Clayton Christensen answered the AI native law firm question in 1997.

He just wasn't talking about law firms.

The Innovator's Dilemma says an incumbent cannot build the disruptive business inside the existing organization.

The best customers, the cost structure, and the way decisions get made all reject it.

His fix was a separate unit with its own economics, and his example was IBM building the PC in 1981 walled off from the mainframe business.

I was a kid in Florida people drove around with a bumper sticker that said "Florida Native."

Tourism was a fraction of what it is now and the locals were already tired of it.

The sticker meant: I am not the reason for the traffic and why you couldn't get a table. I was born there, so I had one.

Then a second sticker showed up. "Florida Semi-Native."

That one was for the transplants who moved down and stayed long enough and wanted to distinguish themselves from the tourists.

Nobody ever printed a third sticker for the transplant who became native. There is no such thing. You were born there or you weren't.

Every large law firm is about to pick one of those two stickers.

The AI Native Law Conference put on by Patrick DiDomenico and Kevin Klein is in NYC on Wednesday.

A great list of speakers including Mark A. Smolik, Matt Pollins, Jenn McCarron, Josh Porte, Elizabeth Spector Louden, Ken Crutchfield, Helen Fan, Rob Saccone, Ryan Walker, David Perla, Richard Perris.

Many of which have been guests on the pod whom I know well.

The firms on that stage were born native.

AI in the operating model from day one.

No billable hour to protect, no partner distributions competing for budget, no partnership vote before things gets delivered.

A traditional firm will have a very hard time getting there.

The partnership pays out every year and keeps almost nothing to invest. Decisions need consensus.

The practice is the center of the universe and everything else is overhead. Outside capital is off the table without an MSO.

There are massive granite cornerstones of the industry that have to be turned upside down to go true AI native.

Redirecting decades of cultural inertia.

A traditional firm can still make real progress BUT it becomes semi-native.

For most of the Am Law 200 that is a fine place to land, and I'd argue it's the right one.

The firms that want to be native have one option, and it's the one Christensen highlighted with the IBM example.

Stand up a separate entity. Build the workflows from first principals with technology in the design instead of bolting on.

Be open to outside capital.

Outcome based pricing from day one.

Run it like an enterprise instead of a partnership.

The transplant never becomes native. Their kids do.

IBM figured that out over 40 years ago.

Semi-native is nothing to be ashamed of. Just don't mistake it for native.