The Internet’s Democratization of Industry and Why Law Remains Unaffected
How the internet has enabled traditionally closed off industries to be democratized through its global network of knowledge.
Since the introduction of the internet as a means to share knowledge and communicate, we have seen major paradigm shifts in established industries ranging from financial services, news, entertainment, and politics. Interestingly, as these systems evolve as do the sources of their democratization.
The financial services industry has seen a major paradigm shift with the ongoing boom in retail investors entering the capital markets. News and media revenues have sharply declined since social media platforms and streaming services were introduced. And political discourse is consistently a heated topic online with increased access to network effects and communication. Yet, law has remained — for the most part — unchanged.
1) News and Entertainment
One of the first major democratizations of industry was in media. The internet grew and enabled more people to self-publish their ideas and opinions online. At the same time, traditional media publications started earning less revenue and their circulations decreased. This graph above shows how newspaper revenue decline ~75% over a fifteen-year period.
More recently we have seen how internet streaming services like Netflix have taken over the entertainment world. Over the past twenty-years, attendance at movie theatres have been steadily declining as the access and options of content to watch from home increases.
2) Politics
With the rapid increase in online news and media sources continuing throughout the 21st century, as did the ease of which we communicate with each other. The introduction of social media platforms like Facebook and Twitter, as well as forums like Reddit, all led to a major paradigm shift in the political world.
In his 2008 presidential campaign, President Obama had utilized this growing influence of Facebook and Twitter to spread campaign messaging and fundraising. In 2012 his campaign increased their use of social media by introducing marketing techniques such as micro-targeting where content was shown to individual users based on their data points.
Similarly, the use of social platforms had a major impact on the 2016 election. It is difficult to think of Trump without thinking of his tweeting habits. However, the election of 2016 was also heavily influenced by the forums and messaging boards such as Reddit and 4Chan. Many forums and message boards had begun to serve as a destination for people (good and bad) to speak their minds through the safety of anonymity.
3) The Stock Market
The stock market is quickly becoming more and more accessible for the common person through self-directed investment services such as Robinhood and E-Trade in the U.S. as well as Questrade and WealthSimple in Canada. These services have essentially revolutionized the financial services industry as they enable everyday people to control their investments for a low to non-existent fee.
This rise in self-directed investing has been met for the most part with positivity given the agency it grants, and I think that the accessibility of the capital markets is just another expression of the powerful influence that technology has on the democratization of industries.
With new innovations like Robinhood enabling self-directed and low fee investing converging with the popularity of semi-anonymous forums like Reddit, there was also a growing community of retail investors lurking that ultimately disrupted traditional financial actors.
A peak example of this democratization of institutional knowledge was through GameStop. For those who do not know, GameStop is a retail seller of video games that some financial institutions believed was going to fail. Several hedge funds began shorting GameStop stock seeking to make money off of the business failing.
An important thing to note about shorting is that when it is done by large institutional investors who have large sums of capital to move markets, it can be difficult for companies they are shorting to survive even when they have good business fundamentals. As a result, a community on Reddit called WallStreetBets began investing in GameStop in an effort to stop the short.
GameStop stock jumped from a trading value of ~$20 USD on January 19th, 2021 to a trading value exceeding $347 USD on January 27th, 2021. The short sellers lost an approximately $13 billion as a result and several retail investors became millionaires.
In this situation, the influence of the internet did the exact same democratization it did to the media and political industries through giving individuals a voice and platform to gather in mass to cause change.
The Legal Industry
In comparison to the other industries discussed thus far, the legal industry has for the most part remained unscathed by the internet’s democratization.
The rule of law simply states that no one is above the law. It is a principle that transcends the judiciary, executive, legislature, and the people. The people are the true source of power in the Western societies as they have the ability to elect members of the executive and legislature branches who enact law and appoint the judiciary who in turn enforce it.
The irony is that despite all that the internet has done to increase power to the individual, most legal services remain uninfluenced by the internet’s democratization of knowledge. There are some who believe that such democratization is in the near future and there have been some technological shifts that have empowered individuals to represent themselves in legal matters; but for the most part the practice of law remains complex and confusing for most.
It is important to note that the legal industry is different than the other paradigm shifts discussed above for several reasons.
1) Participation is mandatory
All of the industries discussed above have some form of a consent element involved. For example, if you prefer to watch movies in the theatre over Netflix then you have the opportunity to do so (absent Netflix original content) or if you rather read the physical newspapers then you can do that as well.
This element of participation is also evident in politics. No one forces you to vote despite the pressure you may face from your social circle. Similarly, it is your choice alone to self-direct personal investments and you can only lose the amount you put in assuming you stay away from more complex investments.
Participation in the legal system is mandatory. When you are ordered to pay child support, receive a criminal indictment, or if the tax man comes by, you have no choice but to co-operate or you will be severely penalized.
Indeed the number of self-represented litigants has increased over time, many of them cite their experience representing themselves as being a negative one.
The main reasons for this stem from: perceived unethical behaviour of other justice system actors (37.8%); difficulties navigating procedure (28.9%); financial difficulties (24.4%); and perceived lack of fairness (20%).
2) The stakes are higher
There is no real personal risk to not voting because it is assumed that you do not care which party or person wins given your lack of participation. There is also no real risk (other than inflation) if you do not invest because there is no way you can lose money if the market takes turn.
Yet, there is often a very real and high social and physical risk in most legal situations. In family law, you face the risk of losing a substantial portion of your assets, time with children, or not receiving what you are entitled to by law. In criminal law, you face the risk of losing your freedom and going to jail. And in many other areas you are at minimum faced with the risk of a fine.
The increased risk associated with legal matters are likely a cause for why there has been no major paradigm shift with respect to the democratization of the legal industry in practice. This is because most people do not want to take the risk of representing themselves when there is the threat of unfavourable court orders that will be imposed in the event of failure.
The link between risk and democratization can also be shown through the medical industry. Like law, there is both a mandatory participation element and increased risk with medical situations and most people would rather not take the risk of associated with performing their own surgery. But even in the medical field during the pandemic, the increase in (mis)information has resulted in many individuals questioning industry knowledge.
3) It is equal for everyone
This makes the legal industry different because you must operate in the existing system that is the same for everyone to ensure each person receives a just outcome.
We all must live our lives within the boundaries that our legal systems impose upon us. This is similar to how we all are human beings with the same six elements of oxygen, carbon, hydrogen, nitrogen, calcium, phosphorus, and as a result are bound by the laws of medicine.
We may innovate as much as possible to create a more efficient and democratized process through which we operate, but in law and medicine these operations are governed by boundaries to avoid catastrophe — either through health issues or an amoral society.
4) Tools that compliment the industry, not change
The internet is a tool. It is a tool of knowledge, efficiency, and access. The impact of technology on certain industries will depend on what category of tool it innovates upon.
The news and media industries have become democratized because technology increased its efficiency and access. It is much easier for someone to produce content by writing a tweet or posting blog than it used to be for large newspapers to circulate their articles to readers. Movies and TV are also much more accessible now because we can just turn on our TV and do not have to go out to the theatre or Blockbuster (RIP). Technology has influenced politics through the access and efficiency through which information spreads now — fake or not. Financial professionals have had access to high frequency trading systems for years now and have access to large amounts of capital, but groups online that are motivated enough now have the reach to compete on certain trades.
The legal industry has made efforts to increase its access to justice so that more people can receive their right to be represented by a lawyer and understand the legal process. The coronavirus pandemic arguably forced the largest technological innovation through the widespread use of virtual court rooms and e-filling of documents, but this is about as far as it has gone to increase efficiency and access.
The internet has democratized legal knowledge. But the legal industry has yet to experience the paradigm shift that other industries have in recent years. The data shows that dealing with other justice system actors and the procedural hurdles of seeing a legal matter through is too complex.
Technology and the internet have already levelled the playing field for those who wish to access the optimum abstraction of legal knowledge. Time will tell if continued access to justice efforts lower the procedural and emotional complexity of seeing a legal matter through. But as long as we rely on the rule of law to maintain a just society, the only way to maintain true democratic principles is to maintain mandatory participation, high stakes, and equality.
