It is a truth (almost) universally acknowledged that a law firm in possession of a strong client base must be in want of pretty much nothing. (Apologies to Jane Austen.) As a species, lawyers are risk-averse. The practice, after all, is paved in precedent and bad things can happen to you and your clients if you veer off-road.
Here at the Aspen Ideas Festival, however, risk is not a four-letter word. I attended four panels Thursday, on topics ranging from the future of the Republican Party to financing the energy projects of the future. The single theme that ran through all of them is that opportunity grows out of crisis, and the winners of the next decade will be the leaders who aren’t afraid of new ideas.
That might sound intangible, but there are practical implications for lawyers and law firms. In a breakfast session, for instance, U.S. Trust President Keith Banks, whose firm manages about $200 billion in assets for ultrawealthy people, predicted an imminent boom in mergers and acquisitions. Companies are under pressure from shareholders and directors to expand their revenues, he told me after the session, and can’t grow fast enough organically. With almost $1.45 trillion sitting in corporate treasuries, he said, bottom lines are strong, but with growth in the United States stuck at about 3 percent, top lines are still anemic. So in Banks’s view, companies are going to turn to expansion through acquisition. (Banks is generally bullish on equities and on the private sector broadly; he told the audience that he’s not worried about quantitative easing because he thinks the Federal Reserve will slowly decelerate to a phase he called quantitative maintenance.) A significant uptick in M&A means more work for law firms. If you’ve already got an M&A practice, make sure clients know about it. If you don’t, perhaps this is the time to start thinking about laterals.
In the energy business, there has perhaps never been a richer opportunity for private-sector start-ups and the investors who fund them, according to panelists Kristina Johnson (a former Obama undersecretary of energy who specializes in hydroelectricity), James Rogers (CEO of Duke Energy), Christopher Hyzy (of U.S. Trust) and moderator Robert Gruendel, head of the energy practice at DLA Piper. Ingenuity comes from the private sector, emphasized Rogers, a former big-firm lawyer whose abundant business success speaks to the benefits of risk-taking. Hyzy predicted that private equity funds are going to turn to the energy sector because they’ve seen the potential for technologies that revolutionize the business. A trillion dollars of investment, Johnson said, would permit the United States to meet its energy goals (even though she had to personally guarantee some of the money her start-up borrowed from a local bank for a small hydroelectric project). It’s difficult to attract investors for utility-scale projects, the panel conceded, but old-school engineering and industrial companies that will design and construct the infrastructure for shale oil and natural gas are good bets. And venture capital is going to be chasing ideas like batteries to store energy on a scale we can’t even yet imagine. DLA partner Gruendel mentioned the role he’s already playing as a matchmaker between capital and projects. Surely there’s opportunity for other lawyers and firms to follow his lead.
I’ll admit that there was no legal business angle to the session on the future of the GOP, featuring former Labor Secretary Elaine Chao, former congressman Vin Weber, former Bush policy adviser Michael Gerson, and GOP strategist-in-chief Karl Rove, but there was a lot of talk about risk and opportunity. Gerson and Weber said the Republican Party has to articulate a policy rationale for the party, embracing the idea of social mobility in a way that it doesn’t right now seem to do. Rand Paul’s brand of libertarianism is a threat, said Gerson and Rove, not least because Paul himself – unlike his father – is a formidable politician. (The audience laughed when Gerson said that Rand Paul is libertarianism without looniness.) Both Rove and Chao seemed to be unwilling to give much ground on the bedrock Republican principles of low taxes and small government, but Gerson had some creative ideas for redefining the party and widening its voter base, such as opposing the concentration of power in big banks and opposing corporate tax breaks. (Rove agreed with him on that point.)