David Teece speaks with James Libson, managing partner of Mishcon de Reya. They discuss Mishcon’s strategic direction and independence, agility in decision-making, and the past, present, and future of the firm.
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[00:00:00] David Teece: Hello. My name is David Teece, and I’m executive chairman of Berkeley Research Group. I’m also a professor at the University of California, Berkeley.
It’s my pleasure today to talk to James Libson of Mishcon de Reya. Mishcon is a very interesting firm, UK based, of course. James, tell me about the history of Mishcon and what makes it great. Or what’s made it great in the past, and what’s going to make it great in the future.
[00:00:27] James Libson: Thank you, David. First of all, it’s a real pleasure to be in conversation with you. So today, coincidentally, our next cohort of trainee solicitors—those are the people doing training contracts for the next two years before they qualify as solicitors—joined us. And it always gives me an opportunity to reflect on the history of the firm, because that’s how I start the discussion with them, and reflect on the progress that we’ve made since I joined the firm thirty-one years ago, also to the day. And I joined a firm where its founder, Lord Mishcon, was still very much a dominant presence. And it was a typical story of someone who came into a much smaller profession, found that the established firms at the time were not particularly welcoming to him as an immigrant and a Jew who’d come into London at the time. And he founded his own firm, which was a criminal practice in South London, in an area called Brixton. He was very entrepreneurial. And soon after that, he established the second office in Holborn, which is where we’ve been since the 1960s, and turned what was a criminal and general advisory practice into a broader commercial practice.
And at the time, law firms in England were limited in terms of the amount of partners they could have. And so, it was a relatively small firm. And then, when that rule was lifted and the partnership limit was abolished, Mishcon’s was slightly slower to grow. So, the older firms that you see around, which are now the global giants, grew their partnerships much quicker. So the firms that became Clifford Chance weren’t much bigger than Mishcon’s in the 1970s, but then obviously grew very quickly.
But the hallmark was a firm—and is a firm—that is interested in the world, interested in its clients, and does a lot of litigation, a lot of work in the public space. And I don’t mean necessarily that just in an impact pro bono way, but work that touches upon big public issues. And we’ve grown into a much bigger firm with a thousand people here, and 180 partners that have a broad commercial practice, transactional and incorporating real estate, but still with a very dominant litigation practice. And so, we’re one of the biggest litigation outfits in the UK, now with a footprint outside of the UK—in Singapore, Hong Kong, and a small offering through one of our ancillary businesses in Dubai.
But at the heart of the firm still remains a sort of attitude of independence, a slight degree of belligerence on occasions, and a strong sense still—even though that we’ve grown to the degree that we have—of partnership and values that attract people here and glue us together.
[00:03:54] Teece: Well, it’s interesting you use the word independence, because typically, of course, one thinks of the lawyer as being an advocate. Tell me a little bit more about what you mean when you say independence.
Certainly, at Berkeley Research Group, where we provide expert witnesses, independence is very critical, but normally, the lawyers in the US here wouldn’t claim to be very independent. So, what do you mean by independence in the context of a law firm and in the context of the competition that you face?
[00:04:23] Libson: I mean independence of ownership and autonomy of direction, rather than independence of representation. Obviously, our representation is guided by our obligations to our clients and regulatory principles, as I said, I mean autonomy and in charge of our own direction.
We’ve grown at quite a fast rate over the last twenty years, but we’ve done that without merging into other entities, without having associations—big associations—with other organizations. And so, the control of destiny has been very much in the hands of the partners. And that is something that has attracted some people and obviously is not attractive to all people.
[00:05:02] Teece: Tell me a little bit more about that strategic direction which the partners have set, in as much as I understand that you’ve been contemplating an IPO and being listed in the public markets in the UK. Does this represent a change in strategic direction? And how did the partners come to agree that this is a potentially interesting way forward?
[00:05:26] Libson: We don’t think it’s a change in direction. We actually think it’s the way of guaranteeing our direction, which may sound slightly strange. In a competitive environment where we have to grow, –we thought that the best way of raising the capital—without being beholden to banks, or to private equity, or to other outside interests—was to list some of our ownership, have investors in the public market with the majority of the holdings being still owned by the partners in the business, and maintain control of our own destiny. And we thought that was the best way of pulling off what we wanted to do, and the way in which we wanted to invest in the strategic direction of the business.
Now, how we went around convincing our partners—we have a firm that has been built on the concept of partner consensus, and so we have very few votes during the course of a year. We have our constitution. We have our partnership agreement, but it’s there to be in the drawer rather than to guide the way in which we do business. And so, we build consensus by making sure that the arguments for any particular strategy or investment are made over a long term and are bought into. It took a long time for us to convince our partners that that was the right thing to do, but that is the nature of building consensus over a partnership. We love the partnership model. People still value the partnership model and being a partner. One of the aspects—some may say downside, but some may say attributes—of the partnership model is that in relation to critical decisions, you can’t turn on a penny, so you need to build consensus and that’s what we did.
[00:07:11] Teece: Well, there are a number of questions that are raised by what you said, which is all very interesting. So, let’s first of all, begin with where you’ve finished, which is agility of decision-making. How much authority, if you will, has been delegated to the managing partner, and where do you need to go back to the partnership, in terms of approval? Is it formal? Is it informal? And how do you think you can maintain agility as you move forward and grow?
[00:07:40] Libson: So, a very, very large amount of authority is dedicated to the managing partner in our model and my management board as well. So, I have a lot of authority delegated to me—but the way in which I exercise that authority, I obviously do that with discretion. I don’t check when I am exercising my authority or when I’m seeking to build consensus, what I can and can’t do under that authority. I make a decision based on the decision that I am seeking to implement or get through. And depending on what it is, I will make the decision myself, or I will go out and understand what the partnership’s will is and seek to build consensus around it. That’s the way in which we we’ve managed.
I’ve been in this job only for coming up to two-and-a-half years, but my predecessor, who’s now the executive chair, Kevin Gold, was in the job for the previous twenty-five years. And I sat alongside him for fifteen of those twenty-five years as his sort of deputy. And our board is also comprised of people who’ve been around the management of the firm for a long time. So, we have very, very steady management and steady management has been created by virtue of that authority being delegated to the managing partner, but also to the management board. But knowing when to go and confer with the rest of the firm, the rest of the partnership, I understand that you can’t run a firm in that way completely in a listed environment. We were going to keep the partnership. One of the things that we had designed was the partnership was going to sit underneath the listed entity, and obviously one had obligations to the listed entity and all of the disciplines of being in a listed environment, which meant that not all decisions could be made in the way in which we’ve made decisions in the past. And that required, of course, discussion, debate, and consensus building around that. But we reached a compromise in the way in which we had organized things constitutionally that sat comfortably with people.
[00:09:31] Teece: Let me address the remark you made earlier, which was that you see going public as a way to ensure your future and to double down really on what you’ve done in the past. And as I understand it, in the past, you’ve grown at low double-digit rates. But generally, in professional services, cash is generated and spun off that should create sufficient resources for reinvestment and growth. Is the challenge that you have one where the partners expect annual distributions and so, therefore, you have to reach out to the capital markets as you get larger to keep that growth rate going?
[00:010:08] Libson: That’s part of it. As you grow, you need more capital. The way in which we have capitalized the business is through partner capital, and you can ask for partners to contribute more. We’re relatively lowly, lightly capitalized in that respect. And as you grow and your ambitions grow, you would need more of that. But actually, part of it was more creative than that. We have ambitious plans for the way in which we want to grow the business. And so, part of the desire to raise capital was to be able to invest quicker, and to do more M&A activity in the nonprofessional services. So, buy other businesses, and even buy other law firms. We would be one of the few law firms in London, and one of the very few law firms in the world, which could go to other law firms and say, part of the attraction of joining us is a capital event for you. Because we’d be able to use paper to be able to buy some of those law firms. It gives you another string to your bow. And another aspect of it is to do something innovative in and of itself. And that’s a demonstration that we continue to innovate to our clients. And the other thing that we’ve been trying to pull off is ownership beyond the partnership base. To have the entire staff base properly vested in the business, in a way that goes beyond them earning their salary and their annual bonus. But they can see capital growth from their own efforts. It ticked all of those boxes, and those are the reasons why it was attractive to us.
[00:11:39] Teece: You’re fairly lucky by not having offices distributed all over the place, because with remote work you can be anywhere, anytime. In some sense, you’re well positioned to grow geographically without changing your footprint because remote work is now an integral part of what everybody does. Is that a reasonable surmise or do you expect at the same time to grow your physical footprint?
[00:12:04] Libson: I expect to grow our physical footprint, but let me make two observations on that. We opened two offices—one in Singapore, one in Hong Kong—in COVID. I have not been. I’m going in a couple of weeks to our Singapore office. It’s been a really, really fantastic success. So has our Hong Kong office, and Hong Kong still has restrictions, so we have very few people going to Hong Kong at all. Our Hong Kong partner, who opened the office for us, was with us in London a couple of weeks ago for a few weeks. And so, we successfully opened and expanded our footprint. We were a single London office, and these were our two other offices during COVID, and it felt pretty seamless in relation to both of them. We opened with great partners in both places, and we’ve really enjoyed the experience. So that fills you with confidence about both the remote working aspect of it, but also being able to increase your physical footprint in this environment.
But the second point in relation to remote working is that, while I welcome it as something here to stay, I don’t like all of the aspects of it. And so now, the issue is about managing the reality of what remote working looks like and feels like for your organization in the environment going forward. My only point is that that’s got nothing to do with COVID anymore.
[00:13:20] Teece: COVID accelerated something that was going to be beneficial. And you saw that of course, even more so in the healthcare sector than perhaps in the law sector.
Talk a little bit about the fact that you still love the notion of partnership, but you accept the importance of remote work and so forth. And not just the importance, but the desirability of it. What have you got up your sleeve in terms of keeping that sense of partnership together as the company works in this more distributed way?
[00:13:52] Libson: I think, and we’re at the beginning of the experiment, that you have to really invest in the things that bind you. And some of it’s little things, soft things about the nature of the physical environment that you occupy. To make it attractive enough that people want to come in—to make the air conditioning good enough that they want to come in hot periods. You need to make sure that there are occasions, but the occasions and the requirements are not confected for people to work together in a meaningful way that deepens relationships. And some of that is physical. And some of that is the way in which you interact with people. It requires much more thought and investment around those things.
What we decided to do was not to have a policy that says you have to be in two, three, four days a week. What we decided to do was to have a set of principles that guided the way in which we worked and underlying that was that you can’t fulfill those principles without being physically present for at least some of the time. So those principles are around how you look after clients and what clients require, how you train people. What are our obligations to our more junior people—in particular, our trainees? What are your obligations about the development of business in the firm and building teams in the firm? And within that broad set of principles—there are others as well—managers are able to say, actually, you are not fulfilling your obligation to look after this client. This client expects you to be in meetings and wants you to be here and wants to see you interacting with your colleagues in relation to that. And so, I’m expecting you to be in for those days or on those occasions and that sort of thing.
So that’s the experiment that we are in at the moment. I don’t know the results of that experiment yet. What I do know is that our people like the approach, because they believe that it’s treating them as adults. But we still need to measure what the effect is on our business, our client base, and growing the client base.
[00:15:50] Teece: So, let’s deal with the other part of the question, which is geopolitical disturbances. Obviously, what’s going on in Ukraine has impacted your clients. How has it impacted you?
[00:16:02] Libson: Very, very personally, very personally. Four years ago, I was the chair of an NGO [nongovernmental organization] whose operations were in Ukraine. And it was a Jewish organization that looked after the interests originally of children who came to the UK on the kinder transport before the Second World War. It looked after those children as they grew up. And then it became the Jewish Communities NGO in the UK that addressed itself to humanitarian issues, both within the Jewish community and outside of the Jewish community, and the poorest surviving large Jewish community in the world, where there are up to 250,000 Jews, in Ukraine. Many of them stayed there, rather than going to other countries, and they were very impoverished community.
So, this organization that I chaired, most of its work was in Eastern Ukraine. So, in all of the towns that we now read on the news, it was there. And so, all of those places I’ve visited, I know people there. Some of the communal buildings that we funded have been bombed. So, on a personal level, I see a country that I know quite well, that I’ve been very interested in, decimated. Therefore, it operated on that level, as well as a massive threat and challenge to our business.
And so, the business response was a multifaceted response. We have Ukrainian employees here whose families were in Ukraine. For them—but for everyone—we wanted to make sure that there was a proper humanitarian response—raising money, sending money, and that sort of thing. We created an alliance with another law firm and other professions, which we call the Ukraine Justice Alliance, which was a loose alliance of professionals that was dedicated to finding solutions and also just helping people practically.
Then, of course, there were business challenges. London has been a hub for Russian litigation over the last twenty years. And as a big litigation practice, we had our fair share of that. I’m pleased to say that we didn’t have very much of it at the time that the war started. And so, we didn’t have very many decisions to take in relation to our current client base. That represented a tiny fraction of our business at the time.
But the sanctions regime came in, and obviously we had to go through and make sure all our systems were answering and responsive to the sanctions thing. And then, beyond that—which was all instant—all of that stuff was what we were doing in those very few days and weeks—the macroeconomic effect of the war has impacts across our business. It has huge impacts on the UK economy. The UK economy is adversely affected in a more severe way than any other European economy. And it has an impact on the global economy, on where business is going and how it’s been structured.
And, of course, the economic impact is not just about our business, but it affects our people as well. We have a cost-of-living crisis that is happening across the UK at the moment. And we have to think about that as well.
[00:19:05] Teece: Well, maybe this is a good segue to my last question, which relates to Mishcon Purpose. This sounds like a very interesting structure, if that’s what it is, or initiative. Tell us a little bit more about that and how you think that may evolve in the future?
[00:19:25] Libson: As I mentioned in passing, part of the strategy has been to create businesses that sit alongside the law firm, their legal offering. And I’ll give you some examples. So, we have a very big private client business advising private clients on all their requirements. We created, some eight years ago, a private client family office advisory business that sits as a sort of finance director for people’s private offices. It’s not regulated. It doesn’t do any investment advice, but it sits alongside families in helping them organize their affairs. And obviously, it’s very complimentary to our private client offering within the law firm.
A more recent creation is a tech business that navigates between the creation of tech and tech products, big tech projects, and regulation. So, it helps companies build tech in a regulatory compliant way. It does both the engineering—subcontracts the engineering—and does the regulatory advisory side. And that sits alongside our law firm innovation practice.
We’ve got eight of those businesses. And Purpose is one of those businesses. Most of those businesses come from relatively young, entrepreneurial lawyers who’ve seen an opportunity and want to expand their careers, move into something bespoke and set up the business with our support. And Purpose is an example of that. One of our partners, whose passion in life is the environment and ecology—and spent a long time doing work in that space—had a long time actually outside of the law firm, where we gave him a four-year sabbatical to set up an NGO on ivory protection and ivory trading. He came back and said, “Actually, I want to make this more of an offering.”
ESG [environmental, social, and governance] is a movement that has come, and we need to make sure that we tick two boxes. One is that we ourselves are doing what we need to do to make sure that we are internally compliant and that we are answering the requirements of our clients and our people in terms of our commitment to that space. But second of all, we want to have a consultancy offering to clients to be able to give them the advice as they navigate through those spaces. So, it’s the regulatory advisory side of it. It’s the litigation that relates to environment and human rights. It is a purpose as just a pure consultancy, navigating that world for clients. And that’s the business that he’s built and launched. And lots of law firms, obviously, and lots of professional service providers, are in that space. It’s just our take on that space.
[00:21:55] Teece: Well, James, this has been very interesting to crack open what we would call the hood in the United States, or to lift the bonnet, as you might say in the UK. There’s a lot of interesting and different things going on. And so, I congratulate you for that. I look forward to a future podcast where we can learn more about these new initiatives and how the IPO has enabled the firm to double down on what you have done in the past. So, thank you very much for your time today. And we’ll be talking again.
[00:21:44] Libson: Well, David, thank you for giving me the opportunity. There’s nothing I like more than to talk about myself and Mishcon. So, thank you very much, indeed. It’s been a pleasure.
The views and opinions expressed in this article are those of the participants and do not necessarily reflect the opinions, position, or policy of Berkeley Research Group, LLC or its other employees and affiliates.