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Michael Gerstenzang, Managing Partner of Cleary Gottlieb Steen & Hamilton

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Two seasoned dealmakers, business builders, and friends of over twenty-five years sit down to have a frank discussion about the evolution of business, law, culture, and management.

David Stiepleman, Co-Founder and Co-President of global investment firm Sixth Street, and Michael Gerstenzang, Managing Partner of global law firm Cleary Gottlieb, discuss the art of commercialism, the best ways to get buy-in from high-achieving groups, and the potential for generative AI to upend how lawyers advise clients, just as the iPhone did.

David and Michael first met in the late 90s and have been working together in various capacities ever since. Find out all they’ve learned together on this special episode of It’s Not Magic.

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Episode Transcript:

David Stiepleman: Hi, everybody. Welcome back to It's Not Magic, our podcast from Sixth Street. We invite influential leaders and founders to get to the core of how they're creating innovative solutions to stand out in their industries. Look, every one of our guests is fantastic. This is not only a fantastic guest, but it's super special to me. He's a longtime friend and a mentor of mine, and a trusted advisor and partner to a lot of leading global firms, including Sixth Street.

Michael Gerstenzang: When a new associate comes in today, we don't say there's this thing called the iPhone and this other thing called email. You need to learn how to use it. 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.

David Stiepleman: That's Michael Gerstenzang. He's the managing partner of the storied global law firm Cleary Gottlieb Steen and Hamilton. Full disclosure, I started my career as a corporate lawyer at Cleary Gottlieb. I joined them out of law school. Michael, among others, but Michael played a big role for me, teaching me how to get deals done, how to draft documents, spending the time and helping me think about not only all those technical things, but sort of what the role of a counselor is and what it means to be an advisor and provide real value to clients. So, this is just a real special conversation, and we had a real good time, as you'll hear. You're going to hear about a number of things in particular, how the law business and big law firms in Cleary Gottlieb in particular is planning and is already working on artificial intelligence.

David Stiepleman: Michael and I have written a couple of articles about that, and we go a little bit deeper into that topic, how you teach commercialism, how you adapt your skills over your career, how you get to seats, because you're good at something, but then you need to be good at other things. And Michael's going to talk about how he thought about that through his career. I think you'll really enjoy this conversation, and let's get into it. Michael, thank you for being here. It's a pleasure. We've been having this conversation on and off for 26 years or something like that, so this is super fun. I was told by the podcast gurus that if you start off by saying AI, the robots send you a thousand more subscribers, . So, I’m going to start with AI. You and I have been talking about this over the last year or so. We've even written a couple articles together about how AI is going to change the legal business, and you can make predictions if you want. I'm more interested in rewinding the tape, a year and a half, two years. You started this thing called ClearyX. How did you see that coming? How did you convene people internally, externally, to understand or start to understand what you'd want to do? I'd love to have you talk about that.

Michael Gerstenzang: Well, I think generative AI is clearly a new thing, but technology in the law is not a new thing. And 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 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.

David Stiepleman: Was there a pushback internally? People were why are we spending money on this? This is just another fad.

Michael Gerstenzang: 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, we wanted to get ahead of that, not get run over by it. So there were some presentations and discussions of partner meetings, but no pushback to it. Then we went out and found really a world-class CEO to run ClearyX. 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, and to give her, her name's 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 ClearyX a couple of years ago, we had Carla, we had the core team. But now we've got 25 people around the world. Fully remote business. And doing client work on a regular basis.

David Stiepleman: You also have this incredible advisory board. People should go look at it, including one of my partners, Adam Korn, who's our chief technology officer. But I want to go back to something you said, which is the sort of like technological change over the last 30 years or whatever, where email and - talk about that. Did that change the practice of law? Or did that make things harder to do because you were doing more things more quickly and maybe not as thoroughly, and how is that different from this?

Michael Gerstenzang: 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 35 years ago. And I spent a good part of my summer doing compare rights - comparing two different documents by hand with a ruler and a felt tip pen. Crazy. 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 the ability to step back and really reflect on either the document that you're working on or the overall dynamic of the negotiation. And so I think it's been a two-edged sword, like a lot of technology.

David Stiepleman: I always wondered if it was a particular disadvantage for Cleary Gottlieb, because Cleary Gottlieb I think is very good at, and markets itself as the law firm that can do the most complex things. You generally don't do the routinized run rate things. And so you weren't going to get a big benefit speeding yourselves up, because that wasn't really what you were selling anyway. You were selling harder things. So did other firms get a better benefit from going faster and doing those kinds of things? And you still needed to convince people that actually, you want us to think?

Michael Gerstenzang: . 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.”

David Stiepleman: I want to go back to the beginning of your career. So one of the themes of the conversations that we've had with people across different professions and experiences is the thing that they get good at when they're young isn't the thing that they're then doing as they get older and more senior and sit in seats like the one you're in. Is that true of you? Even before you were at Cleary Gottlieb, you were a law clerk in the Hague at the US-Iran Claims Tribunal. Was that just a totally different experience or is that of a piece with becoming a transactional lawyer to where you're now?

Michael Gerstenzang: 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. So 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.

Michael Gerstenzang: 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 is 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 was that I was also 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.

Michael Gerstenzang: 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 are 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 US and in Europe, about 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.

David Stiepleman: How do you institutionalize making people feel comfortable when they come in?

Michael Gerstenzang: I think you have to have open conversations about what it is to be comfortable, and also that it's okay to be uncomfortable. And 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.

David Stiepleman: I'll tell you a quick story. As I said up front, I was at Cleary Gottlieb as a summer associate in 1996, and I started in 1997, and I went to orientation. And you were an associate, I think you were probably in Europe. And they had an older partner and a younger partner. And the older partner told the story of the firm. And the words I remember are “Harvard”, “Rhodes Scholar”, “Oxford”, whatever, “number one in their class”. And I thought, like you said, I'm smarter than some, but not as smart as others. Maybe I'm not supposed to be here. The junior partner got up and said, that's great.

David Stiepleman: That's not why you're here. And committed this incredible act of inclusion, which made me feel comfortable. And I assume everybody else who was in the room, or most other people in the room feel comfortable. So I feel like it's been part of the DNA of Cleary Gottlieb for a while, but also the story of Cleary Gottlieb and lots of other big law firms is that there were lots of women, lots of people of color coming into the firms out of law schools, but then they weren't being retained. And you're doing a much better job of that now. So how did you take that kind of good intentions and make it better?

David Stiepleman: Not that you're declaring victory,

Michael Gerstenzang: 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 of “why is it important at Cleary Gottlieb” is crystal clear, which is I think of our law firm as a talent business. That is what we have, that's our strategy, is 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, are 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 DE&I strategy and initiatives and their own, the number one reason that clients give me for why it's important to them is that they think that 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.

David Stiepleman: That's our experience as well. And that diversity can come in all kinds of different ways. Your own background you're talking about, I didn't necessarily know any of the stuff. I wasn't to the manner born, I didn't have people whispering in my ear what the principles of finance were. But you learn it and you figure it out. And also just having that perspective and being able to kind of boil it down for people and to be able to talk about complicated things in non-complicated ways is appreciated and important. You know, one of the things as a client that we like about you guys, but also just value in legal advice and other advices, and frankly on our own teams, is this idea of commercialism. You were talking about judgment, maybe it's a cousin of commercialism. Can you teach that? How do you get people to think about, I want you to think about your clients as if it's your own business, and really wake up, worrying about that stuff and think about how we get from here to there and not just bring up problems.

Michael Gerstenzang: I think you can teach that. Or I think at least you can set expectations so that people realize they need to develop that. And I think the number one piece of that, and something that we are very focused on, is do you, as a young lawyer, 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 like 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.

David Stiepleman: How do you hire for that? How do you hire for that ability to go do that and be receptive? And listen.

Michael Gerstenzang: If I think about the personal traits that underlie that, I would say that 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 and like what they do.

David Stiepleman: Yeah. My partner, Alan Waxman, who you know, said something to me a long time ago, which is in retrospect seemingly pretty obvious, but very profound, which is people like to do business with people they like. It just makes it more comfortable. And I want to talk to you about my business and I want to help you help me. It's pretty obvious. Different stages of your career, different skills going to be from a deal lawyer to managing teams, to being a partner, to being the managing partner. What's the thing you're doing now that you just had zero preparation for?

Michael Gerstenzang: 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.

Michael Gerstenzang: But it's impossible to prepare for that until you're in the seat.

David Stiepleman: The nature of governance at a law firm generally, maybe Cleary Gottlieb in particular, you can address that if you want. It's hard. You have 195 other partners and they're all pretty smart folks, and they're experts in their space, and they're probably pretty opinionated, and they think they can do their stuff just as well, if not better than you. How do you do that?

Michael Gerstenzang: 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, 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 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'd say, we're going to spend weeks and weeks on this. And in a matter of few hours the consensus had emerged.

David Stiepleman: Well, what's the lesson learned there? I mean, is there a theme to that?

Michael Gerstenzang: 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. Just be very transparent -

David Stiepleman: Because people will react to them. The perception that you’re managing them? That you're managing what they are?

Richard Hurowitz: That they're not included in the discussion. Or you'll just miss the fact that something that seems unimportant to you is actually important to some of your partners. And you can miss that.

David Stiepleman: But you have to prioritize, right? I'm actually interested by the idea that there's no thing that's too small. There are some things that you're one person with a committee and you have people, but you have to kind of drive it. So how do you prioritize, how do you organize the prosaic? How do you organize your time?

Michael Gerstenzang: 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 and pursue 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 box.

David Stiepleman: Right. So how do you do that? You arrive in whatever, you've got 16 offices, you arrive in some city somewhere. The managing partners in town, what are you doing to really hear what's going on?

Michael Gerstenzang: 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 is 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. And not just lawyers, but members of our professional staff. And just ask them what they're up to. And, and 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 advisors.

Michael Gerstenzang: And your kitchen cabinet. One of the things that I've been trying to do over time is not just have one set of trusted advisors 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. And I think you can miss that and 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.

David Stiepleman:Do you do anything deliberate to make that forum one where people feel comfortable saying things that are difficult? I could see being a junior partner, being like, eh, I don't know. I'm not sure I want to say that in front of these guys.

Michael Gerstenzang: Maybe it says something about the Cleary culture, but you'd be surprised at how open our people are.

David Stiepleman: Same with Sixth Street, but I wonder if it's a problem elsewhere.

Michael Gerstenzang: Yeah. 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.

David Stiepleman: Totally. I feel like you're telling me something about this conversation.

David Stiepleman: I'm really listening because I have a question about that , which is, we're both sitting in senior seats, leadership seats in our firms. There's a lot of pressure to talk about what's going on in the world. I don't want to talk about any particular issue, because it's less interesting. I mean, it's interesting, but it's less interesting than something you've given me advice on and given us advice on, on how to frame ahead of time, the evaluation of whether you'll say something and whether you won’t, and can you talk about how you develop that?

Michael Gerstenzang: Yeah. 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 all seeing each other all the time to being at home and seeing each other on Zoom. And that was terrible in many ways but--

David Stiepleman: And particularly hard for an apprenticeship business like law.

Michael Gerstenzang: Absolutely. Very challenging for more junior people to 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 3000 people around the world. And some of those, when I look back at them, 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 is really cool.

David Stiepleman: What were you trying to convey? What were you talking about? What's the dish that you made during the pandemic that you got good at?

Michael Gerstenzang: . I made a lot of pasta.

David Stiepleman: . So you're making whatever, when you're telling people about that, what's the Jedi sort of thing in your head that you're like, I want to make sure people take this away or get - what's the feeling you're hoping that people are getting?

Michael Gerstenzang: Yeah. I think there were two things. One is we're still a community. 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 sense of hope. 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.

David Stiepleman: You know, one of the things I found during the pandemic doing similar things, I didn't record videos, but you're on the firm wide zoom or you're sending out messages, is the sort of performative aspect of that, especially sitting in your home office, beaming this out to however many hundreds of households. I think being a deal lawyer - there is a performance aspect to that that you're very good at. But did you feel like you had to adapt? Did you feel like you like got better at it over the time? What did you do to make that more effective? Because we're not TV personalities, which will become apparent to everybody.

Michael Gerstenzang: . 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 and said, you got to put this behind your camera because you're always in a shadow. So 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 fully embrace.

David Stiepleman: I see.

David Stiepleman: Like to overcome your natural shyness; people actually want to hear from me about--

Michael Gerstenzang: Exactly, why would I record another video that says what I already said? I got nothing new to say.

David Stiepleman: That's a very important message.

Michael Gerstenzang: And I got very good feedback from people across the firm saying, thank you so much for doing these videos. And that kind confirmed this is valuable.

David Stiepleman: This is worth it. We're still here. They're still there.

Michael Gerstenzang: The other part of your question has to do with expectations for leaders to communicate about world events. 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 can't send out a message every single day. It loses it meaning. And so I developed with the help of my team a kind of lens to think about that. And the principle aspect of that is does this event have a direct impact on our people?

Michael Gerstenzang: And once you start putting it through that lens, you say, okay and then what should the message say? 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 violence or racism . And if that's all that you say, then pretty quickly those messages become performative and not meaningful. And so if you take the lens of 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.

Michael Gerstenzang: 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 to, we can't impose those discussions. 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 messages. What does this terrible event mean for our people? And how do we address that at the community level within Cleary?

David Stiepleman: 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 inside your community and kind of be insulated from the nonsense that's out there. It's an important message too. Your framework has been super helpful to help us think about; people should ask you about it if you're willing to talk about it. Because you just did. Let's talk about the legal business for a second. The law firm business, something that most of the rest of the world has to deal with is hiring lateral people, bringing in people who are at a senior level, it's very hard. And I think big law, and I think in particular you guys, have been much slower about that, we're going to talk about your culture, but because your culture is closely guarded. I don't mean to make it sound secretive, It's very important. And to bring someone in new, it's a very difficult thing to do. How have you navigated that?

Michael Gerstenzang: 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 partners joining us. A few years ago, we decided that as part of our efforts to achieve our longer term strategic goals, we were going to do more of that.

David Stiepleman: And the context here is that people are trading away from firms for really big amounts of money. And that's kind of a new phenomenon. So that's a hard thing not to try and compete with.

Michael Gerstenzang: So you're absolutely right that the lateral market has changed dramatically over the last five years. And part of that is eye-popping compensation offers. And another part of it, in some ways, as important as compensation, is the stigma associated with a partner after many years at one firm going to another firm, that has really eroded. I think the kind of 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

Michael Gerstenzang: we decided that we wanted to be more engaged in the lateral market a few years ago. 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. 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's 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 summary.

David Stiepleman: 80 or 90 partners will sit with a lateral candidate?

Michael Gerstenzang: It's now done by Zoom mostly, but yeah.

David Stiepleman: Okay.

Michael Gerstenzang: But in small groups. And we asked 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.” 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 and part of our brand.

David Stiepleman: I want to talk about that. So I dug up this from 1996 before I graduated law school, but it's your 50th anniversary book. So that's 27 years ago. And one of your partners, who's still a partner of yours, wrote a piece. And there's a lot in there, but he talks about how he's confident that basically as a partner in Cleary Gottlieb, he had the envy of others because you enjoyed the most important attribute of all, quote, absolute and uninterrupted peace. Peace among partners, peace with and among associates, and peace with non-lawyers. And then the roots of the peace are quote, lockstep compensation system, the novelty of hiring and advancement on merit alone, the array of personal eccentricities that were celebrated or at least tolerated. And that resulted in having excellent lawyers and thoughtful and considerate people. You're saying the same thing basically, collegiality and respect is what clients want. Talk about that. It's nice to have a through line from 30 years ago.

Michael Gerstenzang: 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 as the managing partner of the firm. And I started hearing a common refrain in those meetings. Usually as the meeting was starting to break up and we're collecting our things, somebody, the client would say, 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.

Michael Gerstenzang: There was 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 clearly like each other was so unusual. But I also reflected on 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, 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 and our strategy of developing deep connectivity with clients.

David Stiepleman: I mean one of the things that we're telling our investors and our prospective employees is that we really do collaborate and we try and do that at scale. And it means that we can be really, hopefully smart generalists who can tackle any issue and that people aren't going to worry about whether or not they're going to get paid for it, or whether or not it ends up in quote unquote their fund or whatever. And it really does come through hopefully when people see us interact, that we actually like each other. And it's nice to have nice winners. That's what we're calling it. Nice winners. I like kind of saying, without doing a whole history lesson, the roots of Cleary Gotlieb is post-war Europe in some ways, New York and Europe helping forge the common market. How do you think about the world now? It's kind of de-globalizing, and that's kind of counter to the DNA of the firm. Do you think about that? Does the firm think about that?

Michael Gerstenzang: We do. 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. 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, of deglobalization or decoupling is an important one for us. My own view today is that deglobalization is more of a political idea than it is, a business idea.

Michael Gerstenzang: And 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 nearshoring opportunity and as they say, businesses and industries being developed or grown to take advantage of the fact that global supply chains are shifting largely away from Asia. And that's a result of the pandemic, but also geopolitics for sure. And that is going to create a real opportunity for Mexico, for businesses and for the government.

Michael Gerstenzang: There are lots of decisions they have to make to realize on that opportunity. But to me it was a good illustration of saying today the single biggest example of deglobalization 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.

David Stiepleman: Okay. So you're in the predictions business. . This is good. So let’s make some predictions. So , let's talk about the law business. And the AI lens I think is an interesting lens but also otherwise. Let's talk about practice groups. Do you, in five or 10 years, have litigation and M&A or do you have industry groups that are kind of interdisciplinary and serving the asset management industry, industrials, whatever?

Michael Gerstenzang: I would say both. In some ways already today we have both, we have practice groups that are built around a substantive area of law. Like taxor 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 of 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 or 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 in 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 developments. But you need to give people the space to really do what we do for a living, which is to serve clients.

David Stiepleman: Will big law on average have larger footprints, more headcount, or less?

Michael Gerstenzang: 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. I think that technology over time, and particularly generative AI, is going to reduce the number of lawyers at the biggest law firms. But 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 ClearyX and how they're approaching it, 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 ClearyX. 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. Today that's happening in small ways. But if you had to define what's the role of a technologist at Cleary Gottlieb, you probably would say, number one, keep the trains running. Make sure my email doesn't collapse.

David Stiepleman: Right.

Michael Gerstenzang: 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.

David Stiepleman: What do you tell incoming classes to prepare for all these new conditions?

Michael Gerstenzang: Well, I think a lot of the technology aspects we don't need to tell them anything. When a new associate comes in today, we don't say there's this thing called the iPhone and this other thing called email. You need to learn how to use it. They are more tech savvy than we were when we joined. 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. 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.

David Stiepleman: But in terms of how to think broadly, and, for example, when you're talking about having a team, you have a technologist or a ClearyX person on your deal teams or on your client teams, there's got to be someone, and maybe it's the technologist, maybe it's the lawyers, maybe it's them together, translating. Like, this is what we're trying to accomplish, this is where we're going, this is what I anticipate the issues are going to be, so that the technologists can think, okay, I understand this framework. Because they may not be lawyers. Is that a skill you can kind of teach or inculcate?

Michael Gerstenzang: I think so. And you and I have used the term, in our articles of “co-piloting”. Having lawyers work alongside technology to deliver great service to clients. And to me that's a very helpful way to think about it. 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. And when I get on a plane, I don't want there to be just the human pilot or just the computer. I want them working together. And I think that is the future of the practice of law. 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 copilots, it's going to be very normal and natural because it's going to reflect how other parts of our lives are already working.

David Stiepleman: Do you remember, and maybe we'll end on this. It's a personal question, because it's about thinking about your background, your understanding of, okay, I can work really hard. I can tell you as a first-person witness, you're a great trainer of people. You spent a lot of time with me personally training me, which was an incredible gift for me. Who did that for you? Where did you learn to kind of put all that together?

Michael Gerstenzang: 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 for me probably. But, 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.

Michael Gerstenzang: . 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 is 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.

David Stiepleman: Michael, thanks. This is super. We could go on for hours and we will, but off camera.

Michael Gerstenzang: Over beers. Exactly.

David Stiepleman: That was Michael Gerstenzang, managing partner at Cleary Gottlieb Stein and Hamilton. We sat down in Sixth Streets' San Francisco office on November 16th, 2023. As I've known for almost 30 years, he's such a pleasure and so thoughtful and a terrific leader. You heard us talk about AI, its role in law firms. You heard us talk about how you adapt your skills over the course of your career, that you need to get good at things that you weren't necessarily good at before and you need to adapt. We talked about culture, we talked about collegiality and respect, and we talked about leadership and how communicating and listening are so important and showing vulnerability in difficult times is in particular very important and something that we've learned to grapple with over the last number of years. So, Michael, as always, thank you for taking the time for sharing all of your wisdom, not only in this conversation, but generally speaking. Our team at Sixth Street always appreciates your partnership and the partnership between our two firms, and we look forward to continue working together for many years to come.

AUM presented as of 12/31/2023 and excludes assets and commitments of certain vehicles established by Sixth Street for the purpose of facilitating third party co-invest opportunities. Calculation of assets under management differs from the calculation of regulatory assets under management and may differ from the calculations of other investment managers.