Solving Legal Debt, Elevating Human Judgment, and the Future of Law with Sebastian Padina

Welcome to Studying Law Around the World. I'm Claudio Claus. In each episode, I talk with lawyers, law students, and professors from different parts of the world to talk about legal education, careers, and what the profession looks like in real life. We talk about the hard parts, the surprises, and the decisions that shaped their paths. Whether you're planning to study abroad, thinking about working in another legal system, or just curious about how law works around the world, this podcast is for you. Today, I'm hosting Sebastian Padina, who is the founder of Housework Law. He's also a fractional GC and a tech-native legal partner. He has an incredible background that spans from corporate law to AI engineering and product management. And he brings this very interesting mix to what legal operations look like these days. Thank you so much for making the time to come on the show today, Sebastian. Very excited to be here, man. I'm really excited to have a conversation about what's going on. Thank you so much for coming. To start off, I'd love for you to tell us more about your journey from law school to becoming a fractional product at Platform Council, working with SaaS and AI. Yeah, it's actually so zigzaggy that you missed the first part. I actually started off in tech, and then that's a lot. But the story goes, I was a tech guy initially. I had a Bachelor of Science, a Master of Science, and at some point, I was going the academic route and I had this moment of, you know what, I kind of like the law challenge, the legal, you know, profession is appealing, I want to look at it. So I became a lawyer, and then after I became a lawyer, I articled on Bay Street, I did all of that. I sort of didn't really find my right place in the profession, I felt it was a little too conservative. I bounced around, I went to a big firm, a small firm, in-house at a big place, in-house at a small place. And at the time, I felt, you know what, this isn't really stimulating me in the right way that I thought it would. Law school was so much fun, it changes the way you think. And then I came out and I felt like the profession was a little disappointing that way. And I jumped back into tech, and my ticket back into tech at the time was data science and AI. And this was before the era of GPT, so it was all predictive analytics. But I developed this weird trajectory in tech and various startups, where I went from data scientist to AI engineer, and eventually combining all these skills, I became a product owner. And that's sort of where it gets interesting, because one of the skills I developed during that was learning how to advise properly. I call it designing a solution for people you can't control and making them take that solution. And that's kind of the story of how I came back to law. After a few startups, I had a moment of like, what do I want to do now? I feel like I'm able to do consulting, and it just hit me. I learned how to advise, whereas in the past I thought a good lawyer means just being technically right. And the other thing that was really cool, I understood how AI works. So the combination of the two things led me to conclude, you know what, I think the industry, the profession is going to finally have a reckoning with these cool tools. I have an idea of how we should be structured, so maybe I should be the one changing that. That's how I came back. So I came back a couple of years ago, and how it ties into the fraction a little bit is, as you know, it's very hard to come back into law for like a bunch of years out. Everybody cares about what you did most recently. So Fractual was my way in, because I work with Littler, as you know, and they have a bunch of early stage founder clients who appreciate my experience in the startup world, just from the business perspective. And when you layer the legal advice on top of that, it just works. So that's why I came back. I was a securities lawyer before, if you can believe it. I came back as a tech lawyer, because that was my background that I knew how to attack now. How did this experience outside of law, you know, with working as a product owner and in tech, has changed your understanding or your view of that? Very good question. So starting off with risk, when you work in startups physically, either on the engineering side or when I say physically, I mean, you're there, you're working on the business side, you're on the engineering side, you're part of that team, you develop a very good understanding of how the sausage is made, for lack of a better word, and in reality, how a developer works when they deliver to clients. Basically, you learn to read which risks are real when you look at a contract and which ones are kind of made up for your particular situation. So it's a more pragmatic approach to risk in the sense that you really understand what matters and what doesn't in reality. A great example of this, we had this very elaborate sort of approval process that we're negotiating an agreement was, and all I had to do was point out that that developer team has a sprint in their agile framework that they use, and they use a ticketing system. So that is the written approval system. So just understanding that little thing and making sure that, hey, we don't need to go overboard with this whole detailed scenario we have. We know what the tech team does, I understand that, we can negotiate on that basis, right? And you just get things done quicker and you don't dwell on risks that sound theoretical, but will never apply to your situation. So that's the risk part. The value part, that one's even more interesting because it's lawyers left to think of their value in terms of how much time they spend on things, at least that's the old way. But in reality, there's just some things that you begin to understand when you're on the inside that you can't really afford the proper full five-hour legal answer to because it's just not economically feasible for what you're trying to do. If you're just, if someone is exploring something that you need to sign an NDA, you're not going to spend a lot of money on an NDA if you don't know what you're going to use it for. You can want a quick answer. The value part is basically understanding what the sales cycle is, what, how the money is made and knowing that some things are actually worth a deeper dive on the legal side and actually spending the time and money and some things aren't. You know, IP assignments in deals with clients, very important. Maybe you don't want to mess around with those, that's value. But maybe fighting over a jurisdiction or something, maybe that's not really worth it, even though some people will because, you know, that's the policy and we have to do it this way. And that's what I learned. So when you consider the pragmatic aspects, you're like, no, that's not where the value is. The value is here. We should spend it here. So you become more aware of what matters and you can tell them, don't worry about that. Worry about this. Once you do a couple of those, people love you for it because you're being honest about no, no, we don't need to do the full, the full thing. So the value part comes from just understanding what really matters to these companies because you've been inside. I know you often help startups with this idea of moving fast, but also reducing their legal debt. And I'm noticing many people use the quote unquote legal debt as a synonym expression. And I want to hear from you. What does that mean? It's a good question. And a lot of what you'll hear me talk about our concepts, they come from the tech world. And this one is no different. I think most people in tech are familiar with the concept of technical debt. But the idea is in the tech world, when you accumulate technical debt, when instead of developing things correctly and in a way that's robust and scalable, you do a quick version of it because we just need to deliver something and we'll fix it later. And you keep going forward. And that thing you're going to keep fixing later sort of accumulates. And one day you realize you can't keep growing your thing because all these things I've come to and you got to fix them, right? It's a very similar concept here. If you think of building your company to success, especially startups, when they're in their early stage, they tend to skip certain things. And I posted about this recently. It's like sometimes it's just a question they don't even think is worth asking. Or worse off, they'll go and sort of half-ask it on a tragic idea or a plot. And they sort of don't set themselves up to be ready to scale when it hits. And I'll give you a few examples because it happens at different levels and it plays out in different ways. A classic one is when two founders or more get together, they come up with a cool thing, they really develop it, they get to a point where they're about to start making money and they're about to sign a contract potentially with a big client, like a bank or something. And all of a sudden they realize, I don't think we own the IP for the product that we thought we did because we used this guy to develop that part and I guess the copyright is owned by the person who does it and can't end the absence of an agreement. Oh, we didn't have an agreement. So that's an example that's happened where they, oh my God, do we own the IP? The bank is asking. We have to say yes. So that's a classic one where nobody thought about it. Like, and you know what? I don't even blame the founders. It's like my favorite client in many ways is a technically brilliant founder that just wants to focus on their job because that makes my life easier. So these folks just want to chase the revenue, you know, chase the scaling. And it's true. The old way of doing a lot is expensive. So they don't ask these questions. So that's one example. Another example is, and this one's so classic, hey, we're going to get together and start a company. Maybe we'll incorporate it on owner, but we don't have a unanimous shareholder agreement. And you know what? We started making money even because, you know, we incorporated it and it's got like a bank account and we now don't agree anymore and we need to sign a big deal. And we're really in disagreement with how to price it. And now we're at a standstill because there's no smart way for our dispute to be resolved. And now we're definitely not going to agree on a unanimous shareholder agreement because we're upset. That's another one. But my absolute favorite one is, and this is a classic that, you know, people want to incorporate their own business. Nothing wrong with that. I actually tell people this all the time. For certain things you really can get away with without a lawyer. You just need to be educated a little bit. So I had a situation where a founder almost lost the entire company, the majority stake in their company because of the sequencing of how they issued shares or they thought they were issuing shares. They almost lost the company because they would have had to bring a million dollars from home when they were the ones trying to get it financed in the first place. And all of those have a common thread where they just didn't know, they weren't, they didn't want to call someone and ask, they might throw a surprise invoice at them. And all these things are legal debts. They accumulate in time. It comes in many forms. These are three examples. Other examples are, you've signed a million versions of ambassador services agreement that everybody, every client just signed, but it gives you a different one because you will make a template at some point. And then you get an investor who will knock on your door and you realize you have such a mess in your contracts. And here's the funniest part about a legal debt. It's like, but like the technical debt, it's the interest that bites you the hardest. Because when you do have to fix it, you're probably going to have to do it faster than you want it to, which means it's more expensive or sloppier, or maybe you're going to cut some corners out because you really need to do it fast. So anyway, that's what I mean by that. It's just letting these little things build up that then slow you down when you need to scale suddenly and you need to slow down and fix something that you didn't think you should. Thank you so much for sharing those. I find it quite fascinating. Those cases are ones that you might see quite often as well. They happen a fair bit, but in a way, like all of them have fixes and it's sort of makes me in a dark, weird way, happy because it's, I love the opportunity to sort of show that value of like, listen, we're going to fix it. And maybe from now on, you just let me handle it. And also I actually get a bit of a kick from helping people build because I'm building something too. So it's sort of, I'm sharing their enthusiasm and I really, really believe in this whole concept of they shouldn't worry about it. You should manage that for them, the whole legal service for them. And that kind of plays into the whole fractional juicy and all that fun stuff. Right? I keep hearing this funny saying, basically that you'd have to be unemployed to be able to keep up with all the AI updates. It's probably true. Right? And it's changing legal work as well, right? And pretty quickly in a way. So I'm curious to hear more about your view on that. Are there tests that you believe will become, you know, more and more automated by non-technical folks over the next couple of months, years? Where do you think lawyers will have the greatest value? I feel like as the tools get better and better and better, it's kind of noticeable where this is going. And I think it's, I hate to say it because everybody throws this word around these days. It's judgments. And what do I mean by judgment? And I posted about this recently and I think I got a bit of flack for it because I defended one of the most hated parts of the legal profession in Ontario, the bar exam. But it's a perfect illustration. What is this? I got to look up the answer quickly and then sort of answer a question every two minutes or so. Right? It kind of turns out that is what AI is revealing. It's allowing the lawyer skill to really be, right? If you think of the lawyer work as falling into two categories, judgment work, intellectually creative work, and the road part, which is a lot of it, the road parts are going to go away. I mean, I'm not saying anything new. Everybody has been pointing at this, but the skill is judgment. The skill is to be able to take a question that's practical, that has a real context to it. You understand this business. That's the whole point of it. And you're going to have to answer a very specific question relatively fast. You may be able to look up the, you know, part of the answer, like at the bar, and then you're going to have to have a judge. If you think that answer makes sense, if you need to nuance it, if you need to apply it to the facts and the ability to spot when a playbook or an answer or something that you've quickly referring to doesn't smell right. And that's the secret sauce, your judgment going, Hmm, I'm not sure about that. I think I need to dig deeper into this. I think that thing is going nowhere. The other thing that's going nowhere conversely is, again, what's AI doing? AI is removing the road stuff and like magnifying glass on the things that make you different from the road work. So one of them is this, the ability to judge what the road work should even be doing in the first place. The other one is delivering the advice, actually talking to the client. One of the things that is going nowhere is the ability to be in the room with a client and advise live. And what I mean by that is many times clients don't actually ask the real question. This is human nature. And I actually learned this trick when I was a product owner in AI startups. People come to you with their idea of a feature, my God, I thought about this feature should work this way. We do this. We do that. Almost every single time they're, they've already colored the answer because they thought of how that feature should be implemented. They've, they've already gotten an idea of how it should be done. They're not starting with the problem. They're starting with part of the solution already. So I used to dial them back and say, no, no, what are you actually trying to solve? Where did this come from? And usually we'll find out that because we know more about what's going on behind the scenes, there's a smarter way to do it, or like just a more efficient way, right? It's the same story with advising legal clients. They've already thought about their problem. Maybe even gone a line, you know, Chad, you could declaw it. They've looked some stuff up. They have a bit of an idea of what they want. But in reality, if you actually peel the onion a little bit, you'll find out there that there's something behind that they've already sort of jumped ahead with. That is the real problem. And you don't get a chat bot can't do that. I mean, they try, you know, they're like, have you considered this? Oh, should I do this extra thing? But no, in reality, it's it's someone who is meeting the room, looking at you. And listen, a lot of my clients, they're early stage startup founders. These people are very emotional about a lot of their business. So that skill is going nowhere. That human connection in a world where I joke about this, you know, my competition is not other lawyers. My competition is the client using Claude for themselves for better or worse. And you're part of the reason why they should go with you instead is the human connection. The fact that a human that they can relate to and kind of can almost sense their issues is taking care of it and is accountable for it. You know, this stuff is like dear to my philosophies of work. Firms will, you know, hire specialists who are former Supreme Court justices or this or that. And really what matters out of that opinion that could have been drafted by a junior lawyer is whoever is signing it. Right. So ending up on the context. Right. And if you take away that last stage, basically, you could have had AI do it. But there is still this value that comes with people, with the accountability, with the reputation and all of that. Right. You know what? Another analogy that I like, since we're sitting in a construction site, we're joking about that, is builders. So the analogy here is, look, you can have access to the same power tools as a builder has. You can. You can go to Home Depot, rent them out. Right. You can watch a master class in how to use them. But chances are you're probably not going to produce a result that's the same as them using those tools because they just know exactly what's going on. They've done it a million times. Right. So I think it's a very similar story here. And I try to be sort of mindful because I don't think clients going to an AI tool to ask basic questions is evil. I think it actually educates clients more than people appreciate. But it's you accumulate a bit of technical legal debt because what happens is you're legally white coating your documents and eventually you will need someone involved to come fix it. And it just it's, you know, undoing all the assumptions can be a little hard. It could do a lot. It can do a lot if you're prompting it. Right. And I think that's still that still sits with the lawyer a little bit. Lawyers are still better than the clients. I've seen you suggesting that, you know, legal technology tools, they're designed around old ways of working right now. So, you know, redesign what is done in a law firm, the way things are repaired to be, you know, more, I guess, integrated with AI, not just asking AI can perform, but actually, you know, doing it the most efficient way that comes to mind. You know, what would that look like? Yes. The topic of how the legal profession might change or how we design it differently is very near and dear to my heart. I sort of posted about this recently as well. I think the current approach for every legal tech toolmaker, AI especially, is to enhance something that lawyers do already today. You know, review this faster, standardize this faster, research this faster. And I find that amusing because there's a funny contradiction there where they're still built by the hour, most of them, and they're working on things that shrink that particular thing and it's going to make it harder to get paid. So what do you do then? Well, maybe the answer should be take inspiration from other industries and create new products that actually focus the AI technology on how to better deliver to the client, as opposed to how to better do the things that lawyers already do today. I commented at the time that it feels like we're stuck in a horseless, carried phase of AI where all we can imagine for AI is things they've already done before, but faster. And that's where the inspiration came from. Another sort of industry that figured this out a while ago, the managed service providers in IT, the guys who manage your cloud deployment or, you know, your whatever IT service you've got going on. And these guys figured out how to run a subscription and manage a certain service and have boundaries around it, but make it, you know, seem like, hey, you're getting all this stuff infinitely for the subscription all throughout the month. And that's where the inspiration, I think, came to me to say, hey, maybe I could use AI to create a product that's a little different for the actual client. One that makes them think, you know what, I don't really want to go use cloud for a few hours and, you know, vibe code my into a document when I can have this product or this law firm that's actually backed by a lawyer, like you said, with accountability. Maybe I can have that do it. I don't have to worry about it. Someone's taking care of it. And you know what? I love to deal with that guy once a month when I see him. So that's where I think we should go, that the profession needs to go somewhere where these tools are used to actually make the delivery of the legal services more appealing and more interesting, or you can have a hard battle with people not even going to lawyers in the first place. And what does that look like? So you do proper onboarding, so you actually have them ready for a subscription like this. The subscription comes, believe it or not, with unlimited async advice on certain things. Like, does this look normal? You know, I'm being asked to do this. Is this typical? How would you think of this issue generally, you know, in a strategic sense, all these things that don't require you touching the specific document that are sort of the kinds of questions that accumulate the legal debt that we talked about. And there's ways to employ the technology where you can answer these questions where there's still a lawyer answering it, but you're doing it very fast because you're using a knowledge base that you built and they get smarter and smarter with every question it answers for you. So anyway, I'm kind of ranting there, but that's how we design it. And I'm not even sure I have the answer yet. I'm going to launch this thing in a couple of weeks. We'll see how it goes. But I think the point is we need to focus more on how does this enable a better legal service? This is one of the things you learn in the product world is every experience is a product and every product is an experience. And I really think of what is it like to be a founder and get something done in the legal world? What do you want that to feel like? And yeah, I think this is what we should be focusing on with the tools, not making what we do today faster. And I guess the last thought on that is you can't really do fixed fee. This is the other thing. I don't believe in the billable hours. So everything in my firm is either substructure or fixed fee. You can't really do fixed fee if you don't also find another way, smarter ways to use technology where what you're providing is value, not time, right? So that's, you have to redesign the profession that way too. The billable hour I think is going away. That's amazing. Well, I really appreciate you bringing all of these very, very interesting points in ways where the profession is moving. And to wrap up today's episode, I wanted to hear your opinion on some thinking about junior lawyers before. Can you tell me a little more about that? Yes. So I started off a year ago thinking, you know, how do you scale a modern law firm in the era of AI? Because, you know, I didn't call my law firm my name. I gave it a name. I want to grow it. And my first thought was, well, it's AI time now. All that junior stuff that they used to do, like out the window. So you need someone with your peer. And I've changed my mind completely on that. I think the way to scale a firm is actually with juniors. And I stumbled onto how, there's a big question out there now. Hey, how do you train juniors in the world of AI if, you know, all that work is done by AI? Well, I think I stumbled on the answer almost by accident. So we were talking about the subscription product and how there's the, I'm looking at releasing a very low cost. And as I started building the sort of knowledge base for that and designing how this might work, it hit me. You know how I told you the biggest thing that AI is not going to take away is judgment? You're trying to find a way to train a junior by making a mini partner from day one, right? So you're trying to build up their judgment. That's really what you're trying to do. What's the best way to do it than actually doing it for real, advising in a low stakes environment with plenty of guardrails, with a big, thick knowledge base you can relate to where the skill you're developing is going, I'm operating on the margins of this playbook. I think I know the answer. I think I have a good gut feeling here and go for it. Right. And, you know, actually give the answer, not an option menu, give the answer. So remember how I told you about the bar being the same idea where you have to answer quickly. This is the skill. And this low tier one trains a junior very well on a couple of things, because one low, you know, relatively low, low risk questions. They'll probably be not necessarily novel, just the context changes all the time in the fast though. And they get to really learn by escalating at the right time. I mean, you teach this and putting guardrails in place where, hey, let's check before we answer this thing. The analogy I've used before is you don't get to wash the rice for five years before you roll your first, you know, sushi piece. You now have to roll sushis from day one. And yes, it does. It means you're not going to make the fancy roll that if you get wrong, that guy is going to yell at us when you serve it to him. But you will be there from day one, actually making those more basic ones. And this is the thing that bothers me a bit. The profession never stopped to actually design a way to teach juniors how to be good. It's just, you know, you do some of the grunt work, you know, you get you get thrown in with the billables and you kind of develop your skills that way. Some would say not ideally. And I think this this really makes a difference where you design a system that not only is, you know, a low, low price subscription that is appealing to clients, it's smart in the way it builds its own knowledge base, but it also trains a junior and, you know, ideally pays for their salary, too. And then that junior gets smart and can be brought into the higher value work as they've actually done their apprenticeship by advising for real. So ironically, I think the more you develop these new ways of delivering law, the better you're going to train the juniors because you're actually focusing on the judgment part. From day one, the junior today has to be a mini partner. They can't, you know, you can't that world doesn't exist anymore where you get to like hide away for five years into the boring stuff. Thank you so much once again for for being in the show. And thank you all for tuning into today's episode. You're very generous for saying that. And thanks to your listeners for bearing through this. I really enjoyed being here. Looking forward to the next one.