Equity Partner officially launches today with this first piece (below) as the June edition.
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The piece below appeared earlier today in Non-Billable. I’ve republished it here so it sits alongside everything I’ve published to date and everything that follows.
If a topic you’d like me to cover comes to mind, or a problem you’re working through, hit reply or leave a comment — your questions shape what I write about next.
David
Three partners attend the same meeting. They are not in the same meeting.
One has already checked out. His practice is portable; he takes regular head-hunter calls, and whatever the firm decides, he has options. The discussion is background noise.
Another is fixed on the immediate impact. The proposal hits this year’s drawings, and hefty mortgage and school fees must be paid.
Near the front, a partner in her early 40s is paying close attention. She wants the firm to be bold, partly out of conviction and partly because she expects to live with the consequences for at least the next decade.
One proposal. Three sets of incentives. Three different time horizons.
Now, place that dynamic within the decisions most large firms face, multiplied by tens or hundreds of partners. How much to invest in AI, and whether to build, partner or buy. How to adapt the model to attract and retain the best legal and AI talent. Whether that investment is funded by partner distributions or by external capital. Whether the firm remains a traditional partnership or starts to look more like a business with permanent capital. Whether the scale is built organically or through a merger.
These are not marginal choices. They go to how the firm makes money, how it is owned and who benefits over time - and they are all arriving at once. They are often described as strategic, but within a partnership, they are political.
Who Benefits?
As firms invest in AI and technology, more of what lawyers know and produce is captured, structured and reused. Elements of a firm’s collective intelligence - once held largely within individuals - are increasingly absorbed into systems that apply it across the firm.
The effect is initially subtle but becomes increasingly significant. The firm itself, rather than the individuals within it, captures more of the value. That creates something partnerships have historically lacked: assets that endure, accumulate value and require continued investment.
A labour-intensive partnership starts to look like a capital-intensive, data- and IP-owning platform. A model built on fully distributing annual profits and holding negligible capital begins to build a real balance sheet. Once that happens, partners are no longer just labour. They become capital providers, and the line between partner income from work and partner income from capital starts to matter.
Partnerships have always passed the firm to the next generation. Each generation inherits a platform: brand, clients, reputation. The implicit bargain includes a duty to leave it in better condition than they found it. The difference now is not a matter of principle but of visibility, scale and pace.
Historically, that value was diffuse and slow-moving. No group of partners could clearly identify what had been built on their watch or its worth. Almost all law firms rent rather than own their offices for exactly this reason. Questions about which generation bears the cost of ownership and which reaps the profit are troubling in a partnership and usually avoided.
What is emerging now is more deliberate investment, on a larger scale and over shorter periods. The link between this generation’s contributions and the enduring value they create is becoming clearer.
That changes the conversation. If partners are, in effect, funding something durable over their working lives, the question of who benefits and when becomes harder to avoid.
Different paths, same trade-offs
Firms are already pursuing different routes. Some are investing heavily to build and control their own platforms. Kirkland & Ellis’ reported $500 million commitment to build a custom AI system is a recent, striking example. Others are partnering or licensing with shared vendors to move faster, limit upfront costs and benefit from systems that learn across many clients and matters. A third group is waiting and may never catch up.
The same divide is emerging in financing. Some firms are absorbing the cost by cutting distributions. Others are seeking external capital. A smaller number are considering more fundamental shifts in ownership.
Each route solves one problem and creates another. Control comes at a cost. Speed comes with dependency. External capital brings capacity but shifts expectations. Retaining the traditional model preserves autonomy but can limit how much can be invested. Waiting may simply mean a much bigger bill later.
These choices are interconnected. Decisions about AI, funding and structure feed directly into pricing, leverage and hiring, and, over time, into how profits are generated and shared.
When high-stakes decisions are needed, the partnership model is unwieldy. Each partner runs a private calculation: income, autonomy, risk, timing and optionality. The answers often differ markedly.
This is not a moral failing. It is how the model works. Partners are both labour and owners, and the two roles are increasingly pulling in different directions. As labour, the partner focuses on this year’s earnings. As owners, they are being asked to reinvest some of those earnings into something that will pay back over time. In many firms, that trade-off has not had to be faced directly. It does now.
That tension is becoming harder to ignore. A partner nearing retirement may see limited personal return on a long-term investment. A mid-career partner may bear the financial burden. A younger partner may favour reinvestment but have limited influence over the outcome.
The same proposal can therefore feel necessary, unattractive or overdue, depending on where one sits.
Where power lies
Formal governance provides the mechanism for decision-making. It does not determine the outcome.
Every partnership has both a formal and an informal power structure. The informal voice is often highly influential when the partnership makes major decisions. This includes the partner who has always eschewed formal roles and on whom others depend for their work; the outspoken sceptic with a reputation for challenging management, who, despite often causing upsets, is valued as the ‘grit in the oyster’; and younger partners whose views carry weight beyond their years. Their positions shape opinion well before any vote is taken.
Leadership teams that rely on formal processes alone usually struggle to bring the partnership with them. A leader’s work in preparing the partnership for major decisions begins long before any vote. In a partnership, a decision about external investment or a custom-built AI platform cannot be treated as a simple transaction. Because of the partnership’s complex human dynamics, it is a highly charged exercise in change management that requires political and transactional skills.
The practical work is slow and personal. It involves engaging early, before views harden. Anything partners perceive as rushed creates the sense that they are being railroaded. Once that sense takes hold, the vote is lost before it is even held. Momentum is the other side of that coin. A proposition allowed to breathe builds its own weight. A proposition that arrives faltering, is put forward without conviction, or is backed by fake deadlines that slip, almost invariably splutters and dies.
Understanding who others listen to, testing arguments in smaller settings and being open enough that gaps do not fill with suspicion. This is all leadership work. None of this replaces the underlying strategy. It is what allows it to be adopted.
The electorate in the room
Most firms now see roughly the same set of choices. The difficulty is getting enough partners to reach the same conclusion at the same time for the same reasons.
Some firms will manage it and move on. Others will hesitate, balancing competing interests and delaying commitment. Some will try to avoid the sharper trade-offs, only to find that events force the decision anyway.
In each case, the outcome depends less on insight than on whether the partnership can move as a group. That group remains the final decision-maker. It is the electorate in the room. Successful law firm leaders understand that the path to victory, guiding their shareholders to grasp choices well beyond the conventional bounds of partnership, begins long before any ballot is cast.
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