Michael Gerstenzang, Managing Partner at Cleary Gottlieb, on Sixth Street’s It’s Not Magic Podcast

It's a pleasure. It's my pleasure. We've been having this conversation on and off for 26 years or something like that.

Yeah. Well, I think generative AI is clearly a new thing, but technology and technology in the law is not a new thing, right? You can go back to very early in our careers where there were advances in technology that changed the way that we did things. Email, for example, changed the way that we communicate with our clients and with each other. Cell phones changed a lot in terms of being able to communicate more easily but also all the time. And we at Cleary, we could see that technology was going to continue to change the way that we did work for clients. And so we started actually about four and a half years ago saying we want to create something that is technology first—not technology only, but technology first in the way that we approach client service. And we thought that the best way to do that would be to create a standalone business wholly owned by the firm but that operated independently, because we wanted to give it enough flexibility to pursue ideas and approaches to the business that were not unduly influenced by the way that we currently...

There really was not. It took some time to explain to people what we wanted to do and to explain the inevitability of technology replacing a lot of the work that humans do, and we wanted to get ahead of that, not get run over by it. So there were some presentations and discussions at partner meetings but no pushback to it. And then we went out and found really a world-class CEO to run Cleary X. It was a little bit revolutionary within our firm to have somebody we call the CEO—that's not a cultural term for us. And to give her—her name is Carla Swansburg—some independence in the way that she hired people, compensated people, and so on. And I think in any business, but especially a new business, having a great leader is essential to your success. And so when we officially launched Cleary X a couple of years ago, we had Carla, we had the kind of core team. But now we've got 25 people around the world, fully remote business, and doing client work on a regular basis.

Yeah. I think it had a bunch of different implications. Part of it was allowing us to do things that we had traditionally done faster and easier, and that's a good thing. I mean, I sometimes reflect on when I was a summer associate at Cleary Gottlieb, you know, 35 years ago, and I spent a good part of my summer doing redlines—comparing two different documents by hand with a ruler and a felt tip pen. That's crazy, right? And today you press a button and you get a much better and more accurate version of comparing two documents. But I think it has impacted the pace at which we practice law, and that's in some ways a good thing, in many ways not a good thing, because the speed that we practice at has sometimes replaced or eliminated really the ability to step back and really reflect on either the document that you're working on or the overall dynamic of the negotiation. So I think it's been a two-edged sword, like a lot of technology.

Yeah. I think our clients really do want us to think. It's important to remind them of that. But look, I think even in high-end work, which is the work that we are aiming for and that we think we're the best suited for, there are more routine aspects of that high-end work. And I think it's important to be able to adjust the way that you approach the work so that you apply the right tools. And if the right tool is brain power and experience, that's what we want to apply. And if the right tool is a machine, a technology, then we should be applying that. And we shouldn't be taking tools that don't fit just because that's the way we, quote, always do it.

You know, I think that all of your professional experiences have a way of building on themselves. It's not always obvious how that's going to go, but I think we're all on a journey in terms of developing our own skills and abilities and the way we think about our work and our role in the job. And I think all of my professional experiences have built on that. And actually, I would go back and not just talk about my professional experiences but my personal experiences. I grew up in Albany, New York—small city, state capital. My mom taught third grade. My stepfather, with whom I grew up, had a small business repairing trucks and selling truck parts. I had no exposure as a kid to big law or finance or any of those things, and really no sense of those things until I got to law school. And I think a lot of people have that kind of experience where suddenly they're doing things that they had no prior experience to. And for me, the way that I approached that was to say, I have to work really hard. That's how I'm going to be able to be successful and compete with these other people who have a much broader experience and a much more sophisticated understanding of the world. At least I can work really hard. And I did that, and I still work really hard. But over time, what I came to realize is that I was also, you know, as smart as most of them, smarter than some, not as smart as others. But it wasn't just about working hard. I actually had other tools that I could use to try to be successful. And then your career advances and you have more experience and you work hard, and then you kind of realize, you know what, I have pretty good judgment. I can take the combination of hard work and intelligence and turn that into judgment in a way that allows me to add value to clients and to firm discussions. And I think it's important to understand how it is that you're going to be successful and that it's not one thing at every stage in your career—it develops. And I think it's especially important for people like me who come from a background that wasn't privileged, wasn't exposed. We talk at our firm now, both in the U.S. and in Europe, about kind of first generation. And when I talk to first generation young lawyers, one of the things I say to them is, listen, just because you're uncomfortable in a room doesn't mean you don't belong in that room. And sometimes you just got to accept some level of discomfort, but you belong in that room. We want you in that room, and we want you to work hard to acquire experience and then to exercise judgment. And I think any of us can do that.

I think you have to have open conversations about what it is to be comfortable and also that it's okay to be uncomfortable. All of us have experiences, either because it's something new or it's a new substantive area or new client relationship, where we are uncomfortable. And we work to develop relationships and comfort level. And I think that's really what it is to grow as a professional and as a person.

Yeah. Well, certainly not declaring victory on this. And I think it starts with asking why. Why is diversity important at a law firm or any business organization, and why aren't we achieving our goals there? To me, the why—it's important to Cleary Gottlieb is crystal clear, which is, I think of a law firm—certainly our law firm—as a talent business. That is what we have. That's our strategy: to develop and retain great talent. And I look at what that means in practical terms, and it means having a diverse talent base. And that's because the best problem solvers, the best teams in tackling hard problems, are diverse teams or teams that bring different perspectives and insights and experiences to the problem. And that's what we're in the business of—developing great teams to solve hard problems. When I talk to clients about our D&I strategy and initiatives, the number one reason that clients give me for why it's important to them is that they think they get better advice and better solutions and better service from a diverse team. And that's been my experience in client relationships. It's also been my experience in our internal decision-making about important business questions—having a diverse team, whether it's on our executive committee or in other committees, that's really key to making good decisions.

Yeah. I think you can teach that, or I think at least you can set expectations so that people realize they need to develop that. I think the number one piece of that—and something that we are very focused on—is, do you as a young lawyer, do you understand the client's business? Have you talked to them about their business? And it's actually a great opportunity for young lawyers to talk to their counterpart—not to go to the CEO but to go to the junior person that's more or less at their level—and say, can you just explain how your business works, what's important to your business, and what are the risks in your business? And just spend that time, because that's how we give the best advice—in the context of understanding the business. And I think over time, lawyers who do that realize that they should be tailoring their advice to what they're hearing from their clients about the business.

If I think about the personal traits that underlie that, I would say there are two key ones. One is curiosity—hiring people that are interested in learning about other people, about the world, about businesses. That curiosity is something that you actually can identify or at least talk about in the recruiting process. And the other is enthusiasm. And approaching interactions with clients or colleagues with a sense of enthusiasm, I think, is incredibly important because it signals that you are interested in what they do and you like what you're doing. And everybody wants to work with people who are interested in what they do.

Yeah, almost all of it. I think the thing that is different about leading an organization is the range of topics and concerns and issues that you get the privilege of dealing with on a regular basis. And if you are in a client relationship or you're leading a project team, or even if you have a leadership role within an organization but you're not the leader of the organization, you deal with a subset of things. And those are interesting and there can be a broad range there, but there is no topic that comes up at Cleary Gottlieb that I don't feel like I should understand and ultimately I'm responsible for. It doesn't mean I'm the only one, doesn't mean I don't take advice from other leaders, but the range of topics is really incredible. And I find that very engaging and interesting and fun.

You talk to people. You just constantly talk to people. I sometimes joke that if I get to the end of the day and I'm not losing my voice, I haven't done my job. It's really a matter of listening to people, sharing information and ideas with them, developing consensus around developments at the firm or in the legal industry or with clients. And not deciding that there's any topic that is either too small or too big to talk to your partners about.

And that was an early lesson for me actually in my time as managing partner. I've been in the seat now—I'm coming to the end of my seventh year in the role—and I realized pretty quickly through making some mistakes that I couldn't really predict what topics within the firm were going to be important to partners and unimportant to partners. And I would sometimes have a topic that I thought, well, this is a minor thing, let's just do this, and then suddenly people are like, wait, what? We didn't talk about this? And sometimes there'd be big things where I thought, oh, we're going to spend weeks and weeks on this, and actually, in a matter of a few hours, the consensus had emerged.

I think the theme is you got to constantly engage with people across different topics and not self-select for what you think they should be concerned about or should want to know.

Yeah. I think one of the things that we've done successfully over the last seven years at Cleary Gottlieb is to really recruit and empower senior professionals—often non-lawyers, not partners of the firm—but people who are really running our business as an operating matter on a day-to-day basis. And we've empowered them to do that. And they are a great source of guidance and information for me, because there are a lot of things that I can't spend my time so far in the weeds, but I have people that are talented and that I trust to do that and that are open with me about things that are going well and things that aren't going well. And I think treating law firms as operating businesses and taking pride in operating and running a very well-organized global business—in the old days, lawyers took pride principally in being great lawyers, and we still do, but we also have to take pride in running a great business. And that's been an important development on our journey. But the other thing I would say, and it cuts a little bit contrary to this—it can be really easy, too easy I think, for somebody in my seat to just hear from the same people and to not break through the bubble.

First of all, I'm preparing for that visit by talking to people in that office and people in other offices or in other parts of our business about what do they think's going on, who are the key clients, what are the issues, what are the challenges, so I don't walk in cold. And then when I get there, I'm really walking the halls and I'm just popping into people's offices—not just partners, associates, not just lawyers, but members of our professional staff—and just ask them what they're up to. I think that's really important. People sometimes refer to that as management by walking the halls. It's really important to gather information from as broad a variety of people as you can. It's important to have your kind of trusted advisers and your kitchen cabinet. And one of the things that I've been trying to do over time is not just have one set of trusted advisers or kitchen cabinet but many, depending on the topic. And also to try to make sure that those kitchen cabinets include our junior-most partners. You can miss important themes if you're only talking to the people roughly of your age, seniority, or your tenure at the firm. So breaking through the bubble in lots of different ways, I think, has been important for me.

Yeah. Maybe it says something about the Cleary culture, but you'd be surprised at how open our people are with me. Same with Sixth Street, but I wonder if it's a problem elsewhere. But you do have to create a comfort level. I think part of that is just being a good listener and not reacting to everything that people say, but just sitting there and kind of sitting with the concerns, the criticism, whatever it is. And avoiding the reaction that I think a lot of people have of, well, let me tell you why that's not so, or let me try to make you feel better about that. And instead, just sitting with it and hearing it all out. And maybe you come back to that person in a few days or a week to offer a different perspective or talk about it some more. But I think if you are thinking about how you're going to react and respond, you're not really listening.

And this is something that I think really has evolved a lot over the last seven or eight years. And I think there are different strands to it. A big strand was the pandemic, where we went from seeing each other all the time to being at home and seeing each other on Zoom...

That was terrible in many ways, and particularly hard for an apprenticeship business like law. Absolutely very challenging for more junior people to kind of get the exposure and the experience that they wanted, and very hard for senior people to take a different approach in terms of how they worked with more junior people. An important lesson early on in the pandemic for me was the importance of communicating. And actually, I spent about 15 months recording a weekly message, video message that I sent to all of our people, so it's about 3,000 people around the world. And some of those, when I look back at them, like I really didn't have anything to say other than, yeah, we're still all at home and this is terrible, but let me tell you about a movie that I watched this week and you might like it, or what I'm cooking because I spent a lot of time cooking during the pandemic. And I think that was really important for people to hear from me on a weekly basis. Sometimes there were more substantive things to say, but often not. And the power of communication during a crisis, I think, is really great.

I made a lot of pasta.

Yeah, I think there were two things. One is, we're still a community, right? You're still part of an organization that cares about you and cares what you think and how you're doing. And the second was a kind of a sense of hope, like we are adapting in some pretty effective ways, surprisingly effective ways, and we are going to get back to a new normal. I don't know what that looks like today, but I know that we are going to get back to a new normal. And there are a lot of terrible things going on in the pandemic, but we are going to get through this, and that's really what I was trying to convey.

Yes, yes. Well, about two weeks into these videos, one of the folks on the professional team that I work with a lot sent me one of those little light things, you remember lights, and said, you got to put this behind your, you know, your camera because you're always in a shadow. So there was like, there was some of that. But the other thing was to accept that it was okay to make a short video that didn't have substance in the traditional way of thinking about that, or that didn't say anything new or revelatory, but just accepting that sometimes communication is important for the sake of communication. And that took me a little bit of time to kind of fully embrace. I say now, there's another part of like, to overcome your like natural shyness of like, people actually want to hear from me? Exactly. Why would I record another video that says what I already said? I got nothing new to say. But I think that's a very important message. And I got very good feedback from people across the firm saying, thank you so much for doing these videos, and that because confirmed, like, okay, this is valuable, this is worth it. Yeah, yeah, we're still here, they're still there, we're still here, yeah, yeah.

The other part of your question has to do with expectations for leaders to communicate about world events. And we've had more than our fair share of really terrible world events over the last few years. And I think today, it is clearly the expectation among our people that when something in the world happens, if it impacts them or the organization, they expect to hear from me about it. And on the other hand, there are terrible things that happen almost on a daily basis, and you got to, you can't send out a message every single day, it loses its meaning. And so I developed, with the help of my team, a kind of lens to think about that. And the principal aspect of that is, does this event have a direct impact on our people? And once you start putting it through that lens, you say, okay, and then what should the message say? Like, I don't think that anybody at Cleary Gottlieb, or I'm sure at Sixth Street or other well-run organizations, nobody's in doubt that we as an organization stand against hatred or racism or violence. And if that's all that you say, then pretty quickly those messages become a little performative and not meaningful. And so if you take the lens of, okay, what does this mean for our people, then it allows you to get past that and say, we are a community at Cleary Gottlieb, and I'm communicating today to acknowledge this terrible thing has happened in the world, but also to say, let's all recognize that this has an impact on members of our community, and some a bigger impact than on other parts of our community. And it's incumbent on all of us to support people who are feeling the very real anguish, strain, anxiety that these events have caused. And we need to support each other, and we need to have open discussions, but when people are ready, we can't impose those discussions, right? And we need, when we do have discussions, to approach them with respect, with civility, and more than civility, with empathy and support for each other. And that has become the kind of key theme of my message: what does this terrible event mean for our people, and how do we address that at the community level within Cleary? And let's give grace to each other and deal with each other in good faith and assume that we're going to screw things up. People don't always say things the right way, and to create that bubble of like inside your community and, you know, kind of be insulated from kind of the nonsense that's out there, it's an important message too.

Yeah, yeah. Historically, we have had very few lateral partners join us. I mean, over a long period of time, one, maybe two in a year, many years with no lateral partner joining us. A few years ago, we decided that as part of our efforts to achieve our, you know, longer-term strategic goals, we were going to do more of that.

Yes, you're absolutely right that the lateral market has changed dramatically, I would say, over the last five years. And part of that is escalating compensation offers, and another part of it, in some ways this is, I would say, as important as compensation, is that the stigma associated with a partner after many years at one firm going to another firm, that has really eroded. And I think the kind of the bonds that kept people together have been eroded, and I'm not happy about that, but it is a reality that individual partners think of themselves more as free agents than they ever did before. And at some firms, you see a lot more of that than others, and there's a range. But I think that has become more prevalent over the last five years. For us, we decided that we wanted to be more engaged in the lateral market a few years ago, and 2021 was the first year that we did that. We brought in five lateral partners, which, frankly, is nothing compared to many of our competitors, but for us was a big deal. In the following year, 2022, we brought in seven lateral partners, and this year, you know, it'll be more like 11 or 12. And so that's marked a pretty significant change for us in the way that we think about and approach lateral partner hiring. But the thing that has been critically important for us as we've done this is the culture point. And we go through a very lengthy process compared to most other firms that involves a potential lateral partner meeting dozens of current partners. Every partner at our firm is invited to a meeting to meet the potential lateral partner, and typically 80 or 90 partners have actually met somebody before we then have a firm meeting to discuss the candidacy and before we have a vote. And we ask partners during that process to write up a summary. So, 80 or 90 partners will sit with a lateral candidate, it's now done by Zoom mostly, okay? But still, but in small groups, in small groups. Yeah. And we ask the partners through that process to write up their impressions from the meeting. And what's been interesting is, I would say, probably 80% of the comments focus on culture: 'I think this person would fit in well with us for the following reasons,' or 'I have some concerns about how this person would fit in with us for the following reason.' Very few comments about, 'I don't understand the business case,' or 'What's the diligence on their revenue generation abilities?' Right, very few comments. And I think that is a testament, really, to how important our culture is to us, not just because it makes Cleary Gottlieb a nice place to work as a partner, but also because we recognize it as part of our strategy.

Yes, that is pretty cool. That is pretty cool. And it's funny, one of the things that I started doing when I first became managing partner was going to meetings with clients, could be in the pitch, could be a relationship meeting, but meeting a broad array of clients that hadn't been part of my practice. They weren't clients that I knew from when I was a full-time practicing lawyer, but I was going to see them kind of as the managing partner of the firm. And I started hearing a kind of common refrain in those meetings, usually as the meeting was starting to break up and we're kind of collecting our things, somebody, the client would say, 'You guys, referring to the Cleary team, you guys really seem to like each other.' And what I recognized through that was that struck the client as unusual. There was a kind of a note of surprise in their voice: 'You guys seem to really like each other.' And first of all, it made me a little bit sad for the legal profession that the fact that partners in a meeting kind of clearly like each other was so unusual. But I also reflected on, well, why does that matter to the client? It was clear that it did matter to the client; they were noting it. And I think it matters to clients because they believe, I think rightly, that lawyers who know each other, trust each other, like each other, they're going to perform better as a team. And that's going to be to the benefit of the clients. They're going to get, the client is going to get better work, more consistent work, the type of work, the timing of their work, the cost of the work is not going to be affected by internal tensions or squabbling among the lawyers that are providing the service. And I think that really resonated with me. First of all, it made me realize, frankly, how lucky I've been to be at Cleary Gottlieb for 32 plus years. But also that the culture is important to our relationships with clients.

We do. So, you know, as you said, the firm was started in New York and Washington, opening on the same day, and five years later we opened in Paris. And that was very much part of the rebuilding effort in post-war Europe. And then we were in Brussels, but not just in Europe. You know, we opened in Hong Kong in 1980. Today, almost 40% of our people are outside the United States, so we really think of ourselves as one of the original and still today as the preeminent international law firm. And so that forces us, and I think any well-managed business should think about what their brand is and what's the relevance of how they approach the market to changes in the market. And so this question of de-globalization or decoupling is an important one for us. My own view today is that de-globalization is more of a political idea than it is a business idea today. And that you've got big businesses that are so intertwined internationally that they're not likely to make significant changes in the sense of pulling back to becoming solely or primarily domestic businesses. Now, there may be shifts in what their internationalism looks like. Last week, I was in Mexico City visiting clients and visiting some of the large local law firms. And a very hot topic in Mexico, both for private sector and for the government, is the nearing opportunity, as to say, businesses and industries being developed or grown to take advantage of the fact that global supply chains are shifting, right? Largely away from Asia, and as a result of the pandemic, but also of geopolitics. And that is going to create a real opportunity for Mexico, for businesses, and for the government. There are lots of decisions they have to make to realize on that opportunity. But to me, it was a good illustration of saying, well, today, the single biggest example of de-globalization is tensions between us and China. But in fact, that is going to cause a different kind of internationalism, which is US-Mexico, or maybe even Mexico-Europe, or Mexico-Asia. And so I think you have to really understand not just at the high level but the details, what are the impacts going to be. But I don't think it's going to be a significant retrenchment from internationalism.

I would say both. Yeah. In some ways, already today, we have both. We have practice groups that are built around a substantive area of law, like tax or executive comp. We have practice groups that are built around a particular type of work, M&A or litigation. But we also have overlays based on industry or client teams. And I think all that is important and for different reasons. I think if you are trying to train junior lawyers and get them to fall in love with what we do, you need to create an environment in which that's going to happen. I think practice groups, substantive practice groups or practice area groups like litigation, M&A, are really the best way to do that. On the other hand, if you want to deliver great client service, you need to understand the business that your client is and the industry that they're operating in. So I think you need to do all of that if you're going to be successful. The trick is to do that in a way that doesn't just create endless numbers of meetings. And that can be a challenge because you want to share information and insights about industries and legal development, but you need to give people the space to really do what we do for a living, which is to serve clients.

So that's a super interesting question, and I do have a crystal ball, but it's, on this one, it's a little bit cloudy. It's a little bit cloudy, fair enough. I think that technology, over time, and particularly generative AI, is going to reduce the number of lawyers at the biggest law firms. But, well, two things: one, I don't know what that time period is because we're in the very early days of generative AI, and second, it may well be that the lawyer headcount is replaced with technologist headcount. If I think about ClearX and how they're approaching it, we, when we go to pitch a project, we're kind of linked arm in arm, the lawyers and the technologists and the project managers at ClearX. That's how we're pitching the work, and that's how we're carrying out the work. And I think we're going to see more and more of that, where we have first-rate technologists at Cleary Gottlieb who are part of the client team. You know, today that's happening in small ways, but if you had to kind of define what's the role of the technologist at Cleary Gottlieb, you probably would say number one, keep the trains running, make sure my email doesn't collapse, exactly. Right, but I think over time, number one is going to be making sure that we are presenting ourselves to clients as a tech-savvy, tech-enabled law firm, and that we're doing the work hand in hand with our technologists.

Well, I think a lot of the technology aspects, we don't need to tell them anything. You know, I mean, we when a new associate comes in today, we don't say, you know, there's this thing called the iPhone and this other thing called email, you need to learn how to use it. Like, they are more tech-savvy than we are when they join. And I think in a few years, that's going to be true for generative AI also, because they will have had experience in high school and college and law school using that. So really, what it's about is making sure that they're using those tools in a way that supports our clients and that is consistent with the firm's views on client confidentiality, on document security, on preserving the value of our data. You know, those things we're going to have to teach and train and inculcate. But the basic use of technology, they're coming ready for that.

I think so. And you know, you and I have used the term, in your articles, of co-piloting, right? Having lawyers work alongside technology to deliver great service to clients. And to me, that's a very helpful way to think about it. You know, I mean, we get on a lot of airplanes, both of us, right? And when we get on the airplane, we see the human pilot, delighted to see that person, but also feel pretty good about the fact that they're alongside a computer that's helping them navigate this flight. Yes. And when I get on a plane, I don't want there to be just the human pilot or just a computer; I want them working together. And I think that is the future of the practice of law. And I think that we're going to have to train both the lawyers and the technologists to talk to each other and work closely together in that. But the hard part of that training, I think, is going to be in the first generation. And once you get past this first generation of co-pilots, it's going to be very normal and natural because it's going to reflect how other parts of our lives are already working.

I think I've been incredibly lucky in my career to have a pretty broad range of people to learn from. Some of them more senior than me, some of them my level, some more junior than me. I think I learned as much from you as you did from me, probably. So, but I think, and I think the key to that is being lucky when people invest in you, but recognizing the investment that they're making and trying to grab more of that. Not taking it for granted goes back to showing enthusiasm, like, I really want to learn this and I think you can help me learn it. And another part of it is your own responsibility to learn, including from people that aren't trying to teach you, and including from people where what you're learning is how not to do things. And I think it's really incumbent on anybody if they want to develop professionally to be a little bit of a sponge and watch what people are doing and how they're approaching things, and figure out what of that you think will work for you and make you a better professional, and what of it you want to avoid because it doesn't feel natural to you or because you just think it's not a good idea. But I think we all are on this journey of learning that continues. For me, I mean, the day I feel like I've stopped learning how to get better, like, the day for me to go read books or something. So I think it's really important that people take initiative, take responsibility for their own development, and don't look for just one mentor or example, look for dozens and figure out what you can learn from how they're doing things.