1 00:00:01,240 --> 00:00:04,360 Speaker 1: Stephen Schwartzman is the founder of Blackstone Group, the largest 2 00:00:04,400 --> 00:00:07,880 Speaker 1: alternative asset manager in the world with five hundred fifty 3 00:00:07,920 --> 00:00:11,280 Speaker 1: four billion dollars worth of assets under management. With a 4 00:00:11,320 --> 00:00:15,320 Speaker 1: wide range of global business interests in private equity, debt financing, 5 00:00:15,480 --> 00:00:19,360 Speaker 1: hedge fund management, and real estate acquisitions, Schwartzman is one 6 00:00:19,360 --> 00:00:22,360 Speaker 1: of the most powerful people on Wall Street. He was 7 00:00:22,480 --> 00:00:25,720 Speaker 1: named one of Time Magazine's most Influential People in two 8 00:00:25,720 --> 00:00:29,640 Speaker 1: thousand seven, and has donated hundreds of millions of dollars 9 00:00:29,640 --> 00:00:33,199 Speaker 1: to different causes over the years. Schwartzman sat down with 10 00:00:33,320 --> 00:00:36,200 Speaker 1: David Rubinstein, co founder of the Carlisle Group and host 11 00:00:36,280 --> 00:00:39,640 Speaker 1: of the Bloomberg television show Peer to Peer Conversations, to 12 00:00:39,720 --> 00:00:42,879 Speaker 1: discuss starting the firm, surviving the real estate crash of 13 00:00:42,920 --> 00:00:47,120 Speaker 1: two thousand seven, and being rejected from Harvard. Before we 14 00:00:47,159 --> 00:00:49,280 Speaker 1: get into Blackstone, I like to talk about a couple 15 00:00:49,360 --> 00:00:52,120 Speaker 1: other things. Um, you grew up in a middle class 16 00:00:52,240 --> 00:00:55,600 Speaker 1: environment in Philadelphia, and now you're one of the wealthiest 17 00:00:55,600 --> 00:00:57,600 Speaker 1: men in the world. You're one of the biggest philanthropists 18 00:00:57,600 --> 00:00:59,639 Speaker 1: in the world, and you are an advised with the presidents. 19 00:01:00,160 --> 00:01:02,440 Speaker 1: The last three presidents have asked your advice on various things. 20 00:01:02,440 --> 00:01:04,800 Speaker 1: And you're very close to President Trump. So when you're 21 00:01:04,800 --> 00:01:07,600 Speaker 1: growing up in Philadelphia, did you ever, in your wildest dreams, 22 00:01:07,640 --> 00:01:11,640 Speaker 1: imagine this could possibly happen? No? Did you? Are you? 23 00:01:11,720 --> 00:01:14,119 Speaker 1: Do you pinch yourself every day now you think about 24 00:01:14,280 --> 00:01:18,120 Speaker 1: where you have achieved your status in life? Yeah, frankly, 25 00:01:18,720 --> 00:01:21,360 Speaker 1: every day is an adventure. Uh, and every day is 26 00:01:21,400 --> 00:01:25,039 Speaker 1: a privilege. Now you've come to know President Trump quite 27 00:01:25,040 --> 00:01:27,000 Speaker 1: well in recent years since he's been president. Did you 28 00:01:27,040 --> 00:01:29,320 Speaker 1: know him before he was president? Or know him very well? Then? 29 00:01:29,720 --> 00:01:34,039 Speaker 1: I knew him before he was president. So when he 30 00:01:34,080 --> 00:01:36,280 Speaker 1: told you I'm running thinking of running for president, did 31 00:01:36,319 --> 00:01:37,720 Speaker 1: you tell him you have a good chance? Or do 32 00:01:37,760 --> 00:01:39,960 Speaker 1: you tell him that's a tough thing to do. I 33 00:01:40,680 --> 00:01:44,160 Speaker 1: thought that was a veritable impossibility. Okay, So when he 34 00:01:44,200 --> 00:01:47,080 Speaker 1: got elected, did he say, Steve Um, you were wrong 35 00:01:47,160 --> 00:01:49,440 Speaker 1: and why don't you come in and serve in the administration? 36 00:01:50,480 --> 00:01:52,880 Speaker 1: I can't tell you exactly what he said, but it 37 00:01:52,960 --> 00:01:57,280 Speaker 1: was very funny. Uh, And uh, you know I I 38 00:01:57,320 --> 00:02:00,720 Speaker 1: didn't want to be part of, uh the government. I 39 00:02:00,800 --> 00:02:04,560 Speaker 1: have a wonderful life as it is, and I didn't 40 00:02:04,560 --> 00:02:07,400 Speaker 1: want to disrupt that. So you've been an advisor off 41 00:02:07,440 --> 00:02:09,959 Speaker 1: and one for from the beginning administration to president. And 42 00:02:10,000 --> 00:02:11,919 Speaker 1: he's actually to do a number of assignments. But I've 43 00:02:11,960 --> 00:02:14,880 Speaker 1: never seen him tweet anything unfavorable about you. So you've 44 00:02:14,919 --> 00:02:17,680 Speaker 1: managed to stay on his good side. What's the secret 45 00:02:17,680 --> 00:02:19,760 Speaker 1: to staying on his good side? Well, you tell people 46 00:02:19,840 --> 00:02:23,440 Speaker 1: the truth. Uh. You know, I don't work in the administration. 47 00:02:23,600 --> 00:02:28,520 Speaker 1: I'm an independent person and I give my views. I 48 00:02:28,560 --> 00:02:32,519 Speaker 1: find that he likes to listen. Uh, and and that's 49 00:02:32,560 --> 00:02:35,320 Speaker 1: I think a good thing. But I suppose he's reelected 50 00:02:35,720 --> 00:02:38,200 Speaker 1: and he said, I, Steve like to be Secretary of State, 51 00:02:38,280 --> 00:02:41,360 Speaker 1: Secretary of Treasury. Would you ever consider that? When I 52 00:02:41,440 --> 00:02:43,280 Speaker 1: was younger, I would do that, David, I'm at a 53 00:02:43,320 --> 00:02:46,160 Speaker 1: point in my life now where that that's not where 54 00:02:46,160 --> 00:02:49,360 Speaker 1: I want to spend my time. Okay, So you have 55 00:02:49,440 --> 00:02:52,160 Speaker 1: spent some time recently writing a new book. Um, this 56 00:02:52,280 --> 00:02:55,800 Speaker 1: is Steve Schwartzman. What it takes Lessons in the Pursuit 57 00:02:55,840 --> 00:02:58,600 Speaker 1: of Excellence? Well, I read the book and it's quite fascinating. 58 00:02:58,840 --> 00:03:01,200 Speaker 1: I know you quite well, but I didn't know a 59 00:03:01,240 --> 00:03:03,600 Speaker 1: lot about your background, and which I found quite interesting. 60 00:03:03,639 --> 00:03:05,079 Speaker 1: And why don't we start with your back when I 61 00:03:05,160 --> 00:03:08,639 Speaker 1: take you through the creation of Blackstone. So you grew 62 00:03:08,720 --> 00:03:11,200 Speaker 1: up in the Philadelphia suburbs, is that right? That's right? 63 00:03:11,520 --> 00:03:13,600 Speaker 1: And you were from a middle class family. Your father 64 00:03:13,680 --> 00:03:18,400 Speaker 1: had a curtain store. Yeah, curtain story sort of would 65 00:03:18,400 --> 00:03:22,120 Speaker 1: have been a bed bath and beyond the type of store. 66 00:03:22,320 --> 00:03:25,280 Speaker 1: And it was started by his father, and so he 67 00:03:25,360 --> 00:03:27,960 Speaker 1: came into the business. And did they say, Steve, you're 68 00:03:28,000 --> 00:03:30,480 Speaker 1: the oldest of the three sons that he had. Now 69 00:03:30,600 --> 00:03:32,359 Speaker 1: it's time for you to come into the business. So 70 00:03:32,520 --> 00:03:36,320 Speaker 1: that was sort of expected. And I found that standing 71 00:03:36,400 --> 00:03:41,840 Speaker 1: up and waiting on people buying linen handkerchiefs was perhaps 72 00:03:41,880 --> 00:03:45,960 Speaker 1: not my highest and best use. But you told your father, 73 00:03:46,000 --> 00:03:48,320 Speaker 1: according to the book, that maybe he should expand it, 74 00:03:48,640 --> 00:03:51,240 Speaker 1: do more than one store, and maybe become bead bath 75 00:03:51,280 --> 00:03:54,040 Speaker 1: and beyond. What did he say to that advice? He said, Steve, 76 00:03:54,120 --> 00:03:58,280 Speaker 1: that's really interesting. I don't feel like doing that. And 77 00:03:58,360 --> 00:03:59,960 Speaker 1: I said, Dad, why why don't you want to do? 78 00:04:00,000 --> 00:04:02,960 Speaker 1: Would we have lots of people in this store. I 79 00:04:03,000 --> 00:04:06,040 Speaker 1: haven't seen another store like this. I think we could 80 00:04:06,080 --> 00:04:10,320 Speaker 1: be national and he just said not for him, he said, 81 00:04:10,960 --> 00:04:13,840 Speaker 1: I'm just not interested. So I I said, well, why 82 00:04:13,840 --> 00:04:17,080 Speaker 1: don't we open stores? All over Pennsylvania because I was 83 00:04:17,120 --> 00:04:20,400 Speaker 1: from Philadelphia. And he said, I don't want to do that. 84 00:04:21,160 --> 00:04:24,400 Speaker 1: So then I had a third option, which is why 85 00:04:24,400 --> 00:04:28,560 Speaker 1: don't we open stores all over Philadelphia? And he said 86 00:04:28,560 --> 00:04:30,760 Speaker 1: I don't want to do that either. I said, Dad, 87 00:04:30,800 --> 00:04:33,679 Speaker 1: why why don't you want to do this? And he said, 88 00:04:34,920 --> 00:04:39,000 Speaker 1: I'm happy the way I am. I have a house, 89 00:04:39,800 --> 00:04:43,039 Speaker 1: I have two cars. I have enough money to send 90 00:04:43,080 --> 00:04:46,360 Speaker 1: you and your brothers to college, and that's really all 91 00:04:46,400 --> 00:04:49,719 Speaker 1: I want. And I shook my head and I went, 92 00:04:50,839 --> 00:04:54,200 Speaker 1: I don't understand that. I just saw the opportunity to 93 00:04:54,279 --> 00:04:58,279 Speaker 1: open stores all over the country, and he just didn't 94 00:04:58,279 --> 00:05:01,480 Speaker 1: want to do it. And surprising to me is he 95 00:05:01,560 --> 00:05:04,760 Speaker 1: was very very intelligent. When you're saying your book that 96 00:05:04,839 --> 00:05:07,480 Speaker 1: he was far more intelligent than you, that might be 97 00:05:07,520 --> 00:05:10,120 Speaker 1: an exaggeration, but he obviously was a very smart person. 98 00:05:10,279 --> 00:05:14,440 Speaker 1: That was not an exaggeration because I would talk to him, Uh, 99 00:05:14,520 --> 00:05:17,800 Speaker 1: when I was starting my career on things, and no 100 00:05:17,800 --> 00:05:20,920 Speaker 1: matter what I was working on, he could always find 101 00:05:20,960 --> 00:05:25,279 Speaker 1: the weakness in the argument or in the deal. And 102 00:05:25,360 --> 00:05:28,200 Speaker 1: what about your mother? What did she do? She she 103 00:05:28,320 --> 00:05:33,240 Speaker 1: was just aggressive? Uh, she was a housewife. Was the 104 00:05:33,360 --> 00:05:38,679 Speaker 1: nineteen fifties, uh, and in sixties, and I have twin brothers, 105 00:05:38,720 --> 00:05:41,920 Speaker 1: and three of us were a handful, and that that 106 00:05:42,000 --> 00:05:44,880 Speaker 1: was the paradigm at that time. So, as I said, 107 00:05:44,920 --> 00:05:46,920 Speaker 1: I've known you for quite a while, but honestly, until 108 00:05:46,960 --> 00:05:48,920 Speaker 1: I read this book, I did not realize you were 109 00:05:48,960 --> 00:05:51,359 Speaker 1: a track star. Were there a lot of you know, 110 00:05:51,480 --> 00:05:54,200 Speaker 1: white Jewish boys on the track team or were you 111 00:05:54,240 --> 00:05:56,320 Speaker 1: a minority in that regard. I think I was a 112 00:05:56,360 --> 00:05:59,479 Speaker 1: minority of one. You say in the book, which obviously 113 00:05:59,560 --> 00:06:02,080 Speaker 1: is true, that you did something that's quite audacious. You 114 00:06:02,080 --> 00:06:06,719 Speaker 1: applied to Harvard Yale, and I think Princeton and Harvard 115 00:06:06,760 --> 00:06:09,640 Speaker 1: did not accept you. So you then got out some 116 00:06:09,720 --> 00:06:12,680 Speaker 1: coins and called the director of admissions at Harvard and 117 00:06:12,720 --> 00:06:15,359 Speaker 1: said you made a mistake. What was that? Like? That 118 00:06:15,480 --> 00:06:19,760 Speaker 1: was frightening? Actually, uh, you know, we didn't have cell 119 00:06:19,800 --> 00:06:24,400 Speaker 1: phones then, so so I got some quarters, uh, and 120 00:06:24,640 --> 00:06:27,479 Speaker 1: I found the phone number for the admissions office and 121 00:06:27,600 --> 00:06:32,640 Speaker 1: some document and and the pay phone was was outside 122 00:06:32,640 --> 00:06:36,360 Speaker 1: the gym. Uh, And I stood there and put those 123 00:06:36,440 --> 00:06:39,080 Speaker 1: quarters on in and you could hear the ringing when 124 00:06:39,080 --> 00:06:42,280 Speaker 1: they dropped down, and I asked for the dean of admissions, 125 00:06:42,279 --> 00:06:45,479 Speaker 1: and I was put right through. And so he picks 126 00:06:45,560 --> 00:06:48,080 Speaker 1: up the phone and I said, Hi, I'm Steve Schwartzman 127 00:06:48,160 --> 00:06:52,120 Speaker 1: from Abington High School in Abington, Pennsylvania, and I'm on 128 00:06:52,200 --> 00:06:57,200 Speaker 1: the waiting list and I'd really like to go to Harvard, 129 00:06:57,240 --> 00:06:59,760 Speaker 1: So why don't you take me off the waiting list? 130 00:07:00,680 --> 00:07:04,440 Speaker 1: And so he said, how in the world did you 131 00:07:04,480 --> 00:07:07,440 Speaker 1: get through to me? He said, you're not allowed to 132 00:07:07,440 --> 00:07:11,440 Speaker 1: talk to me. I don't talk to applicants. Um And 133 00:07:11,800 --> 00:07:15,080 Speaker 1: I said, but we're talking and he said yes, he said, 134 00:07:15,560 --> 00:07:17,800 Speaker 1: he said, you sound like a very nice young man, 135 00:07:18,440 --> 00:07:22,360 Speaker 1: but unfortunately, we're not going to be taking anyone from 136 00:07:22,400 --> 00:07:24,880 Speaker 1: the waiting list this year, you know, we are. Yield 137 00:07:25,000 --> 00:07:29,120 Speaker 1: was was higher than we thought. And where where else 138 00:07:29,840 --> 00:07:32,679 Speaker 1: were you accepted? I said, well, I've accepted at Yale. 139 00:07:33,160 --> 00:07:35,360 Speaker 1: And he said, well, you'll have a very good time 140 00:07:35,400 --> 00:07:38,320 Speaker 1: at Yale and you'll enjoy it. I said, I'm sure 141 00:07:38,320 --> 00:07:41,160 Speaker 1: I would. I said, but that wasn't my objective for 142 00:07:41,200 --> 00:07:44,000 Speaker 1: the phone call. He said, well, I understand that. I'm 143 00:07:44,040 --> 00:07:46,440 Speaker 1: just so sorry. Did you ever see him again or 144 00:07:46,480 --> 00:07:50,560 Speaker 1: hear from rom again in life? Ironically, it's really a 145 00:07:50,600 --> 00:07:55,560 Speaker 1: great story. Uh. The CEO of Mackenzie was in my 146 00:07:55,680 --> 00:08:00,280 Speaker 1: office twenty five years later, and he was on the 147 00:08:00,400 --> 00:08:06,200 Speaker 1: Harvard Corporation. Uh and Um I told him this story. 148 00:08:07,000 --> 00:08:10,440 Speaker 1: So he asked what year. And that dean of admissions 149 00:08:11,160 --> 00:08:14,440 Speaker 1: UM was a close friend of his. He said, do 150 00:08:14,440 --> 00:08:16,880 Speaker 1: you mind if I told him that I ran into you. 151 00:08:16,920 --> 00:08:19,840 Speaker 1: I said, no, that's fine. Uh. And and so I 152 00:08:19,920 --> 00:08:23,480 Speaker 1: got a letter two weeks later from that former dean 153 00:08:23,520 --> 00:08:26,840 Speaker 1: of admissions. Uh. And he said, I remember getting that 154 00:08:26,920 --> 00:08:34,360 Speaker 1: phone call in sixty four and he said, every time 155 00:08:34,400 --> 00:08:38,760 Speaker 1: I see you in a newspaper, I realized I blew it. Uh. 156 00:08:40,360 --> 00:08:43,439 Speaker 1: I wish I made all the right decisions, but as 157 00:08:43,480 --> 00:08:46,800 Speaker 1: I told you at the time, there were no no 158 00:08:46,960 --> 00:08:50,280 Speaker 1: beds at the end you Um then went to Harvard 159 00:08:50,280 --> 00:08:53,319 Speaker 1: Business School? Yes? And did you enjoy Harvard Business School? 160 00:08:54,800 --> 00:08:57,800 Speaker 1: Did you want to drop out? Yes? And what kept 161 00:08:57,800 --> 00:09:02,000 Speaker 1: you from dropping out? I wrote a letter? Uh? There 162 00:09:02,040 --> 00:09:05,520 Speaker 1: was no internet. Uh. I wrote a letter to Dick Jennerette, 163 00:09:05,520 --> 00:09:09,560 Speaker 1: who was president of a firm called Donaldson Lufkin Jennerette, 164 00:09:10,000 --> 00:09:12,640 Speaker 1: which is where I worked a bit right after I graduated, 165 00:09:12,679 --> 00:09:15,079 Speaker 1: before I went into the army. And I said, Dick, 166 00:09:15,160 --> 00:09:20,200 Speaker 1: it's called up here. The classes are highly repetitive. Uh. 167 00:09:20,240 --> 00:09:23,080 Speaker 1: And I'd like to come back to work, and if 168 00:09:23,080 --> 00:09:25,280 Speaker 1: you don't want me to d LJ, I'll do something else. 169 00:09:25,920 --> 00:09:28,480 Speaker 1: What do you think? So, so he wrote me a 170 00:09:28,480 --> 00:09:32,080 Speaker 1: six page letter and he said, that's just the way 171 00:09:32,080 --> 00:09:35,360 Speaker 1: I felt in December of my first year, and I 172 00:09:35,440 --> 00:09:39,000 Speaker 1: was going to transfer uh to to the Economic School 173 00:09:39,040 --> 00:09:43,000 Speaker 1: and get a PhD. And I didn't drop out, and 174 00:09:43,120 --> 00:09:46,360 Speaker 1: you shouldn't either. You should complete what you're doing. And 175 00:09:46,440 --> 00:09:50,800 Speaker 1: I was so dumbfound that he was so kind and 176 00:09:51,000 --> 00:09:56,720 Speaker 1: thoughtful and had similar feelings and and basically said, don't 177 00:09:56,720 --> 00:10:00,160 Speaker 1: you do that. It's the wrong decision that I just 178 00:10:00,240 --> 00:10:02,959 Speaker 1: listened to him and stay. You stayed. You must have 179 00:10:03,000 --> 00:10:05,920 Speaker 1: done pretty well because you had lots of offers afterwards. Yes, 180 00:10:06,000 --> 00:10:08,160 Speaker 1: so you interviewed with number of firms and the one 181 00:10:08,200 --> 00:10:10,559 Speaker 1: you decided to go with was Lehman Brothers. Yes, why 182 00:10:10,559 --> 00:10:12,360 Speaker 1: did you pick Lehman Brothers? So? I thought it would 183 00:10:12,400 --> 00:10:16,200 Speaker 1: be the most interesting cast of characters. Uh. You know 184 00:10:16,360 --> 00:10:19,920 Speaker 1: that was before m b a's went to Wall Street, 185 00:10:20,520 --> 00:10:23,560 Speaker 1: uh and um so, so they just hired at random. 186 00:10:23,600 --> 00:10:27,160 Speaker 1: And this was the first class of MBA's that Lehman 187 00:10:27,280 --> 00:10:29,600 Speaker 1: was going to hire, and the people were fascinating you 188 00:10:29,640 --> 00:10:33,520 Speaker 1: had x CIA agents, you had people who had worked 189 00:10:33,559 --> 00:10:38,080 Speaker 1: on oil rigs, who who had all kinds of unusual 190 00:10:38,200 --> 00:10:43,000 Speaker 1: people working at the firm. So I thought, for whatever 191 00:10:43,000 --> 00:10:45,680 Speaker 1: the reason, it was the right personality fit for me. 192 00:10:45,920 --> 00:10:47,840 Speaker 1: And you became a partner at an early age, I 193 00:10:47,840 --> 00:10:51,319 Speaker 1: think thirty one, something like thirty one, thirty one years old. 194 00:10:51,320 --> 00:10:54,640 Speaker 1: You're a partner at Lehman Brothers and life was going well. 195 00:10:54,679 --> 00:10:56,760 Speaker 1: But then there's a problem at Lehman Brothers. And Lehman 196 00:10:56,800 --> 00:10:59,920 Speaker 1: Brothers ultimately was sold is that right? Yes, that's right. 197 00:11:00,000 --> 00:11:03,320 Speaker 1: I sold it, uh, and to American Express. And the 198 00:11:03,400 --> 00:11:06,719 Speaker 1: problem was that in the trading side of the firm 199 00:11:06,760 --> 00:11:10,439 Speaker 1: there was a position taken that really went wrong. So 200 00:11:10,480 --> 00:11:13,000 Speaker 1: you then decided to join somebody who had been previously 201 00:11:13,040 --> 00:11:16,079 Speaker 1: been the president of Lehman Brothers, but he was eased out. Um, 202 00:11:16,160 --> 00:11:19,240 Speaker 1: that's Pete Peterson, previously also Secretary of Commerce and the 203 00:11:19,280 --> 00:11:22,000 Speaker 1: Knick's administration. And you and he decided to start a 204 00:11:22,040 --> 00:11:29,000 Speaker 1: new firm in Yes, and that firm's name was um Blackstone. 205 00:11:29,240 --> 00:11:34,079 Speaker 1: So Blackstone starts two people, you and Pete Peterson. Uh. 206 00:11:34,120 --> 00:11:36,720 Speaker 1: Where did you have to get the money for the firm? Well, 207 00:11:36,720 --> 00:11:39,840 Speaker 1: it didn't require much. It was an advisory business, so 208 00:11:39,920 --> 00:11:42,160 Speaker 1: you talk and people give you money. You each put 209 00:11:42,160 --> 00:11:46,079 Speaker 1: in two hundred thousand dollars. The strategic plan for the business, 210 00:11:46,200 --> 00:11:49,640 Speaker 1: which we announced in letter to everyone we knew, was 211 00:11:50,040 --> 00:11:53,120 Speaker 1: first you know, the m and a advisory business because 212 00:11:53,120 --> 00:11:57,080 Speaker 1: it required no capital. Right. Uh. The second was going 213 00:11:57,120 --> 00:11:59,880 Speaker 1: into the private equity business. And you had never been, 214 00:12:00,640 --> 00:12:03,880 Speaker 1: you or Pete privately invested before, and Peach that since 215 00:12:03,920 --> 00:12:05,800 Speaker 1: we haven't been, we'll go out and raise a small fund, 216 00:12:05,920 --> 00:12:09,080 Speaker 1: fifty million dollar fund. You said, if I recall the book, 217 00:12:09,120 --> 00:12:12,520 Speaker 1: let's go raise a billion dollars. Billion dollars. So that's 218 00:12:12,559 --> 00:12:15,480 Speaker 1: fairly audacious. Where were you gonna get a billion dollars? 219 00:12:15,240 --> 00:12:19,800 Speaker 1: So we went to our top eight team prospects. Everyone 220 00:12:19,880 --> 00:12:23,880 Speaker 1: said no, except Metropolitan Life in New York Life. One 221 00:12:23,920 --> 00:12:26,040 Speaker 1: said I'll give you a fifty million. The other one said, 222 00:12:26,040 --> 00:12:28,520 Speaker 1: I'll give you twenty five. But I don't want to be, 223 00:12:29,120 --> 00:12:30,800 Speaker 1: you know, sort of a big part of the things 224 00:12:30,800 --> 00:12:34,080 Speaker 1: that you have to raise at least five million dollars 225 00:12:34,200 --> 00:12:38,280 Speaker 1: or else our commitments are worthless. And we had already 226 00:12:38,280 --> 00:12:41,240 Speaker 1: gone to everybody we knew who was the best targets, 227 00:12:41,400 --> 00:12:43,200 Speaker 1: and I sort of looked at that and I went, 228 00:12:43,480 --> 00:12:47,520 Speaker 1: oh MG, we are going to fail. And we just 229 00:12:48,720 --> 00:12:52,559 Speaker 1: met one more company is called Prudential Life Insurance Company, 230 00:12:52,600 --> 00:12:56,640 Speaker 1: which was the number one financier in in those days. 231 00:12:57,280 --> 00:13:02,600 Speaker 1: And we're over at Newark on a Friday, having uh 232 00:13:02,880 --> 00:13:07,079 Speaker 1: lunch with the chief investment officer, and he was having 233 00:13:07,080 --> 00:13:11,120 Speaker 1: a two nail and white bread cut across and I'm 234 00:13:11,160 --> 00:13:15,800 Speaker 1: busy pitching this private equity fund and you can share 235 00:13:16,040 --> 00:13:20,040 Speaker 1: part of our advisory profits as a merchant bank. And 236 00:13:20,120 --> 00:13:24,080 Speaker 1: he keeps chewing and Adam's apples going up and down, 237 00:13:24,120 --> 00:13:28,160 Speaker 1: and I keep doing my thing, finishes the first half 238 00:13:28,160 --> 00:13:33,480 Speaker 1: of the sandwich, gets through the other half halfway, and 239 00:13:33,520 --> 00:13:36,200 Speaker 1: he looks over at me and he says, I think 240 00:13:36,240 --> 00:13:39,240 Speaker 1: that's a good idea. Put me down for a hundred 241 00:13:40,920 --> 00:13:45,760 Speaker 1: and I just I can still remember that moment. Did 242 00:13:46,000 --> 00:13:50,320 Speaker 1: did he actually say he's going to give us a 243 00:13:50,440 --> 00:13:54,640 Speaker 1: hundred million dollars? The number one investor in the world, 244 00:13:55,320 --> 00:13:59,320 Speaker 1: so if he gives us money, other people will follow him. 245 00:14:00,080 --> 00:14:05,640 Speaker 1: I realized somehow in Newark on some dreary friday, and 246 00:14:06,440 --> 00:14:08,560 Speaker 1: he gave us the money. I just didn't want him 247 00:14:08,600 --> 00:14:11,640 Speaker 1: to choke on the rest of that Sandwich, make sure 248 00:14:11,679 --> 00:14:13,720 Speaker 1: he lived to give you the money exactly. You did 249 00:14:13,760 --> 00:14:16,280 Speaker 1: pretty well and your devise, your business is booming. You 250 00:14:16,360 --> 00:14:19,880 Speaker 1: decided to get into um other businesses. The first one 251 00:14:20,080 --> 00:14:23,680 Speaker 1: was ended up is black Rock with Larry Fink, and 252 00:14:23,960 --> 00:14:28,480 Speaker 1: Larry brought people over and they were called Blackstone Financial, 253 00:14:28,880 --> 00:14:32,600 Speaker 1: Blackstone Financial. And so you actually owned the firm, or 254 00:14:32,640 --> 00:14:37,000 Speaker 1: own part of the Okay, so you owned fifty fifty 255 00:14:37,160 --> 00:14:40,760 Speaker 1: and now black Stone financials now black Rock, which is 256 00:14:40,840 --> 00:14:44,080 Speaker 1: managing like six trillion dollars I guess or something like that, 257 00:14:44,240 --> 00:14:46,760 Speaker 1: six and a half six and a half trillion. Okay, 258 00:14:46,840 --> 00:14:49,960 Speaker 1: So how did they escape from black Stone? Well, they 259 00:14:50,000 --> 00:14:53,520 Speaker 1: didn't really escape. Uh. You know, we set up in 260 00:14:53,560 --> 00:15:00,240 Speaker 1: an economic arrangement which ended up being inappropriate for a 261 00:15:00,280 --> 00:15:03,200 Speaker 1: business that was growing as rapidly needed to add as 262 00:15:03,280 --> 00:15:06,920 Speaker 1: many people. Uh. And I made a mistake, you know, 263 00:15:07,000 --> 00:15:09,240 Speaker 1: I took the original agreement. I didn't want to change it, 264 00:15:09,280 --> 00:15:14,040 Speaker 1: which was advantageous, uh, you know for my side. Uh. 265 00:15:14,080 --> 00:15:18,680 Speaker 1: And uh, the black Rock people, Blackstone Pavior, Blackstone Financial 266 00:15:18,680 --> 00:15:22,360 Speaker 1: people were frustrated with that. And and that was the 267 00:15:22,360 --> 00:15:27,160 Speaker 1: the judgment of an amateur me. On two thousand seven, 268 00:15:27,400 --> 00:15:30,200 Speaker 1: you decide maybe you should take the firm public. It's 269 00:15:30,200 --> 00:15:33,680 Speaker 1: a private company. Why did you take the firm public? Well, 270 00:15:33,720 --> 00:15:36,080 Speaker 1: I took a public for a lot of different reasons. 271 00:15:36,560 --> 00:15:39,480 Speaker 1: I had a sixth sense that something terrible was going 272 00:15:39,520 --> 00:15:43,600 Speaker 1: to happen in the environment. Money was so available, money 273 00:15:43,680 --> 00:15:48,680 Speaker 1: was cheap, everybody was doing things, prices were crazy, and 274 00:15:49,120 --> 00:15:51,440 Speaker 1: I just had a sense this was going to come 275 00:15:51,480 --> 00:15:53,560 Speaker 1: to a bad ending and we should have a lot 276 00:15:53,640 --> 00:15:57,760 Speaker 1: of capital to make sure we were bomb proof. So 277 00:15:57,760 --> 00:16:01,400 Speaker 1: so that was one reason. A second reason is I 278 00:16:01,400 --> 00:16:04,000 Speaker 1: thought it would be a great branding event for the 279 00:16:04,080 --> 00:16:07,680 Speaker 1: firm on a global basis. Everybody would know who we were, 280 00:16:08,120 --> 00:16:11,360 Speaker 1: and that would make as easier to raise money as 281 00:16:11,560 --> 00:16:15,400 Speaker 1: as well as to um have people sell us companies 282 00:16:15,440 --> 00:16:18,360 Speaker 1: and other assets. So ultimately what happened was the China, 283 00:16:18,680 --> 00:16:21,360 Speaker 1: Chinese sovereign wealth from was the process of being created. 284 00:16:21,760 --> 00:16:25,000 Speaker 1: They heard about your going public and they threw an intermediary, 285 00:16:25,080 --> 00:16:27,480 Speaker 1: Actually somebody working for you said can we buy a 286 00:16:27,520 --> 00:16:29,160 Speaker 1: big stake in the I p O? And you ultimately 287 00:16:29,200 --> 00:16:31,000 Speaker 1: decided to let them do that. Right. I PO was 288 00:16:31,040 --> 00:16:34,240 Speaker 1: going to be four billion dollars. They offered to invest 289 00:16:34,320 --> 00:16:38,560 Speaker 1: three billion, which we didn't even ask them. Uh, and 290 00:16:38,600 --> 00:16:42,200 Speaker 1: I hadn't been to China since, so this was it 291 00:16:42,360 --> 00:16:48,400 Speaker 1: was shocking because um that China had not invested in 292 00:16:48,440 --> 00:16:54,840 Speaker 1: another public company since since it was founded in nine 293 00:16:55,280 --> 00:16:59,800 Speaker 1: So so this was a complete paradigm shift for for China. 294 00:17:00,160 --> 00:17:03,640 Speaker 1: We were chosen by them. It was pretty heavy stuff. 295 00:17:03,840 --> 00:17:06,240 Speaker 1: It worked out and UM ultimately you did the I 296 00:17:06,359 --> 00:17:09,719 Speaker 1: p O and Chinese invested. And then after you did 297 00:17:09,760 --> 00:17:12,119 Speaker 1: the I p O, let me mention two deals that 298 00:17:12,160 --> 00:17:15,600 Speaker 1: you did. One was the biggest real estate deal in history, 299 00:17:15,680 --> 00:17:19,320 Speaker 1: e OP real estate company built by Sam's l and 300 00:17:19,400 --> 00:17:22,480 Speaker 1: you did a forty billion dollar buyout and effect is 301 00:17:22,520 --> 00:17:26,280 Speaker 1: that right? Thirty nine actually? Okay, all right, thirty nine 302 00:17:26,320 --> 00:17:28,679 Speaker 1: billion dollars. It was a bidding war. You won the 303 00:17:28,680 --> 00:17:31,480 Speaker 1: bidding war, but the real estate market crumbled right after 304 00:17:31,520 --> 00:17:33,520 Speaker 1: the deal was done. So how did you survive with 305 00:17:33,560 --> 00:17:37,320 Speaker 1: that deal? Well, we worried because the same reason we're 306 00:17:37,359 --> 00:17:42,399 Speaker 1: going public. I since we were in market top for 307 00:17:42,480 --> 00:17:47,720 Speaker 1: real estate. So so just buying thirty nine billion dollars 308 00:17:47,720 --> 00:17:53,359 Speaker 1: of real estate, UM, I thought it was dangerous because 309 00:17:53,400 --> 00:17:55,480 Speaker 1: you had to pay a pretty good price to get 310 00:17:55,520 --> 00:17:59,320 Speaker 1: it because it was competitive. So as soon as we 311 00:17:59,440 --> 00:18:03,000 Speaker 1: decided we were going to actually raise our price enough 312 00:18:03,040 --> 00:18:07,280 Speaker 1: to be the winner. Um, there were two or three 313 00:18:07,320 --> 00:18:11,919 Speaker 1: of us sitting around saying, this deal is potentially dangerous. 314 00:18:12,600 --> 00:18:17,439 Speaker 1: We've got to reduce the leverage, and we've got to 315 00:18:17,480 --> 00:18:21,719 Speaker 1: take advantage of the crazy prices that people are paying. 316 00:18:22,119 --> 00:18:25,760 Speaker 1: So we decided to sell half of what we bought 317 00:18:26,440 --> 00:18:29,640 Speaker 1: the same day we bought it. So when I told 318 00:18:29,680 --> 00:18:33,920 Speaker 1: people that, they just sort of looked at me and 319 00:18:33,920 --> 00:18:37,520 Speaker 1: and said the same day I said, I don't want 320 00:18:37,520 --> 00:18:42,119 Speaker 1: to take any risk that the world's going to change 321 00:18:42,119 --> 00:18:44,399 Speaker 1: and we're gonna be stuck with all of this. So 322 00:18:44,440 --> 00:18:49,600 Speaker 1: we basically had every conference room at the firm active 323 00:18:50,040 --> 00:18:53,199 Speaker 1: one buying. But then we broke it up into all 324 00:18:53,280 --> 00:18:55,560 Speaker 1: these pieces. But if you hadn't done that, you would 325 00:18:55,560 --> 00:18:58,640 Speaker 1: have lost all your money. I think that's probably market creater. 326 00:18:58,880 --> 00:19:02,680 Speaker 1: Virtually the next day because most of the people who 327 00:19:02,720 --> 00:19:07,960 Speaker 1: bought from us basically got into enormous financial trouble or 328 00:19:08,440 --> 00:19:13,119 Speaker 1: went in solvent. And so after we did that and closed, 329 00:19:14,359 --> 00:19:17,960 Speaker 1: everybody went home. They've been sleepless. Three days later they 330 00:19:17,960 --> 00:19:24,560 Speaker 1: came back and we said, let's sell half I've always 331 00:19:24,560 --> 00:19:30,200 Speaker 1: got left now and be even more conservative. So everybody 332 00:19:30,200 --> 00:19:32,840 Speaker 1: went back to work. And we ended up with one 333 00:19:32,920 --> 00:19:37,359 Speaker 1: quarter of what we bought very conservatively priced so we 334 00:19:37,400 --> 00:19:40,639 Speaker 1: could survive any kind of nuclear winner. We ended up 335 00:19:40,680 --> 00:19:45,920 Speaker 1: making three times our money buying this, this giant thing 336 00:19:46,119 --> 00:19:48,920 Speaker 1: at the top end. And there's never been more than 337 00:19:49,000 --> 00:19:54,600 Speaker 1: ten billion dollars bought or sold by a group. We 338 00:19:54,720 --> 00:19:59,119 Speaker 1: did seventy billion. So you also bought another company before 339 00:19:59,160 --> 00:20:02,720 Speaker 1: the recession, the hit that was called Hilton, and that 340 00:20:02,800 --> 00:20:05,359 Speaker 1: was a leverage buy out, some people might say, at 341 00:20:05,359 --> 00:20:09,520 Speaker 1: the top of the market, and that deal went down 342 00:20:09,560 --> 00:20:11,639 Speaker 1: in terms of the debt and maybe the equity, but 343 00:20:11,680 --> 00:20:13,720 Speaker 1: then you ultimately did things that made it the most 344 00:20:13,720 --> 00:20:16,720 Speaker 1: profitable buy out in the history of buyouts. What did 345 00:20:16,720 --> 00:20:20,200 Speaker 1: you do, Well, that was pretty easy, actually looked hard, 346 00:20:20,560 --> 00:20:24,119 Speaker 1: but uh, you know Hilton had not been integrated. They 347 00:20:24,119 --> 00:20:27,920 Speaker 1: were running four different headquarters. Uh, and there was a 348 00:20:28,000 --> 00:20:33,119 Speaker 1: huge modernization and and and and cost take out. Ultimately, 349 00:20:33,119 --> 00:20:36,359 Speaker 1: you've sold it about a fourteen billion dollar profit. Yes, well, 350 00:20:36,560 --> 00:20:38,880 Speaker 1: if we had held it, it would have been held 351 00:20:38,920 --> 00:20:41,720 Speaker 1: it longer, would have been over twenty So so it 352 00:20:41,800 --> 00:20:46,080 Speaker 1: was a good day because in recent years you become 353 00:20:46,080 --> 00:20:48,920 Speaker 1: one of the nation's biggest philanthropists. You gave three and 354 00:20:49,000 --> 00:20:52,399 Speaker 1: fifty million dollars to m I T for a computing center. 355 00:20:52,840 --> 00:20:55,119 Speaker 1: And relating to artificial intelligence, you never went to m 356 00:20:55,160 --> 00:20:56,960 Speaker 1: I T. You had no connection there. How did that 357 00:20:57,000 --> 00:20:59,919 Speaker 1: come about? Well? That was that was really fascinating. Uh. 358 00:21:00,359 --> 00:21:04,040 Speaker 1: I'm not a technologist. I had met the president of 359 00:21:04,160 --> 00:21:08,720 Speaker 1: m I T, Raphael Raefe, and we started talking, uh, 360 00:21:08,720 --> 00:21:12,439 Speaker 1: and you know, we were concerned that the US was 361 00:21:12,560 --> 00:21:16,520 Speaker 1: just not investing enough in these technologies. And I said, 362 00:21:16,520 --> 00:21:21,520 Speaker 1: do you have any interesting ideas? So he came back 363 00:21:22,000 --> 00:21:26,840 Speaker 1: with a let's double the computer science faculty. Let's take 364 00:21:27,000 --> 00:21:31,240 Speaker 1: our established a new department, in effect, a new school, 365 00:21:32,240 --> 00:21:34,800 Speaker 1: called it a college, which is now going to be 366 00:21:34,880 --> 00:21:38,119 Speaker 1: the m I T. Schwartzman College of Computing. And let's 367 00:21:38,160 --> 00:21:43,600 Speaker 1: connect AI to all the other departments at m I T. 368 00:21:43,760 --> 00:21:47,160 Speaker 1: So m I T will become the first AI enabled 369 00:21:47,280 --> 00:21:51,080 Speaker 1: university in the world. And I said, now that's a 370 00:21:51,200 --> 00:21:54,359 Speaker 1: vision I could buy in. On final question, I'd like 371 00:21:54,400 --> 00:21:57,240 Speaker 1: to ask you it just deals with this um. If 372 00:21:57,280 --> 00:22:00,320 Speaker 1: somebody is watching, we're reading your book and they want 373 00:22:00,320 --> 00:22:03,440 Speaker 1: to be a leader, leader in business or philanthropy or 374 00:22:03,760 --> 00:22:05,480 Speaker 1: or in government, what do you think is the key 375 00:22:05,560 --> 00:22:07,600 Speaker 1: quality to be a leader, and what have you seen 376 00:22:07,600 --> 00:22:09,639 Speaker 1: as your key quality enable you to be a leader. 377 00:22:09,880 --> 00:22:12,199 Speaker 1: I think to be a leader you have to be 378 00:22:12,240 --> 00:22:16,760 Speaker 1: a really good listener. Um. You have to understand what's 379 00:22:16,800 --> 00:22:22,480 Speaker 1: going on around you. You have to be measured um, 380 00:22:22,560 --> 00:22:27,200 Speaker 1: and you have to realize that everything you do is 381 00:22:27,320 --> 00:22:30,639 Speaker 1: amplified in the minds of the people who are listening 382 00:22:30,680 --> 00:22:37,639 Speaker 1: to you. So so care, nuance uh, kindness uh. But 383 00:22:38,320 --> 00:22:43,200 Speaker 1: defining a culture, that's what a leader does. Steve, thanks 384 00:22:43,280 --> 00:22:46,240 Speaker 1: very much for this time. I appreciate it. Thanks David. 385 00:22:46,720 --> 00:22:50,440 Speaker 1: That's Blackstone Group Chairman and chief executive Officer Steven Schwartzman.