Hsu Untied interview with Michael Gerstenzang, Managing Partner at Cleary Gottlieb

Thank you, Richard. It's a pleasure to be with you.

Well, Richard, there actually was a moment where I started thinking about the need for something like ClearX, and that was in the spring of 2018. I was about one year into my tenure as managing partner of the firm, and we had a partner meeting. We invited a professor and lawyer named Richard Susskind to speak. He talked about the power of technology and how it improves over time, not linearly but in fits and starts, generally faster than people think. He also said that lawyers, especially senior ones, tend to be dismissive of technology, holding it to a standard of perfection and overstating the value of judgment and experience. This resonated with me, and I walked away thinking we need to get ahead of technological developments. It was a vision based on fear—fear of what happens to Cleary Gottlieb and other firms as a result of technology. I spent time thinking about it, went to the executive committee, and proposed creating a business focused on technology in the practice of law. The vision statement was: let's imagine the business that puts Cleary Gottlieb out of business, and then go create it, but with a broad view of what that might look like. That led to the establishment of ClearX.

Yeah, the idea of having it be separate—and it is wholly owned by Cleary Gottlieb but operates with a fair amount of autonomy—was pretty early on one of our core principles. The reason was that we wanted to make sure this business that might put us out of business had the latitude to grow and develop without being restricted by Cleary Gottlieb culture, both the good and the bad. We wanted it to chart its own destiny in terms of products, client base, and employee autonomy. We were convinced that if we tried to do it within Cleary Gottlieb, it would unduly restrict what ClearX could become. Now, there is a strong connection between Cleary Gottlieb and ClearX, more than just ownership. ClearX benefits from the substantive expertise, client relationships, and brand of excellence and internationalism at Cleary Gottlieb, but the day-to-day operating function of ClearX is pretty autonomous, and I think that's good for its long-term ambitions and capabilities.

I wouldn't say I was particularly technology-oriented as a practicing lawyer. I grew up in a time of significant technological advances—when I was a summer associate, I spent time blacklining documents by hand, but then benefited from email, cell phones, and mobility. However, those technologies allowed lawyers to continue doing things faster and more efficiently, not fundamentally changing how we practice. As I sat there in spring 2018, even before generative AI was in common domain, we were looking at technologies that have the prospect of fundamentally changing how we practice law and how we all relate to each other.

Yeah, we have a great CEO of ClearX. We intentionally structured the relationship so they operate with significant autonomy, but it's integral to how we approach client service and our long-term strategy. I stay closely involved with ClearX as a result. We govern ClearX through a four-person operating committee, effectively a board, and I'm the chair of that. We have a standing quarterly meeting with senior management to discuss strategy and business plans. I also spend a lot of time with the ClearX folks between meetings because it's so important to our long-term business.

Yes, that's been quite a collaborative process. One of the founding principles of ClearX was autonomy from the firm, benefiting from Cleary Gottlieb culture without being constrained by it. Another important principle was focus on clients, starting with the premise of what are the client pain points we should address. We talk to clients about that. Sometimes in innovation, people develop clever tools but don't start with client conversations, so something impressive might be hard for clients to use or miss the mark. We intentionally started with client conversations and continue that today to help figure out the product roadmap and strategy. Pretty early on, we formed a client advisory board for ClearX—it doesn't have governance role but has been a useful sounding board. Staying really close to clients is critically important for ClearX to succeed.

Yeah, so generative AI wasn't in common domain when we launched ClearX. We were very focused on technologies that were cutting edge at the time and disciplined about making sure our product offering was technology-first, not trying to be an alternative legal service provider reducing human labor costs, but coming up with a different, technology-driven solution. As generative AI started filtering into popular domain, we used ClearX in the early days as a sandbox to experiment with it. That proved effective because of concerns about confidentiality and errors like hallucinations. ClearX gave us a controlled environment to experiment and plug generative AI into other technologies we were already using. It's easier when you have a small organization and a structure already using technology. Now, generative AI has advanced a lot, and early concerns are being reduced and mitigated, so we're using it more broadly across Cleary Gottlieb, but it's still in the experimentation phase. We're trying different tools and engaging directly with clients on proof-of-concept experiments, which is an ongoing process but broader today across the firm than in the earliest days.

Well, I think it's too early to tell. It's grown a lot and should continue on an aggressive growth trajectory. One of my partners says, half-jokingly, that someday ClearX will be 'the firm' and Cleary Gottlieb will be the content provider to ClearX. I don't know if we'll get quite there, but it's important to be ambitious and meet the opportunity and, most importantly, client need. We see a lot of future growth for ClearX in doing that. What the ownership structure looks like is an open question. We've seen private equity firms invest in legal technology companies, which can accelerate growth by providing capital, but we're not at that point now. We have a ways to go in growing the business as a Cleary Gottlieb fully-owned business.

Absolutely. It both forces you to do that, focuses your attention, and gives you an opportunity to do that. ClearX is very much in the flow of innovation in this space, so we talk to a lot of relatively young companies in the legal tech space and understand what they're doing. When we can, we try to help them figure out the best path from the point of view of the client. Going back to something I said earlier, it can be a challenge for innovators to really understand client needs, and ClearX and Cleary Gottlieb are often at the intersection between technology and client need. It's good for everybody if we can help guide what the development should look like to best serve clients.

They're often surprised and intrigued by it. They don't see a lot of this out in the market, particularly for firms like Cleary Gottlieb. We've gotten a lot of engagement from clients, and one of the interesting things is that every legal department is trying to come to grips with what generative AI means for them. So even for clients that aren't sure or don't feel they have the right project for ClearX at the moment, they really want to talk to our team to help them figure out what internally within the legal department they should be doing as they do their own experimentation on different legal technology. It's almost like a consulting role for technology. Now, we're not trying to become a legal technology consultant—that's not a business we're trying to build—but we do see clients who realize we have the expertise and credibility to be helpful to them as they chart their own roadmap for this.

Yes, absolutely.

I do see it as a possibility, and we encourage that. Lawyers may want a different career path and are interested in technology, which I think is attractive. Big law sometimes has a talent challenge, especially with younger people. People with an entrepreneurial spirit might not find big law appealing, but ClearX, and I think we can do this with other businesses over time within Cleary Gottlieb, can offer a different framework. We can create a career path for somebody in ClearX, and for some, the idea of working at essentially a startup in the legal technology space with the benefit of being under the Cleary Gottlieb umbrella is very attractive.

I do. I do feel that way, and it's very exciting. One of my happiest moments in the evolution of ClearX was about a year and a half into it. One of our senior folks at ClearX happens to be a very gifted woodworker, and we had a meeting in New York. He brought me a little woodwork thing that says 'Founder ClearX' in the ClearX colors. In the old days, lawyers like me would put deal toys around their office—that's not such a big thing anymore—but I proudly display my 'Founder ClearX' deal toy.

Absolutely. There is something about a startup and fostering that startup ambition. We have very entrepreneurial and ambitious people at Cleary Gottlieb, but within a smaller organization, you just find a different sense of urgency, of growing, of failing fast. That's one of the things we talk about at ClearX—let's try different technologies, and if they don't work, let's fail fast and move on to the next one. We can come back to the prior one in six months once it's further developed. Failing fast is kind of a hard thing to embrace in a big law firm; the stakes are very high, and there's a commitment to excellence and perfection. It doesn't quite fit with the vibe of big law to say let's fail fast. It fits very well within ClearX and within a startup culture.

I have.

Yes, I am.

My pleasure, Richard. Thanks.