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Speaker 1: Blackstone CEO and chairman. That's of course, Steve Schwartzman. Steve,

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Speaker 1: thank you so much taking time out of.

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Speaker 2: Your world toward to talk with us here in Paris.

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Speaker 1: Look, we are here in Paris, We're here in Europe

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Speaker 1: the week after an ECB high rates, confront of a

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Speaker 1: sticky inflation, weaker growth. The risk is constantly changing. How

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Speaker 1: do you think about risk in this European region.

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Speaker 3: Well, I think Europe is slowing down. It's pretty clear

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Speaker 3: that there's certain countries, for example, Germany, where it was

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Speaker 3: yesterday you know, where growth is slightly negative. In France

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Speaker 3: today We've got an expansion of our office here and

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Speaker 3: France is doing the best of the European countries, and

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Speaker 3: I think has been the biggest beneficiary of Brexit. I

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Speaker 3: think the government's done a great job making France attractive,

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Speaker 3: Paris attractive. But as as the central Bank continues to

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Speaker 3: raise interest rates, no one ever knows where these things stop.

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Speaker 3: You know, it's certainly suppressing growth. So I think it's

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Speaker 3: a reasonable expectation for Europe over the next year to

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Speaker 3: have pretty muted performance.

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Speaker 1: Does the ECB need to stop soon for fear of

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Speaker 1: not just being muted but a full on recession, Well.

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Speaker 3: That's up to Christine, not to me. And I think

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Speaker 3: the inflation is still pretty high here. It's in the

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Speaker 3: fives and you can't stay at that level, and so

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Speaker 3: the central bank typically would do what it needs to

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Speaker 3: do to lower that.

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Speaker 2: See, you've ever the diplomat.

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Speaker 1: One source of support for Europe that we don't have

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Speaker 1: that we thought we would have at the start of

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Speaker 1: the years China. We came into the year thinking China

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Speaker 1: would be this huge source of global growth. Now we're

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Speaker 1: just hoping for more large scale stimulus. Have your assumptions

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Speaker 1: about China change this year?

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Speaker 3: I think they did change. UH. I was in China

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Speaker 3: in u uh April, and my expectation UH was that

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Speaker 3: there would be a pretty rapid bounce back UH. But

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Speaker 3: what I found uh wa was that people really had

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Speaker 3: had a tough time UH over the last three and

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Speaker 3: a half years. UH. They had had a real estate

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Speaker 3: crisis for a while UH and that became more pronounced

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Speaker 3: as they uh actually had to meet maturities UH. And

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Speaker 3: the Chinese people tend to put eighty to ninety percent

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Speaker 3: of their savings UH into real estate, So when real

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Speaker 3: estate goes down, it really takes away confidence because nobody

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Speaker 3: likes spending a lot of money as their net worth

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Speaker 3: is going down. It's just not how humans work, whether

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Speaker 3: they're Chinese or any other place uh A and so

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Speaker 3: it's difficult for China now, in the face of that

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Speaker 3: uh to have the kind of rapid growth rates that

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Speaker 3: we're having. And uh y Europe has been a big

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Speaker 3: uh exporter uh to uh China. N Uh. China has

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Speaker 3: provided you know, over the last ten years or so

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Speaker 3: before uh COVID, you know, probably half of the world's growth.

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Speaker 2: So what does the opportunities that look like for blackstone

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Speaker 2: in China?

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Speaker 3: Then?

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Speaker 2: Is there still opportunity or do you need to wait?

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Speaker 3: I I think most people, uh, including the Chinese uh

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Speaker 3: are taking uh uh a wait and see uh type

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Speaker 3: of approach. One of the things with China UH is

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Speaker 3: they often make mistakes, but they typically don't continue making

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Speaker 3: them UH and they they they don't have a lot

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Speaker 3: of pride in wrong decisions UH and they're practical uh.

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Speaker 3: And so it's in a way a matter of time

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Speaker 3: uh before they make uh the appropriate adjustments and start

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Speaker 3: growing again. But in the short term, UH, I think

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Speaker 3: it's gonna be uh somewhat difficult.

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Speaker 1: Steve, if I can take you back around four decades

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Speaker 1: when you founded Blackstone just four hundred thousand dollars in

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Speaker 1: pocket and capital to now one trillion.

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Speaker 2: Dollars, how do you get to the next one trillion?

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Speaker 3: Well, we just keep doing what we're doing. Uh I

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Speaker 3: I I didn't realize that one trillion was an ending.

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Speaker 2: Point of some certainly sounds nice.

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Speaker 3: Yeah, well it's it's nice. You know when you start

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Speaker 3: with nothing. Uh. We've got a market cap now of

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Speaker 3: uh a hundred and forty billion dollars. Where the fifth

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Speaker 3: largest financial UH company in the United States after uh

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Speaker 3: JP Morgan and Bank America and Wells Fargo, and we're

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Speaker 3: not a bank and and and the fourth ones Morgan Stanley,

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Speaker 3: were seven billion uh UH dollars short of Morgan Stanley

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Speaker 3: at the moment. UH So hopefully at some point, you know,

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Speaker 3: we'll be the fourth largest UH and the only non

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Speaker 3: bank UH to do that. Uh. You know, I I

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Speaker 3: don't manage anything to a number. We're in the business

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Speaker 3: of creating great products for for institutions and individuals so

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Speaker 3: that they can perform better than all other alternatives with safety.

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Speaker 3: That's what we do.

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Speaker 1: Well with that number, you definitely get more attention though,

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Speaker 1: and perhaps even more scrutiny. Jamie Dunmond, for example, specifically

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Speaker 1: called out Blackstone talked about your industry altogether. But Blackstone

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Speaker 1: is saying you'd be dancing in the street about new

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Speaker 1: banking regulation, that you would step in and do more lending,

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Speaker 1: more private credit.

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Speaker 2: It is he right, were you.

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Speaker 1: Dancing in the street after more banking regulations?

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Speaker 2: To you?

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Speaker 3: I like going dancing regularly, but not in streets. So

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Speaker 3: we're just doing what we have been doing for a while,

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Speaker 3: and it's been very safe for our our customers, very

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Speaker 3: good performance with all of our debt products. As we

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Speaker 3: look to the future. Credit has been the most rapidly

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Speaker 3: growing part of our business for the last uh three years.

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Speaker 3: Uh and and to some degree that that's helped by

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Speaker 3: central banks increasing uh the rates. So credit is now

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Speaker 3: very competitive with other equity type of products, and it

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Speaker 3: has the virtue of being much safer than some of

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Speaker 3: some of the equity products. But these things actually are cyclical.

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Speaker 3: M and when interest rates go down, real estate is

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Speaker 3: really gonna pop uh in terms of value and and

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Speaker 3: and and growth uh and and it'll also positively affect

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Speaker 3: of private equity. So so for those of us who've

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Speaker 3: who've been through at least six cycles. Uh, you know,

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Speaker 3: you look at all of this with a little bit

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Speaker 3: of balance, and I think we're gonna have a lot

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Speaker 3: of opportunities for the firm to be growing.

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Speaker 2: To that point.

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Speaker 1: I mean, you have a lot of men and women

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Speaker 1: investing right now who have never lived with five and

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Speaker 1: a half percent.

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Speaker 2: You've lived with it, you lived through higher rates.

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Speaker 1: What do they need to understand about investing right now

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Speaker 1: in a higher rate regime?

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Speaker 3: Well, I think I think you start thinking about alternatives

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Speaker 3: in the sense and I mean alternatives within different things

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Speaker 3: that you can do that you know, you can invest

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Speaker 3: in certain credit products and get a ten, eleven, twelve

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Speaker 3: percent return with very high levels of safety. You learn

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Speaker 3: that when interest rates go up, certain things you thought

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Speaker 3: were wonderful become unappealing. You know, some of the super

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Speaker 3: high tech companies where people were buying them multiples of revenue.

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Speaker 3: I I always know that that's a bad moment. M Uh.

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Speaker 3: When somebody tells you you can buy something at ten

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Speaker 3: times revenues in the market's trading at fifteen, So you've

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Speaker 3: got to bargain the fact is it won't hold that

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Speaker 3: value when interest rates go up. So you have to

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Speaker 3: learn what fundamental value is. Uh. I know that sounds

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Speaker 3: old fashioned, UH, but the people who don't do it

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Speaker 3: really suffer. UH. A lot of the venture stuff is

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Speaker 3: down fifty percent s I. I I think some of it's

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Speaker 3: down a lot further an and so you you you

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Speaker 3: learn to be in touch, uh with with more of

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Speaker 3: what's safe with growth uh as opposed to just anything

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Speaker 3: works MM. For for some period of time, everything did work.

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Speaker 1: Uh. Are we still overvalued though in those pockets that

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Speaker 1: you're concerned about? Or has evaluations coming down in the

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Speaker 1: venture space? Has that normalized?

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Speaker 2: Now?

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Speaker 1: Are you still concerned we're still askew with fundamentals?

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Speaker 3: Well? I I think we're probably still a little optimistic.

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Speaker 3: You have to get through a cycle, uh to see,

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Speaker 3: you know, where where things will really be worth uh.

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Speaker 3: A lot of the venture business where I'm not an

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Speaker 3: expert MM, but it it struck me that ever increasing

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Speaker 3: markups with no cash flow, ultimately every time I've seen it,

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Speaker 3: that stuff really goes down and and we're in that cycle. H.

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Speaker 1: Or how steep of a downturn are you expecting in

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Speaker 1: the cycle. In terms of a recession, are you expecting one?

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Speaker 1: Are you preparing for one?

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Speaker 3: I I I think we're gonna do pretty well this time.

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Speaker 3: You know, we have very low unemployment UH in the

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Speaker 3: United States, and that kind of environment is tough to

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Speaker 3: have a serious UH recession.

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Speaker 2: What about a fiscal accident?

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Speaker 3: Call something, well, you can always have a trigger that

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Speaker 3: really affects markets, which will affect UH an economy. We're

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Speaker 3: running huge deficits, and you know, we have more fiscal

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Speaker 3: problems than we do normal business cycle problems.

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Speaker 1: See if you're asked very frequently about who you're supporting

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Speaker 1: for the GOP, and I don't want to ask you

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Speaker 1: that because I know you frequently say I'm looking towards

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Speaker 1: the next generation. I want to ask about the next generation.

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Speaker 2: Do you see that rising stars?

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Speaker 1: Are you optimistic that there are those there who can

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Speaker 1: carry the mantle?

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Speaker 3: I've learned there's always people who appear who you had

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Speaker 3: no expectation. So when Barack Obama was elected as senator,

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Speaker 3: wasn't even within a year before he started running for president,

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Speaker 3: and he became president soon thereafter. You know, there are

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Speaker 3: other people who will come m and do that UH.

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Speaker 3: American politics I've found at the presidential level it's pretty volatile. Uh.

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Speaker 3: The people you think are gonna win, uh, whether it

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Speaker 3: was uh Hillary uh in twenty sixteen and they didn't win,

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Speaker 3: uh other other people who were no place, you know,

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Speaker 3: uh they end up winning. Mm uh. And you know,

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Speaker 3: mm in in twenty fifteen, about where we are now,

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Speaker 3: uh for a presidential election for the Republicans. Y, you

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Speaker 3: had the governor of u uh Wisconsin in the first place.

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Speaker 3: You had Jeb Bush in second place. Uh y, you

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Speaker 3: had Rudy Giuliani uh in third place. And and by

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Speaker 3: the time there were two or three primaries, they were

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Speaker 3: all gone mmm. Uh and somebody named Donald Trump one

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Speaker 3: who wasn't even in the game. Uh. And and so

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Speaker 3: I think all the straight line predictions uh of of

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Speaker 3: what's gonna happen uh I I sort of just sit

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Speaker 3: back and say, I've seen a lot of volatility in

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Speaker 3: my life of what the public wants. Uh. You know,

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Speaker 3: uh apparently the public is not that interested uh in

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Speaker 3: uh really older people, right.

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Speaker 1: Uh.

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Speaker 3: I think there was a survey it's at seventy seven

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Speaker 3: percentative people didn't want Biden to run again. Uh. And

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Speaker 3: and so when you have that kind of situation, usually

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Speaker 3: something else happens.

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Speaker 1: Wait, well, Steve, I I hate to put it in

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Speaker 1: this life, but you're only a few years younger than

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Speaker 1: the current president and the former president. How are you

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Speaker 1: thinking about your legacy right now?

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Speaker 3: Jeez, I don't think about legacy. Uh you know, I

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Speaker 3: j I may be a little delusional. I still think

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Speaker 3: I'm younger, but then apparently you do. Uh and uh so,

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Speaker 3: so as long as I have uh, really high levels

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Speaker 3: of energy, and I'm fortunate enough to have a simply

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Speaker 3: amazing person, John Gray, who's president of the firm, who

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Speaker 3: does stuff that I used to be doing. You know,

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Speaker 3: I love what I do. It's fascinating. You know, it's global.

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Speaker 3: We're learning all kinds of things every day. Plus I

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Speaker 3: have a very interesting philanthropic life and also involved in

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Speaker 3: the political world. So for me, those three things certainly

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Speaker 3: be retirement. What would I do?

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Speaker 2: You know?

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Speaker 3: This is so stimulating. Plus I get a chance to

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Speaker 3: meet you. I'm here in Paris. You know, I have

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Speaker 3: a certain enthusiasm.

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Speaker 1: If you will see I may be a millennial, but

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Speaker 1: I know in age is just a number.

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Speaker 2: Don't worry, thank you so much.

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Speaker 1: Unfortunately we're out of time, a pleasure to speak with you,

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Speaker 1: Steve Schwartzman.

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Speaker 3: There