Life as a Managing Partner: Leading Your Firm to Future Success - Michael A. Gerstenzang - S8 E35

I love being the managing partner of this firm, and one of the reasons is there is no typical day. It's a really exciting time for new lawyers to join the legal profession because we're on the cusp of so much change, and I think that's going to be a very good thing for more junior lawyers. Law firms are talent businesses, right? We don't have factories or warehouses. We don't have anything that we are, quote, selling other than the talents and experience and judgment of our people. One of my jobs as managing partner and the jobs of our senior partners is to help the next generation fall in love with what we do and with our organization. In many ways, we are overdue for significant change, and now we're in the early days of significant change. I think that's exciting. I think we should embrace that.

Rob, thank you. It's a pleasure to be here.

Okay, well, I'm a little bit ashamed to say that I haven't seen it, but my impression is that it is much more interesting than the average day of a lawyer at any big law firm. My embarrassment at not having seen Suits is really twofold. One, I watch a lot of TV and most of it is pretty lowbrow, and I think Suits should definitely be on my watch list, and I've got to remedy that. The second is there's actually, at least in the lore of our firm, a pretty strong connection between the show Suits and Cleary Gottlieb. A longtime Cleary partner who's now a federal judge in New York is a fellow named Lewis Liman. His brother is Doug Liman, who is one of the forces behind the show Suits as well as a number of other TV shows and movies. And for those who watch the show Suits, you'll know that one of the lead characters is called Lewis Litt, which people around here like to think maybe is a connection to our former colleague Lewis Liman. I don't know if that's true or not, but it makes it even worse that I haven't seen the show.

Sure. I grew up in Albany, New York, a small city. My mom taught third grade. My stepfather, with whom I grew up, repaired trucks — heavy-duty trucks — for a living. It was a very middle-class upbringing, had no involvement in big law, in finance, really in anything of that sort. But I went to college at Georgetown University in Washington, went to law school at Columbia Law School in New York, and through those experiences started thinking about the world in broader terms and became attracted to the idea of being a lawyer, mostly because it felt like a profession where you got to do lots of different things, and it combined both an academic orientation and a business orientation, and those two things appealed to me. So I graduated from Columbia Law School. I had two clerkships. The first was for a judge on the Second Circuit Court of Appeals here in New York — that was 18 months — and then I went abroad and lived in The Hague, in the Netherlands, and clerked for a judge on the Iran-US Claims Tribunal and did that for a little over a year. And then came back to New York and joined Cleary Gottlieb. And my experience at Cleary has been absolutely tremendous. I've been at the firm for about 34 years. It's been a fascinating journey through lots of different client work and different roles at the firm, and more than happy to talk to you about that today.

I found both of the clerkships incredibly interesting and valuable, and that's for somebody who pretty much knew I did not want to do litigation in my practice. So it was a little bit of an odd choice, perhaps, for somebody who was more interested in corporate to not just do one clerkship but two. But at the time, and looking back, I felt like I learned a tremendous amount about the law. I learned a tremendous amount about thinking analytically and writing in a very clear and crisp and concise way. So I got a tremendous amount from both of them. And one of the lessons that I've since carried with me is, of course, the clerkship is very much about a close relationship with the judge, and I was incredibly fortunate to work for two terrific judges who really took time and interest in mentoring their clerks. But it was also about learning and developing relationships with my co-clerks. And looking back on it, I feel like I often learned just as much from my co-clerks, even though we were peers within the chambers, as I did from the judges. I think that's an important life lesson — there are lots of people you can learn from. It's not always the person who's more senior than you; it can be the person who is your peer or somebody who's junior to you. The second clerkship at the Iran-US Claims Tribunal was also my first opportunity to live abroad, to live outside the United States, and that was a tremendous experience both professionally and personally. It opened my eyes to a kind of internationalism that's been an important part of my career and my life since then, and made me interested in doing another stint abroad, which I ended up doing with Cleary a few years after that. So I think, regardless of what you think your long-term professional interests are, it's certainly worth considering a clerkship.

I'd be happy to. And I feel really fortunate to have come into private equity work really in the earliest days of that industry, and it's given me a kind of front-row seat and often involved directly in work and the development of the private equity business that frankly nobody could have imagined in 1992 and 1993 — including working on the very first fund that TPG raised in 1993 and working with them and continuing to work with them now over several decades. Private equity firms essentially raise money mostly from institutional investors — endowments and pension funds and sovereign wealth funds and the like — and then invest that money, could be buying a company, could be investing in other kinds of assets, with the goal of increasing the value of the company, improving their operations, helping guide them strategically, and then selling the assets some years later and returning the profits to their investors, which people call limited partners. It's a very entrepreneurial business, a very dynamic business, and has become an important part of the commercial landscape on a global basis because of the size of private equity firms and alternative asset managers more generally, and the role that they play in M&A and in capital markets and so on.

When I think about the experiences I've had working for clients — and again, I feel incredibly fortunate to have gotten involved in this work in the earliest days and for the client relationships that I've had — some of the most memorable client work really was because of developments either in the private equity business or in the world that forced both investors and private equity firms to adapt. Part of that was a dramatic increase in the size of private equity funds — from funds in the mid-'90s, it would be a big fund if you had a billion or a billion and a half dollars, and just five or six years later it was 10 and 12 and 14 billion dollars, and that changes the way the funds get raised and the nature of the relationship with investors. Then you had the really enormous LBOs — $30, $40 billion LBOs in 2005, 2008 — and that led to other changes in the way deals were structured and money was raised for those deals, co-investment opportunities for limited partners, which has now become a very common thing but was new at the time. The global financial crisis forced both private equity firms and limited partners to rethink their relationships and how the money was being deployed and at what pace. And the changes just continue. We've, at our firm, had an important role on succession issues as the founding generation of large private equity firms begins to move offstage and are succeeded by the next generation, dealing with liquidity issues both for private equity firms themselves — many of which have gone public — or for portfolio companies. So it's been a journey marked by change and adaptability and by entrepreneurship. Some of the most memorable moments, though, for me, really are about the teams and working with the people — the people at the clients and the Cleary Gottlieb people — and really rallying around and getting smart, dedicated, hardworking people to focus on complicated problems and come up with novel solutions. There's no better feeling than sitting around a room and brainstorming and coming up with an answer which wasn't immediately apparent and then figuring out how you're going to implement that answer. Those moments are memorable and deeply satisfying both intellectually and personally. I feel incredibly fortunate and also very lucky, and I think that's worth underscoring because I think it's altogether too easy for successful people to forget the role that luck has played in their success. I feel incredibly lucky to have gotten involved in the private equity industry in its early days and to have developed long-term relationships, and I feel incredibly lucky for the people I've gotten to work with at Cleary Gottlieb along this journey.

I think there were a couple of things that really stuck with me from that time. One is the people that I got to work with in our Brussels office, which is an incredibly international, diverse office, and that's been true for decades. We had lawyers from all over Europe, and at that time it was the early days of the post-Soviet era in Eastern Europe, and so we had young lawyers from Poland, from Hungary, from Romania working with us in our office for a year or two. Just being exposed to these really bright, energetic people who came from a completely different background than me — a different cultural background, a different educational background — and learning from and with them was incredibly enriching. The work I was doing at that time, a lot of it influenced by the privatizations going on in Eastern Europe, was also really interesting. It was a moment of adaptation for those businesses, for those countries, for the legal systems, and I think living through a time of adaptation was very valuable for me. It instilled in me excitement about adaptation that has carried with me to today. And Rob, you mentioned generative AI — we're very focused on that here at the firm, and we're embracing it in a very positive way. I did a presentation at one of our partner meetings recently and put up a quote: 'When the winds of change start to blow, some people build walls and some people build windmills.' And we're a firm that's building windmills. I have that feeling and optimism about change because of my experience in Brussels and because of my experience in the private equity industry. I think change can be a very positive thing if you embrace it with a positive spirit.

Well, one of the great things about this job — and to be clear, it is a great job, I love being the managing partner of this firm — and one of the reasons is there is no typical day. It is a very broad remit. I think about my role as having different categories. There's the strategy piece of it — I'm thinking all the time about what our near-term, medium-term, long-term strategy as a firm is. There's the communication piece of it, and I think that's critically important. I spend a lot of time talking with our people — partners, other lawyers at the firm, members of our professional staff — just hearing from them about what's going on in their professional lives and also in their personal lives, just getting a feeling for the firm as a whole. And then there's communication outward. I think in some early interviews in my time as managing partner I described myself as Listener-in-Chief, and I continue to think of that as being an important part of the role. But there's also the part of the role of taking what you've heard, whether that's from clients or from our people, and then sharing that more broadly around the firm so that everybody can benefit from what I've heard in my various conversations and travels around the world. That communication, I think, is critically important and has become more important in the kind of post-COVID hybrid world.

There are a few core elements of that, and I was glad to hear that quote because while it was something I said in 2017 and frankly had kind of forgotten about it, it completely resonated with me today. I could have given you that quote today; it would have captured the way I think about the firm and the opportunities for us. Number one: be client-centric. Focus on what our clients need and where their business is going. This is the Wayne Gretzky point — it's important to understand a client's business today, but a lot of my time talking with clients is asking them where they think their business is going in the next five and ten years, as a matter of geographic focus or product focus or business strategy, because we want to be prepared not just to do a great job for them today but to do a great job for them five and ten years from now. So being client-centric is critically important. The second part is being focused on talent and people within our organization. Law firms are talent businesses, right? We don't have factories or warehouses. We don't have anything that we are, quote, selling other than the talents and experience and judgment of our people. And making sure that we're an organization that attracts talented people and develops their talents and retains them over the long term — that is kind of the core of our strategy as it relates to delivering excellent client service. And I would say the third part is innovation. When I talk to senior lawyers, whether it's at our firm or at other firms or in-house lawyers, I will often hear from them, 'Oh my goodness, things are changing so much and so rapidly in the last few years.' And that is true to a degree. But when I step back and think about the industry, big law over the last 34 years — and I use that because that's when I joined Cleary Gottlieb — big law has changed very little. It's changed less than the industries of really any of the clients that I can think of. And not just over the last 34 years, but over the last ten years, it's changed less than just about any other industry. And so in many ways, we are overdue for significant change, and now we're in the early days of significant change. I think that's exciting. I think we should embrace that. I think it's going to be good for law firms and for clients to have this evolution. But I'm not somebody who wrings their hands about change. In fact, if anything, the fact that we've changed so little over a 30-year period is more worrisome than how much we're going to change over the next five and ten years.

I spend a lot of time, and we as a firm spend a lot of time, talking about our culture and our values. Most law firms and most organizations will articulate the importance of their culture. For us, what has made the real difference is the continuous articulation and embracing the core elements of our culture and doing it in a very specific and detailed way. I have a slide that I use when I do town halls with our people, when I talk to our partners, and it's nine words that attempt to summarize our culture — the key attributes of our culture. Now, our organization is much too textured and too large, and it would be foolish for me to think nine words can capture everything, and they don't. But the reason I use that slide is because I think it's important to talk in very specific ways about your cultural attributes, because otherwise you default into these generalities that don't really convey what you're about as an organization. Some of those values and cultural attributes are the ones that were in that quote you read. It's about collaboration, it's about internationalism, it's about mutual respect, it's about striving for excellence. But I think — and this is true for us but I think is generally true — it's important to push the conversation about culture beyond the kind of feel-good elements. If your culture kind of comes across as mom and apple pie, maybe everybody feels good about that, but it doesn't really drive behavior in the way that you want it to. So when I talk about our culture, and included on this slide of nine key attributes, are things like entrepreneurship and accountability and adaptability and innovation — things that, frankly, are hard. It's uncomfortable to be adaptable. It's uncomfortable to be accountable. But those are just as much part of our culture as things that are a little softer — mutual respect and collaboration. They're all important. But if you really value your culture, you've got to talk about it a lot, you've got to be specific about it, and you've got to be authentic about it and not try to present your culture as all the easy things. There are hard things that are part of our culture, and that drives us to be ambitious. And I think that's a good thing for an organization.

We've talked a little bit about technology and generative AI. I view that both as an opportunity and as a challenge. We're very committed to introducing — and we're already on the path of introducing — generative AI in our work, but there are going to be challenges to make sure we do it right. We're committed not just to using the technology but to using it in the right ways. We just published, and people can find on our website, our responsible AI principles. I think it's important that law firms and other business organizations really commit to using AI in a responsible way. But that's not a frozen-in-time set of principles, because the technology is evolving rapidly and will continue to evolve rapidly, and the use cases both within law firms and in client work are going to continue to evolve rapidly. So one of the challenges is going to be making sure that we continue to adapt our work and use technology, but that we use it in the right way — we don't just put ourselves on autopilot but we really think carefully about how we're using it, and that we're talking with clients about that. This goes back to being a client-centric business. Some of our most successful early pilots in using generative AI have been where we've had one-on-one discussions with a client about the problems that they're trying to solve, and then we design the technology tool and the procedures around those problems. That's clearly the path forward, but it takes work and thought. So it's an opportunity but a challenge to make sure we realize the opportunity. I think the other big challenge for law firms is going to be the talent game and competing to recruit and retain the best talent. Unlike prior generations, there are many opportunities in the world for interesting work — work that's intellectually satisfying, satisfying from an entrepreneurial point of view, remunerative — and we need to compete for the best talent and then try to convince those people that making a long-term career at Cleary Gottlieb would be a great thing for them. Some of our best partners — and I would like to put myself in that category — arrived at Cleary Gottlieb not really sure whether a long-term career at a big law firm was the right thing for us, but somewhere along the way we fell in love with it. We fell in love with the practice, we fell in love with the firm. And today, one of my jobs as managing partner and the jobs of our senior partners is to help the next generation fall in love with what we do and with our organization. But that's not easy, and there are generational changes and different ways of thinking about things. I, for one, am really impressed and encouraged by the way the young generations think about work, think about the impact that they want to have. I am the last person to say 'oh, kids these days' in a dismissive way. I actually am in awe of the mentality, the ambition, the courage that so many of our younger people have. And I think it's incumbent on us to explain to them why we're the right place for them — not incumbent on them to prove to us that they're the right folks for us. That's the nature of a talent business: we've got to continually attract and retain and develop the best people.

Look, I think generative AI is going to be a game-changer for the legal industry and for many other industries. There can be a temptation to compare it to other technological innovations within law — email, blacklining, Westlaw — but this is something very different. And it's going to be crucially important for individual lawyers and for law firms to embrace generative AI as a tool and to work as a co-pilot with that tool. I sometimes give the analogy of flying in a plane. I travel a lot for my job, and whenever I get on a plane, I'm happy to see the pilot standing there greeting people and they seem like they know what they're doing — that's great. But I'm also very happy to know that there is a computer in the cockpit that is making a lot of the decisions and cross-checking what the human pilot is doing. That co-piloting approach is one that we ought to be embracing in law firms, working very closely with the generative AI tools that are rapidly developing. One of the things that David Stepleman and I say in the article is it's going to be important to think about what generative AI is good at and what it's not good at. What it's good at is essentially pattern recognition — looking at how things have been done in the past and applying that to the new question or the new problem. What it's not good at is approaching that with empathy, with understanding the human dynamics of why this is a problem or an opportunity that deserves attention. That could be the dynamics within an organization, it could be the dynamics between two organizations — the computer isn't going to be able to do that. And it's not likely to be especially creative either, because it's going to give you the answer that says, 'Well, in the last 10,000 times, 9,999 of them, here was the answer.' But sometimes it's the one-in-10,000 answer that is the right answer for a particular client, or it's an answer that has never been used before in this particular context but is used in a different context — a different geography, a different practice area — and turns out to be a very useful solution. So I think we need to focus on developing the human skills of empathy and creativity, because that's where the machines are not going to be able to do our job. If I think about how, over many years, certainly when I was a young lawyer, how were young lawyers evaluated — well, the truth is, and certainly 30 years ago this was the case, stamina was a big part of it. How hard could this person work over a long period of time? Well, no human's going to be able to outwork the machines. We shouldn't even try to do that. So let's bring what we as humans can uniquely deliver to clients, and let's focus on that, and use the machines for the rest of it. That's the way I think about it.

Look, first of all, it's great to get those awards and recognitions — that feels good. That's not what we're about. We're not about pursuing the next award or recognition. We're about the work and doing great work for clients and figuring out what our clients' needs are today and five years from now and ten years from now. And if we do that, if we remain focused on those basic principles, the awards and recognitions will come. But we've got to focus on really what our business is about, which is client focus and innovative and creative lawyering to achieve great client outcomes. When I think about my personal role in that, I'm trying to push us forward towards innovation, trying to make sure we recruit and retain the best people for that — and that's not just lawyers, it's great technologists, making sure that we've got the right people for this technological advance. But I think of myself as both trying to push us forward and continue to achieve excellence, but without losing sight of our core values and our culture. I think we need to hold those two things in our minds together. I sometimes talk about the Cleary Gottlieb superpower of holding in our minds at one time both courage and humility. Courage to be bold in our advice, be bold in our business planning and the choices that we're making, but remain humble and recognize that we don't know everything. We need to learn from those around us. Often that's learning from clients. Sometimes it's learning from other law firms. Often it's learning from other professional services organizations who are further along on their journey in some ways. So maintaining courage and humility to build a great law firm for the next generation — I think that's really what I'm hoping to achieve.

I think it's a really exciting time for new lawyers to join the legal profession because we're on the cusp of so much change, and I think that's going to be a very good thing for more junior lawyers. The two things I would say to any junior lawyer — frankly, any junior professional — one: approach your work with enthusiasm. Even if sometimes it's a kind of mundane task, approach it with enthusiasm, because you'll get the most out of it and because you will, by showing your enthusiasm, encourage people around you to invest in you. That's just human nature — people like to work with those that seem to be enjoying what they're doing, and they spend time investing in those people. And all of us need others to invest in our success. So approach things with enthusiasm, and that will bring a lot of good. And the second is: develop relationships with other people internally and externally. So much of the legal profession, so much of life, is really getting to know other people and learning from them. It could be people in your law firm that are doing different things than you or have a different way of thinking about the work you can learn from. It could be clients, where it's super valuable and interesting to learn about what they do in their jobs and what's important to them and to their businesses. So really try to absorb as much as you can through those relationships. There are lots of other pieces of advice — the importance of working hard and all of that — but I think the two core areas for me are: enthusiastic approach to your work and developing relationships so that you can learn from as broad a network of people as possible.

I'm active on LinkedIn — I post a lot of thoughts, including about technology, but also important topics for the legal industry. I'm happy to engage with people on LinkedIn. I'm happy to get direct emails from people and have calls or Zooms or whatever it is. I think it's an exciting time in the legal industry, it's an exciting time for Cleary Gottlieb, and I want to share that with people.