on scale. I usually have multiple chat rooms open on my desktop with the monitor so I can communicate to many people at the same time. I think phone calls, unless they're scheduled, are totally inefficient. It hurts your client on the other cases because you can't be working on everything else because you're devoting whatever. I'll get off my soap box.
Jack Newton (00:32:24):
And what we've tried to do with ClionCon too is just bring perspectives that are surprising and new to lawyers. One of the first ClioCons we got Gary Vaynerchuk speak. You guys probably know Gary, Gary V. And it was amazing because I know I've hit the bar for the keynote speaker when almost nobody had heard of Gary in the audience, not a well-known guy to the legal community, in general. Guys-
Charles Lew (00:32:50):
We're not [inaudible 00:32:51].
Bob Simon (00:32:51):
That's true.
Jack Newton (00:32:52):
Guys like you, yes. But the vast majority of the audience had never heard of him. By the end of his talk, everyone's like, "Who is this fucking guy? He's amazing, and I'm going to sign up for every channel he publishes content on."
Bob Simon (00:33:02):
But well business, these ideas they transcend-
Jack Newton (00:33:04):
They transcend.
Bob Simon (00:33:05):
... industries, but I think we're so stuck in our legal space-
Jack Newton (00:33:07):
He talked about building a brand, exactly what you're talking about, Charlie. Building a personal brand, building a brand for your law firm, being authentic, being yourself, all these concepts that lawyers kind of realize are inherently true and valid, but against a lot of what they were taught about by their peers and maybe even their mentors.
Bob Simon (00:33:24):
Because we're told in law school when you start that first job, you can't do this stuff, it makes you look bad. You can't be a-
Charles Lew (00:33:29):
Professional.
Bob Simon (00:33:30):
Yeah, exactly.
Jack Newton (00:33:31):
And everyone's walking around with his persona of what they think being a lawyer is, and Gary V did a great job of busting that. We had, two years ago, Seth Godin talk about marketing. One of the lines he gave I thought was amazing was he talked about becoming an expert in your space. Even if it's a vanishingly small slice of the law, you can probably build a really great business there. And he said, "Nobody woke up in the morning with a billable hour problem. Don't advertise yourself as somebody solving things by the hour. Solve real problems for your clients and they'll come to you." So it's just such a refreshing-
Bob Simon (00:34:09):
We call it nicheing up or nicheing down.
Jack Newton (00:34:09):
Yep. Yeah.
Bob Simon (00:34:10):
I think every lawyer should be either... I look at baseball, you do analogies all the time. You need lefthanded pitcher to come to strike out a lefty. You've got that in the bullpen. If you need someone to do motion writing, and specialize in that toxic tort, that's your person, and specialize. It's an easy brand. Nobody's competing for that specific space enough, that way you could have gorilla marketing for a solo, get in and fucking do it. And if your ops are cured [inaudible 00:34:32].
Jack Newton (00:34:31):
Exactly. Word of mouth, just that flywheel. So it was an incredible experience for these attendees. So we've just seen the flywheel now where people are telling each other that you need to go to this conference. The second reason we did the conference, we felt something was missing. And the second thing we realized was as our ambitions with Clio got bigger... So I talked about our origin story where we started out just me and Ryan really helping solve the needs of solos. And then we grew to two and three-person firms, and then four and five-person firms. And now 30% of our business is from firms in the 20 to 100-plus segment. We've got firms that are several hundred lawyers using Clio. So we run the whole [inaudible 00:35:19].
Bob Simon (00:35:18):
So what's their work? If they onboard lawyers or legal staff, these big companies, do they have a super user for Clio? Do they onboard them? Do they have a workflow?
Jack Newton (00:35:28):
Yeah, we often have a train the trainer program, where there's somebody in the law firm that is deploying. Change management's a huge piece of being successful with deploying a tool like Clio, so you need to be training and also just creating buy-in the teams. These large scale deployments can be tough, especially when you have, and in many cases, lawyers that have been doing things the same way for decades, just digging their heels and saying, "I'm not using that new thing or iPad you just put on my desk, or whatever." Change management's an art.
Bob Simon (00:35:59):
And this is a big thing for conferences. So I always grew up to go on the same conferences for trial lawyers, hearing the same speakers talking about the same shit. I started to venture out, and when you go to things like ClioCon, where they're talking tech and integrations, it was the first time I walked through... I spent most of my time in the vendor room. It's never like that. I usually avoid it like the plague. I don't want to-
Jack Newton (00:36:19):
Our vendors talk about that too. The exhibitors there. We can't believe the engagement we get because people are wanting to get... You're not getting lured down there for the lunch or the drink like most conferences, people are legitimately going down wanting to learn about what's happening.
Bob Simon (00:36:35):
And this is what I think. I talk to a lot of people about attending conference, and I think it's a very good thing for the person relationships, especially if you're our level, you're running companies, you're founder of these companies, you need to be there to meet people on scale, again, to be able to take all these meetings with people at the same time. It's a good opportunity for me to go to a lot of vendors that we partner with at Justice HQ or the law firms that we do cases with, and everybody's there at the same time. It's an efficient thing to do to do that.
(00:36:59):
But also, go meet people, go learn. I think for solos, especially, and small firms, you have to put yourself out there because they'll remember you. If you're a lawyer and they say, "Oh, I saw you at ClioCon, you're in Nashville, you're in Tennessee, I'm going to refer you to that case." This is how I do relationships.
Jack Newton (00:37:16):
100%. It's a huge part of it. And creating that community and creating... that's one of the main reasons we started Clio. We continue to invest in ClioCon. And by the way, we lose money on ClioCon, this is not something... You know how hard it is to run live events profitably, not an easy thing to do. We don't even try. This is about creating community. And what I was saying as we went through this evolutionary journey, Clio, when me and Ryan started it, really trying to build a lifestyle business, we thought, "Maybe this thing gets up to four people-"
Bob Simon (00:37:48):
A lifestyle business. It's good.
Jack Newton (00:37:49):
"Maybe it gets up to four people-"
Bob Simon (00:37:49):
Look at it now, like a thousand people.
Jack Newton (00:37:54):
"Maybe this thing throws off 100K a year for each of us that we can live off of, and that would be a win," that was our initial ambition. And then our ambition got bigger as we started to see the opportunity out there. But we also saw the opportunity... We initially approached Clio just saying, "Hey, let's throw this across the fence and see if this is a useful tool for the lawyers who we're trying to serve." And then what we kept getting pulled by was the lawyers coming back to us saying, "We love the tool but we want you to tell us how to run our business well." They want us to be almost prescriptive like, "Look, I learned how to practice law, but I don't know how to run a business."
Bob Simon (00:38:35):
So how are you going to adopt that machine learning through Clio to help people automate that kind of stuff? It's kind of tough.
Jack Newton (00:38:41):
I think it's a massive opportunity. You're going to be able to look even at firm's books and make recommendations on where they could be streamlining their operations. You could be looking at, "Here's the integrations you should be using that we've seen from our base of 150,000 customers which act... with your kind of profile, which integrations are going to help you improve profitability, which integrations are going to help you drive up your utilization rate, which integrations are going to help you drive up NPS."
Bob Simon (00:39:09):
Or, "Based off of this, this is where you can qualify for more funding so that you can [inaudible 00:39:13]."
Jack Newton (00:39:12):
Exactly. You're going to be able to have a view into the financial. So AI, we're just seeing the first hints of what's going to be possible.
Bob Simon (00:39:20):
Yeah. So one of the great things about conferences like ClioCon is first, relationships. The first time I ever met you in person was in Nashville at your conference. First time I ever met you was actually at our adoption charity in which we had board meeting brought together by adoption. But yeah, so I'm going to let you introduce the next one here. This is a special one because you know what Jack likes and you found...
Charles Lew (00:39:43):
That's your [inaudible 00:39:45].
Jack Newton (00:39:45):
Yes. That's my all-time favorite.
Charles Lew (00:39:47):
So this is a single malt, Isle of Islay, which is also your daughter's name.
Jack Newton (00:39:54):
That's right, yeah. A lot of Scottish heritage in my family, and we named Isla, not after this scotch, but-
Bob Simon (00:40:06):
Maybe conceived with a scotch. I don't know.
Jack Newton (00:40:08):
Yeah, it's possible.
Charles Lew (00:40:10):
Influenced.
Jack Newton (00:40:10):
Influenced, yeah, but I always loved the name.
Charles Lew (00:40:12):
And interestingly enough from the actual village of Lagavulin.
Jack Newton (00:40:16):
That's right.
Bob Simon (00:40:17):
Wow. I did not know about it.
Charles Lew (00:40:19):
So a big smoky, peaty-
Bob Simon (00:40:21):
Well, next year when Clio's 16 years old, maybe we can get Jack [inaudible 00:40:24].
Jack Newton (00:40:24):
Oh, that's a great idea [inaudible 00:40:25].
Bob Simon (00:40:26):
We should actually go to Lagavulin for your 16 years.
Jack Newton (00:40:28):
Let's do it.
Charles Lew (00:40:29):
Let's make it happen, yeah.
Jack Newton (00:40:30):
Circle the calendar.
Bob Simon (00:40:31):
Well, actually before that, Jack, so you have three kids, and Isla is the youngest, and they're all... Well, the youngest is? 11 or 12
Jack Newton (00:40:36):
Isla is 10.
Bob Simon (00:40:36):
10.
Jack Newton (00:40:39):
Patrick is 12, and Ian just turned 14.
Bob Simon (00:40:43):
So these were little during the growth of Clio when it was a two-person shop.
Jack Newton (00:40:47):
Well, this is what made the first years of Clio, and frankly the last 15 years, just go by that where we had Ian in January of 2009, just after launching the company. And that's a white and knuckle experience, having kids and starting a company. I joke in my Twitter bio is running for startups. Clio, Ian, Patrick, and Isla.
Charles Lew (00:41:13):
That's funny.
Jack Newton (00:41:14):
And it certainly felt that way. But it's interesting, one of the-
Bob Simon (00:41:19):
Oh my gosh.
Jack Newton (00:41:22):
This is a good one to finish with.
Bob Simon (00:41:23):
This feels like you are at the campfire-
Charles Lew (00:41:24):
Punch you in the face.
Bob Simon (00:41:25):
Cheers.
Jack Newton (00:41:27):
It feels like you're chewing smoke. Cheers.
Bob Simon (00:41:30):
Well, this will be technology and family.
Charles Lew (00:41:30):
There we go.
Bob Simon (00:41:30):
They've been married together-
Jack Newton (00:41:31):
Yeah, to technology and family.
Bob Simon (00:41:35):
Oh man, this is good. It's a good smell. I'm not a... you know this, I'm not a scotch guy.
Charles Lew (00:41:38):
I know this, but we're going to fix that.
Jack Newton (00:41:42):
Yeah, over this one.
Charles Lew (00:41:42):
We're going to remedy that at some point.
Bob Simon (00:41:44):
Holy crap.
Charles Lew (00:41:45):
It's good though.
Jack Newton (00:41:46):
It's something else.
Bob Simon (00:41:46):
Holy crap.
Jack Newton (00:41:47):
Isn't that something else?
Charles Lew (00:41:48):
But it's balanced. The peatiness is balanced.
Bob Simon (00:41:50):
Yeah, there's a taste-
Charles Lew (00:41:51):
A little sweetness, very rich back. It's-
Bob Simon (00:41:52):
I've never had anything like this.
Charles Lew (00:41:52):
There you go.
Jack Newton (00:41:55):
It's wild.
Bob Simon (00:41:56):
I could get into this. Okay, but you've changed my mind. I'm converted.
Charles Lew (00:41:59):
There you go.
Jack Newton (00:41:59):
Well, this whole family though, it's almost... there's this hustle culture with startups that's often like, "Hey, you've got to build a company at the expense of almost everything else. You can't have kids, maybe not even a wife, you just need to be all in on your company." And it's interesting, my wife and I, when I was starting Clio, she started talking about wanting to have kids. And I was like, "Well, let's punt on that. Not that we're not never going to do it, but let's just wait a while."
(00:42:32):
But she was pretty persistent and asked me the question, which was the right question, which is, "If not now, when? When is this going to get easy?" And she's 100% right, as she usually is. And just said, "I think now is the right time." And what I realized with the benefit of hindsight is it did feel like there was a lot of balls in the air, but it was so energizing and rejuvenating to have kids and to have somebody to just go home with put down the smartphone and play with a newborn or a one-year-old or a two-year-old, or-
Bob Simon (00:43:05):
I never thought about it that way, but it's a mandatory reset for you-
Jack Newton (00:43:08):
It is.
Bob Simon (00:43:08):
... to get out of this...
Jack Newton (00:43:09):
It's a totally mandatory reset.
Bob Simon (00:43:12):
You run every day.
Jack Newton (00:43:13):
I run.
Bob Simon (00:43:13):
Is that your escape?
Jack Newton (00:43:14):
So that's my almost meditative practice. And I love streaks. So 25-
Bob Simon (00:43:22):
Streaks?
Jack Newton (00:43:23):
Streaks like where you're marking an X on a calendar and keep... Not that I love streaking, I love streaks.
Bob Simon (00:43:28):
Streaks. That was a frank [inaudible 00:43:30].
Jack Newton (00:43:29):
Marking an X on a calendar and keeping that streak going. And so about 25 years ago I was like, "I'm going to try to keep a running streak going as long as I can." And I got a week under my belt, got a month under my belt, got a year under my belt. At that point you start having cold sweats, waking up in the middle of the night like, "Did I miss my run yesterday?" Retracing your day and, "No, I got it in. I got it in. I'm good." And 25 years later, still... And it's great, even though I'm traveling, throw a pair of shoes here-
Bob Simon (00:43:59):
You came in from Vancouver to LA last night, got your run in-
Jack Newton (00:44:01):
Yeah, got my run in.
Charles Lew (00:44:02):
How far do you run?
Jack Newton (00:44:03):
So I try to-
Bob Simon (00:44:04):
Two feet. Six feet.
Charles Lew (00:44:06):
Barely easy.
Jack Newton (00:44:06):
So here's the basic set of rules. A minimum of two kilometers-
Charles Lew (00:44:11):
Okay, that's a lot, maybe a mile and a half.
Jack Newton (00:44:14):
Minimum, even if I'm sick, I've done it after surgery. If I'm feeling like hell, I'll still get 2K, and that's the bare minimum. I try to average 4 to 5K, and I'll run usually one half-marathon per year and train up for that. So it's like a kind of a half hour-ish run is what I shoot for every day. And again, it's great. Just like kids, you're getting away from technology, you're not in front of a screen, you're not on a phone call, and it's just you. And I love running outside, I hate treadmills, just disconnecting. And I live on the north shore of Vancouver, which is one of the most beautiful places on earth, you're able to get on trails and just get away from everything. It's pretty hard to beat.
Bob Simon (00:44:53):
So is most of your team in Vancouver? How's that?
Jack Newton (00:44:56):
We've got a few hundred people in Vancouver, a few hundred people in Toronto, and those are the two major technology centers in Canada. Toronto's actually incredible now for tech talent. Lots of big US companies like Salesforce have big offices in Toronto now. So great recruiting ground for us as we're looking for people that have been to that next scale of success. We're starting to recruit in San Francisco. We just hired a new COO and a new CFO that come from SF and are able to bring some incredible-
Bob Simon (00:45:30):
Really? You just [inaudible 00:45:31] new people in the C-suite?
Jack Newton (00:45:32):
New people in the C-suite. Just over the course of the last year, we've done a big-
Bob Simon (00:45:35):
We'll talk more about that off camera, but that's-
Jack Newton (00:45:37):
Yeah, just went through a big upgrade on that front. They're bringing in some incredible people. We've got people all over the US working for us as well, all the way from SF all the way down to Miami, Florida.
Bob Simon (00:45:49):
You've got Dublin.
Jack Newton (00:45:49):
We've got Dublin.
Charles Lew (00:45:50):
And we have to do a quality control check on.
Bob Simon (00:45:52):
Yeah, we've got to make sure your operations [inaudible 00:45:54].
Jack Newton (00:45:53):
I think we need to do a... I feel like we just scratched the surface today, we'll have to do another episode in Dublin.
Bob Simon (00:45:59):
So the last thing we're going to talk about is kind of this evolution where AI is entering the legal force and want to get your thoughts on it because I get this from... actually, one of my Irish barrister friends was freaking out about it, "It's going to be the end of the world. It's going to do..." I'm like, "Bro, this is the best gift for us as a lawyer."
Charles Lew (00:46:19):
I believe it's the best.
Bob Simon (00:46:21):
See. And he's like, "What's your thought process?" I'm like, "Dude, if you can master this and be able to be so efficient and scale with AI, you can be really fucking efficient, man. You can have an associate on the cloud that's doing things for you, if you learn how to-"
Charles Lew (00:46:34):
Absolutely.
Bob Simon (00:46:35):
"So it's like, if you're niche down, if you're specialized in it and you have these systems put in place, bro," I said, "you could be practicing in your underwear in the Maldives if you want to."
Charles Lew (00:46:44):
I would believe the same people that believe that it's end of the world would be the same individuals that you spoke to 15 years ago that scream data privacy issues.
Jack Newton (00:46:54):
That's right.
Charles Lew (00:46:54):
So it's just, again, from my perspective, this continuing fear, uncertainty, doubt. The legal community, as we've talked about a hundred times, entirely reluctant to change because the people in power wanted to remain in power, and all of these technological advances jeopardize that power base, that structure. And I think AI, I saw it when I taught at Loyola this past semester, the AI is a monumental opportunity. And I go online, I write for Forbes, I go online and I write, "Give me a 500 word educational standard article based on artificial intelligence improvement on the practice of law."
Bob Simon (00:47:35):
Do you know what's weird? I taste jalapeno pepper cheese when I drink this. It's one of my favorite things, I think that's why I like it. I didn't mean to interrupt you, but shit.
Jack Newton (00:47:42):
They say that on the bottle, "Hints of jalapeno cheddar cheese."
Bob Simon (00:47:47):
It's supposed to come in five pound blocks and just cut-
Charles Lew (00:47:47):
I get the jalapeno cheese. I can never say that as a scotch connoisseur, but I could say-
Bob Simon (00:47:53):
I'll be the real nose.
Charles Lew (00:47:54):
But yeah-
Jack Newton (00:47:54):
But you're right, the capabilities are incredible. And what's amazing is ChatGPT, this GPT framework they've built, it was version 3 six months ago, it's going to be version 4 in another six months. And what we're seeing with ChatGPT is version 3.5. And just the exponential increase in capabilities we've seen even from 3 to 3.5 in six months. And we're going to see another exponential leap in 4.0 when it comes out later this year. And we as humans are just really poorly equipped to understand the concept of exponential growth as just demonstrated with COVID, as just demonstrated in... We're just not built for it.
(00:48:36):
So your lawyer friend is terrified, should understand that... I think there's really two types of reactions you can have to this technology, there's people that think about where they're at in the value chain today and how do they preserve their spot in that value chain. And this is whether it's AI or regulatory reform. It's all the same stuff.
Charles Lew (00:48:57):
I think the same.
Jack Newton (00:48:57):
It's all the same shit. And people are just figuring out, "How do I preserve my spot here by defeating anything that's trying to unseat me." As opposed to people that think about, "How do I leverage this development, whether it's regulatory reform or ChatGPT as a way of moving up the value chain and create more value for my clients, make me more valuable, help me make more money, help me create more impact?" That's the way, I think, everyone should be looking at ChatGPT.
Bob Simon (00:49:25):
I think everyone... they should be looking at... I always look at historical trends to try very early on to predict where things are going to be in five years. We talk about this a lot. I predicted that non-lawyers owning law firms and the technology are going to rule. I've been saying this for years. And finally it started to happen like, "Oh my god, we're so scared." We're like, "Bro, we built our firm to inflate ourselves from that in the future. So why not?"
Jack Newton (00:49:45):
Well, how you leverage it.
Bob Simon (00:49:47):
No shit.
Jack Newton (00:49:48):
How you leverage it, exactly. And I think that's-
Charles Lew (00:49:51):
Well, unlimited money coming into our practice-
Jack Newton (00:49:52):
"How can I create competitive advantage for my practice when this [inaudible 00:49:55] happens?"
Bob Simon (00:49:55):
And here's the big thing, at the end of the day, who wins? The consumer. The client.
Jack Newton (00:49:59):
The consumer wins.
Bob Simon (00:49:59):
If you have less costs and less hours and you're an hourly lawyer put into stuff, or if you're a contingency lawyer, like I am, and you can be more efficient with your time, huge win.
Charles Lew (00:50:08):
But we were to a degree ignorant, but more so we were foolish, I think, just to believe that the practice of law would be this last bastion of finance and Wall Street. Finance and Wall Street, it's now imbued in every single facet of every single business. And we had built this moat around ourselves with law by only allowing lawyers to own law firms. So I think we were on a timeline and that timeline has now become-
Bob Simon (00:50:40):
I know some of the most poorly run businesses run by lawyers. I know some really good ones run by lawyers. But you give us somebody as a controller that understands business and they come in and run your firm, why the fuck would you not do these things?
Jack Newton (00:50:51):
It's a game changer? Sam Altman was interviewed just yesterday about ChatGPT, and it's not just lawyers that should be thinking about this. He talks about it as something that's going to disrupt capitalism and have transformative impact on society. He's probably not wrong. But as a lawyer, look at it as a minimum of, "This is where I'm going to get my shitty first draft for a lot of work, and that's going to help me become more efficient, I'm going to become better. It's going to have an ocean of research and knowledge and precedence to mine from, to give me that first draft and iterate from there." And it's only going to get better
Charles Lew (00:51:23):
Even to the brand building question or analysis I put in for, again, these Forbes articles. I put, "Artificial intelligence impact on the practice of law, the evolution of law, 500-word academic style article," and ChatGPT kicked back a 500-word article that I kind of looked at and my first inclination or thought was, "Well, I could do better." And then as I read on, I was like, "Oh, maybe not. This actually might be better than..." But it did it in 30 seconds.
Bob Simon (00:51:50):
It's incredible. Add in a few cuss words, and like, "This is a Charles Lew product."
Jack Newton (00:51:50):
And that's 3.5, just wait for 4.0.
Charles Lew (00:52:01):
Just a couple rambling thoughts, and it would've sounded exactly like me, and it did it in 30 seconds instead of a day.
Bob Simon (00:52:07):
You always look and see what is Google threatened by? What's on their roadmap? And they looked at a while to the legal space-
Jack Newton (00:52:13):
They're terrified.
Bob Simon (00:52:14):
They actually looked for... I saw what they were trying to do and then they got these other things had more fires that you had to take a look under.
Jack Newton (00:52:22):
I love it.
Charles Lew (00:52:23):
Can I ask you one question? Because you coded your original company, and one of the things that I remember, we've spoken about Elon before, people were somewhat mocking him and saying he can't code or his coding was so rudimentary as to be childish. And of course, he came back and said, "I'm the richest person in the universe," which is a very strong response to anything. So you coded some of your original coding, and you said it's still in use?
Jack Newton (00:52:53):
Yeah, absolutely so.
Charles Lew (00:52:54):
So what do you think of Elon as a coder?
Jack Newton (00:52:56):
Well, I have no idea how well he can code, but he's clearly a great engineer. I think if you look at what he's done with SpaceX, for example, taking an industry that was hugely inefficient in the way that he did what I would call the waterfall method of software development, except with space flight. He was able to reduce the cost of man's space flight, an unmanned space flight by two orders of magnitude. And that's by pushing, I think, an iterative fail-fast experiment kind of mentality. And I think that's the great engineer that is embodied in Elon Musk.
Bob Simon (00:53:35):
It must be a huge brand awareness thing that he does. I think people just wearing SpaceX shirt-
Charles Lew (00:53:40):
Buy the brand.
Bob Simon (00:53:40):
It's crazy.
Charles Lew (00:53:42):
Yeah. Well, we're back to brand.
Jack Newton (00:53:42):
Yeah, absolutely. He did an interview on YouTube, where he was giving a tour of-
Bob Simon (00:53:46):
Is this the one where he's smoking weed the whole time?
Jack Newton (00:53:50):
No, no. No, that was Rogan, wasn't it? He was giving a tour to this YouTuber, I forget his name, he's a well-known YouTuber, giving a tour of Spaceport and talking about the process of getting Starship up and running, and the iterative process that he used, and some of the principles they use in designing it, even in terms of the fact that if there's an assertion that an engineer's making for example, that the spacecraft can't do X, it can't be written in a document somewhere and treated as truth unless there's an engineer on staff saying, "I support this claim and I'll go and debate with whoever wants to talk about this claim."
(00:54:31):
Because he talks about the fact that knowledge can get dated and incorrect so quickly that you need some... you can't just trust whether maybe an intern that you hired three years ago wrote in a doc as a basic truth. You need to constantly be challenging that thinking and have people on the team-
Bob Simon (00:54:46):
I think it's important to be able to change your mind too.
Jack Newton (00:54:48):
To be able to change your mind. And that's exactly at the heart of what I think is great engineering thought from Elon.
Charles Lew (00:54:55):
So social engineering, even if not computer engineer, he's an exceptional social engineer.
Jack Newton (00:54:59):
Exactly. And in this episode he talks about an example of building the model 3 when it was in production hell. And one of the most expensive things they had to engineer out of the process was this steel plate that was under the battery. And he asked why the steel plate was there. And he went and talked to the battery people and they said, "Well, the designers said it needs to be in there for noise reduction." And then he went and asked the designers why it was in there, and they said, "Well, the battery people said it needed to be in here to protect the battery in a collision."
(00:55:35):
And so he pulls these two groups in a room and is like, "Tell me why this steel plate's here. You're both pointing at each other saying that it's a requirement from the other when in fact it's not a requirement from either." And he ends up discovering that this is a completely-
Charles Lew (00:55:51):
Obsolete, wow.
Jack Newton (00:55:52):
... completely unneeded part, that he was able to save, literally, hundreds of millions of dollars in the production cost of these cars. And one of the key things in taking the model 3 out of production hell was an understanding this dysfunction that can exist in organizations all the time. And that's the learning he applied to SpaceX as well. And I think that why those organizations have done... That being said, I think with what he's doing with Twitter is kind of sad.
Bob Simon (00:56:20):
Yeah, I agree.
Jack Newton (00:56:21):
But he is a great engineer in a lot of ways.
Charles Lew (00:56:24):
Well, we're a big Twitter fans.
Bob Simon (00:56:26):
The Twitter.
Jack Newton (00:56:27):
I love Twitter.
Bob Simon (00:56:29):
I actually don't go on it very much, my social media team does my posts for me.
Charles Lew (00:56:32):
Oh, do they? Do they really? Even your Twitter? I need a social media team.
Bob Simon (00:56:36):
[inaudible 00:56:36] because it's a little more tame there. I feel like I can't be as... I don't think they'll give the login for my Twitter.
Charles Lew (00:56:42):
You're a little more rambunctious on Instagram.
Bob Simon (00:56:44):
Yeah, the stories are a little bit like... Sometimes they'll text me like, "You need to take that down."
Jack Newton (00:56:49):
So by the way, there was one story about Clio, I only got halfway through that I wanted to finish before we wrap up today, it was about fundraising for Clio. And I was talking about fundraising in 2009 and getting nos from everybody. But then this email from a German investor who ended up leading our first-
Bob Simon (00:57:10):
Was it David Hasselhoff?
Jack Newton (00:57:10):
It was not David Hasselhoff.
Bob Simon (00:57:11):
Damn.
Jack Newton (00:57:12):
A guy named Christoph Janz. But what's hilarious is he... A friend of mine... and this is also why serendipity is so important sometimes. A friend of mine says, "Can I write a blog post about Clio?" He's on this blog called Web2.0central.com. And I say, "Sure, no problem. Write this blog post, and at worst it's some Google juice," which was valuable at the time, at least. And he writes this article, it ends up that Christoph reads this article. He just sold his company to my MySpace, actually, the MySpace crew.
Bob Simon (00:57:44):
Tom. My friend, Tom.
Jack Newton (00:57:45):
He sold it to Tom, and had just become an angel investor. He writes this cold email to us at info@goclio-
Bob Simon (00:57:53):
Info@.
Jack Newton (00:57:54):
[email protected] at the time.
Bob Simon (00:57:58):
I still get all those info@ emails.
Jack Newton (00:57:58):
He says, "My name's Christoff Janz. I'm an investor, I just sold my company. I just invested in a company called Zendesk," back when it was four guys in Copenhagen. He then says, "I want to learn about Clio. I want to potentially invest in Clio." And so this email goes right to spam. He sends this cold email and it goes into our spam folder. So we're using this early version of Google apps at this time. And I think because Christoph emailed us from a web.de email address, emailed us about an investment opportunity, this just ran all of Google's spam flags, goes straight to spam.
(00:58:46):
And so what's great is Ryan and I inadvertently slow play Christoff by not responding to this email. He sends another email-
Charles Lew (00:58:54):
It's a power move.
Bob Simon (00:58:55):
You tech tease, you.
Jack Newton (00:58:56):
Inadvertent power move.
Charles Lew (00:58:56):
Power move, yeah.
Jack Newton (00:58:57):
Sends a follow-up email two weeks later saying, "Hey, guys. I'm not sure if you saw my previous email, but I'm legitimately interested in investing in Clio." I'm not a religious man by the way, but in what I can only describe as an act of God, Ryan one day is on this customer call, it's lasting forever, he's bored out of his mind, decides to check out what's in my spam folder.
Charles Lew (00:59:21):
Oh, wow.
Jack Newton (00:59:22):
And sees this email from Christoph. Forwards it to me and says, "This actually looks legit." I look at this like, "This does look legit. Follow up with Christoff." Cut to six months later, by the way, with my wife eight months pregnant, I'd say, "Can I get a day trip to Berlin to meet with Christoph?" We fly out, meet with Christoph. He ends up leading Clio's seed investment round of a million dollars. And again, this was in the backdrop of us pitching what felt like every North American investor and getting no, getting that seed stage. And he's also the guy who talked about us pivoting our mindset to being more ambitious. He's the one that was really influential in helping us think bigger about what the opportunity for Clio was from a mission and impact perspective.
Bob Simon (01:00:09):
And that's what the strategic investors that can help you push you forward... Now, Jack, 2008, 2009 you're struggling to raise funds, $100,000 taken and people telling you no. How much has Clio taken in investments in the past 15 years?
Jack Newton (01:00:26):
So we've raised about $350 million over the last 15 years. What's really incredible though, and what I'm really proud of is we've only burned about $120 million of primary capital in those 15 years, we've been extremely capital efficient. You look at what most companies spend to get to our revenue scale, to get to our scale overall, they're spending three, four times that.
(01:00:55):
This new CFO I talked about, Curt Sigfstead, that we just brought on, he's SF based, worked in investment banking at JP Morgan for 20-plus years, has taken over 80 companies public, he looked at our financials and just said, "This is incredible. I've never seen a company that's been run this capital efficient to where Clio is today in terms of revenue."
Bob Simon (01:01:19):
Thank your business partner, right?
Jack Newton (01:01:20):
And that scrappiness like-
Bob Simon (01:01:21):
2000 edge.
Jack Newton (01:01:22):
I talked about being born in 2008, 2009. I feel like a hardened veteran of the SaaS space now. Vertical SaaS is a real category and there's a lot of founders going through what we're going through right now that have never been through a recession. And I've seen it, and we've never been the spray the money canon around kind of company that I think a lot of startups have been over the last few years.
Bob Simon (01:01:46):
Well, Jack-
Charles Lew (01:01:46):
Can you give two tech nerds the 30-second of where Clio's going in the future and what you foresee for legal industry and technology and confluence-
Jack Newton (01:01:57):
Absolutely. I think about Clio's growth story as really being two chapters. The first chapter was our first, I would say, 12 or 13 years, which was really focused on bringing practice management to the cloud, helping automate the back office for law offices, helping make them more productive, and helping them embrace the cloud. But I think when we talk about the broader opportunity, and this is the second chapter we're starting on now that I'm super excited about, the cloud is not just about productivity. This is not just about provisioning and deploying IT more efficiently than we did in the past.
(01:02:36):
I think the really interesting opportunity here is transforming the client experience, really delivering a different kind of cloud experience to clients. I think legal is still the last major industry to be fundamentally transformed by the internet and we're going to help drive that transformation. Legal demand is starting with a Google search today, it's not consumers driving by a billboard on the interstate that's making them decide to call a lawyer. We don't need a memorable 800 number, you and I were talking about this earlier today, we need to figure out how do we attach to that Google search and give lawyers the confidence, give consumers the confidence that we are the best lawyer to work with because we get technology and we're going to be able to deliver an effortless client experience to you in working with us.
Bob Simon (01:03:24):
And make it real easy for those lawyers to practice law, not worry about their bottom line and [inaudible 01:03:30].
Jack Newton (01:03:29):
Exactly. And that's going to create work-life balance for lawyers.
Bob Simon (01:03:31):
Love it.
Jack Newton (01:03:32):
If we execute on this well, we're increasing access to justice and we're improving client outcomes. And I think there's a real win-win-win that's possible there with the help of technology to improve lawyer livelihood, to improve client outcomes, and to improve access to justice.
Bob Simon (01:03:49):
A big part of access to justice is not only for the client but also for the lawyers that their passion was of law school to go and to do civil rights or something but they feel like they have to go put on the golden handcuffs on someone else [inaudible 01:04:01].
Jack Newton (01:04:01):
Exactly.
Charles Lew (01:04:01):
Unable to because-
Jack Newton (01:04:01):
And by the way, back to that mental health and substance abuse problem, I think it's that disconnect that's at the heart of a lot of it. I've got into this for a reason-
Charles Lew (01:04:09):
We can't do what we want to do very often, we're guided or more driven by economic necessity than passion.
Jack Newton (01:04:17):
And we chose a new mission statement about three years ago. "To transform the legal experience for all," is our new mission statement, and that's the next chapter of our technology.
Bob Simon (01:04:27):
So we've got to end this with Jack, we have to ask, you've had all kind of different whiskeys we've had from Scotland, Canada, to Sonoma to Vermont, so we have to ask you, what is your bourbon of proof?
Jack Newton (01:04:40):
This is a real world tour, but I'm going to have to go with the Lagavulin.
Bob Simon (01:04:45):
Oh, yeah [inaudible 01:04:46].
Jack Newton (01:04:46):
That is-
Charles Lew (01:04:47):
It's a win.
Jack Newton (01:04:48):
That is my favorite. It reminds me of my daughter, the Isle of Islay. And for me, the sweet spot in proof, it's kind of in that 80 to 90 range, I think it's 86, is that right?
Bob Simon (01:05:03):
86. There you go.
Jack Newton (01:05:05):
So it's right in the middle there. I find higher than that, it's a bit of a punch in the face, I'm still recovering from Alberta Premium.
Bob Simon (01:05:13):
That was a good face. Well, Jack, thank you for coming on and speaking 86, we've got 86 you the fuck out of here. Thank you for coming on to Bourbon of Proof, man. It's been a pleasure.
Jack Newton (01:05:19):
Cheers to that. Thank you, Bob. Thank you, Charlie. That was great.
Charles Lew (01:05:22):
This is empty.
