WEBVTT - Stephen Schwarzman 0:00:01.240 --> 0:00:04.360 Stephen Schwartzman is the founder of Blackstone Group, the largest 0:00:04.400 --> 0:00:07.880 alternative asset manager in the world with five hundred fifty 0:00:07.920 --> 0:00:11.280 four billion dollars worth of assets under management. With a 0:00:11.320 --> 0:00:15.320 wide range of global business interests in private equity, debt financing, 0:00:15.480 --> 0:00:19.360 hedge fund management, and real estate acquisitions, Schwartzman is one 0:00:19.360 --> 0:00:22.360 of the most powerful people on Wall Street. He was 0:00:22.480 --> 0:00:25.720 named one of Time Magazine's most Influential People in two 0:00:25.720 --> 0:00:29.640 thousand seven, and has donated hundreds of millions of dollars 0:00:29.640 --> 0:00:33.199 to different causes over the years. Schwartzman sat down with 0:00:33.320 --> 0:00:36.200 David Rubinstein, co founder of the Carlisle Group and host 0:00:36.280 --> 0:00:39.640 of the Bloomberg television show Peer to Peer Conversations, to 0:00:39.720 --> 0:00:42.879 discuss starting the firm, surviving the real estate crash of 0:00:42.920 --> 0:00:47.120 two thousand seven, and being rejected from Harvard. Before we 0:00:47.159 --> 0:00:49.280 get into Blackstone, I like to talk about a couple 0:00:49.360 --> 0:00:52.120 other things. Um, you grew up in a middle class 0:00:52.240 --> 0:00:55.600 environment in Philadelphia, and now you're one of the wealthiest 0:00:55.600 --> 0:00:57.600 men in the world. You're one of the biggest philanthropists 0:00:57.600 --> 0:00:59.639 in the world, and you are an advised with the presidents. 0:01:00.160 --> 0:01:02.440 The last three presidents have asked your advice on various things. 0:01:02.440 --> 0:01:04.800 And you're very close to President Trump. So when you're 0:01:04.800 --> 0:01:07.600 growing up in Philadelphia, did you ever, in your wildest dreams, 0:01:07.640 --> 0:01:11.640 imagine this could possibly happen? No? Did you? Are you? 0:01:11.720 --> 0:01:14.119 Do you pinch yourself every day now you think about 0:01:14.280 --> 0:01:18.120 where you have achieved your status in life? Yeah, frankly, 0:01:18.720 --> 0:01:21.360 every day is an adventure. Uh, and every day is 0:01:21.400 --> 0:01:25.039 a privilege. Now you've come to know President Trump quite 0:01:25.040 --> 0:01:27.000 well in recent years since he's been president. Did you 0:01:27.040 --> 0:01:29.320 know him before he was president? Or know him very well? Then? 0:01:29.720 --> 0:01:34.039 I knew him before he was president. So when he 0:01:34.080 --> 0:01:36.280 told you I'm running thinking of running for president, did 0:01:36.319 --> 0:01:37.720 you tell him you have a good chance? Or do 0:01:37.760 --> 0:01:39.960 you tell him that's a tough thing to do. I 0:01:40.680 --> 0:01:44.160 thought that was a veritable impossibility. Okay, So when he 0:01:44.200 --> 0:01:47.080 got elected, did he say, Steve Um, you were wrong 0:01:47.160 --> 0:01:49.440 and why don't you come in and serve in the administration? 0:01:50.480 --> 0:01:52.880 I can't tell you exactly what he said, but it 0:01:52.960 --> 0:01:57.280 was very funny. Uh, And uh, you know I I 0:01:57.320 --> 0:02:00.720 didn't want to be part of, uh the government. I 0:02:00.800 --> 0:02:04.560 have a wonderful life as it is, and I didn't 0:02:04.560 --> 0:02:07.400 want to disrupt that. So you've been an advisor off 0:02:07.440 --> 0:02:09.959 and one for from the beginning administration to president. And 0:02:10.000 --> 0:02:11.919 he's actually to do a number of assignments. But I've 0:02:11.960 --> 0:02:14.880 never seen him tweet anything unfavorable about you. So you've 0:02:14.919 --> 0:02:17.680 managed to stay on his good side. What's the secret 0:02:17.680 --> 0:02:19.760 to staying on his good side? Well, you tell people 0:02:19.840 --> 0:02:23.440 the truth. Uh. You know, I don't work in the administration. 0:02:23.600 --> 0:02:28.520 I'm an independent person and I give my views. I 0:02:28.560 --> 0:02:32.519 find that he likes to listen. Uh, and and that's 0:02:32.560 --> 0:02:35.320 I think a good thing. But I suppose he's reelected 0:02:35.720 --> 0:02:38.200 and he said, I, Steve like to be Secretary of State, 0:02:38.280 --> 0:02:41.360 Secretary of Treasury. Would you ever consider that? When I 0:02:41.440 --> 0:02:43.280 was younger, I would do that, David, I'm at a 0:02:43.320 --> 0:02:46.160 point in my life now where that that's not where 0:02:46.160 --> 0:02:49.360 I want to spend my time. Okay, So you have 0:02:49.440 --> 0:02:52.160 spent some time recently writing a new book. Um, this 0:02:52.280 --> 0:02:55.800 is Steve Schwartzman. What it takes Lessons in the Pursuit 0:02:55.840 --> 0:02:58.600 of Excellence? Well, I read the book and it's quite fascinating. 0:02:58.840 --> 0:03:01.200 I know you quite well, but I didn't know a 0:03:01.240 --> 0:03:03.600 lot about your background, and which I found quite interesting. 0:03:03.639 --> 0:03:05.079 And why don't we start with your back when I 0:03:05.160 --> 0:03:08.639 take you through the creation of Blackstone. So you grew 0:03:08.720 --> 0:03:11.200 up in the Philadelphia suburbs, is that right? That's right? 0:03:11.520 --> 0:03:13.600 And you were from a middle class family. Your father 0:03:13.680 --> 0:03:18.400 had a curtain store. Yeah, curtain story sort of would 0:03:18.400 --> 0:03:22.120 have been a bed bath and beyond the type of store. 0:03:22.320 --> 0:03:25.280 And it was started by his father, and so he 0:03:25.360 --> 0:03:27.960 came into the business. And did they say, Steve, you're 0:03:28.000 --> 0:03:30.480 the oldest of the three sons that he had. Now 0:03:30.600 --> 0:03:32.359 it's time for you to come into the business. So 0:03:32.520 --> 0:03:36.320 that was sort of expected. And I found that standing 0:03:36.400 --> 0:03:41.840 up and waiting on people buying linen handkerchiefs was perhaps 0:03:41.880 --> 0:03:45.960 not my highest and best use. But you told your father, 0:03:46.000 --> 0:03:48.320 according to the book, that maybe he should expand it, 0:03:48.640 --> 0:03:51.240 do more than one store, and maybe become bead bath 0:03:51.280 --> 0:03:54.040 and beyond. What did he say to that advice? He said, Steve, 0:03:54.120 --> 0:03:58.280 that's really interesting. I don't feel like doing that. And 0:03:58.360 --> 0:03:59.960 I said, Dad, why why don't you want to do? 0:04:00.000 --> 0:04:02.960 Would we have lots of people in this store. I 0:04:03.000 --> 0:04:06.040 haven't seen another store like this. I think we could 0:04:06.080 --> 0:04:10.320 be national and he just said not for him, he said, 0:04:10.960 --> 0:04:13.840 I'm just not interested. So I I said, well, why 0:04:13.840 --> 0:04:17.080 don't we open stores? All over Pennsylvania because I was 0:04:17.120 --> 0:04:20.400 from Philadelphia. And he said, I don't want to do that. 0:04:21.160 --> 0:04:24.400 So then I had a third option, which is why 0:04:24.400 --> 0:04:28.560 don't we open stores all over Philadelphia? And he said 0:04:28.560 --> 0:04:30.760 I don't want to do that either. I said, Dad, 0:04:30.800 --> 0:04:33.679 why why don't you want to do this? And he said, 0:04:34.920 --> 0:04:39.000 I'm happy the way I am. I have a house, 0:04:39.800 --> 0:04:43.039 I have two cars. I have enough money to send 0:04:43.080 --> 0:04:46.360 you and your brothers to college, and that's really all 0:04:46.400 --> 0:04:49.719 I want. And I shook my head and I went, 0:04:50.839 --> 0:04:54.200 I don't understand that. I just saw the opportunity to 0:04:54.279 --> 0:04:58.279 open stores all over the country, and he just didn't 0:04:58.279 --> 0:05:01.480 want to do it. And surprising to me is he 0:05:01.560 --> 0:05:04.760 was very very intelligent. When you're saying your book that 0:05:04.839 --> 0:05:07.480 he was far more intelligent than you, that might be 0:05:07.520 --> 0:05:10.120 an exaggeration, but he obviously was a very smart person. 0:05:10.279 --> 0:05:14.440 That was not an exaggeration because I would talk to him, Uh, 0:05:14.520 --> 0:05:17.800 when I was starting my career on things, and no 0:05:17.800 --> 0:05:20.920 matter what I was working on, he could always find 0:05:20.960 --> 0:05:25.279 the weakness in the argument or in the deal. And 0:05:25.360 --> 0:05:28.200 what about your mother? What did she do? She she 0:05:28.320 --> 0:05:33.240 was just aggressive? Uh, she was a housewife. Was the 0:05:33.360 --> 0:05:38.679 nineteen fifties, uh, and in sixties, and I have twin brothers, 0:05:38.720 --> 0:05:41.920 and three of us were a handful, and that that 0:05:42.000 --> 0:05:44.880 was the paradigm at that time. So, as I said, 0:05:44.920 --> 0:05:46.920 I've known you for quite a while, but honestly, until 0:05:46.960 --> 0:05:48.920 I read this book, I did not realize you were 0:05:48.960 --> 0:05:51.359 a track star. Were there a lot of you know, 0:05:51.480 --> 0:05:54.200 white Jewish boys on the track team or were you 0:05:54.240 --> 0:05:56.320 a minority in that regard. I think I was a 0:05:56.360 --> 0:05:59.479 minority of one. You say in the book, which obviously 0:05:59.560 --> 0:06:02.080 is true, that you did something that's quite audacious. You 0:06:02.080 --> 0:06:06.719 applied to Harvard Yale, and I think Princeton and Harvard 0:06:06.760 --> 0:06:09.640 did not accept you. So you then got out some 0:06:09.720 --> 0:06:12.680 coins and called the director of admissions at Harvard and 0:06:12.720 --> 0:06:15.359 said you made a mistake. What was that? Like? That 0:06:15.480 --> 0:06:19.760 was frightening? Actually, uh, you know, we didn't have cell 0:06:19.800 --> 0:06:24.400 phones then, so so I got some quarters, uh, and 0:06:24.640 --> 0:06:27.479 I found the phone number for the admissions office and 0:06:27.600 --> 0:06:32.640 some document and and the pay phone was was outside 0:06:32.640 --> 0:06:36.360 the gym. Uh, And I stood there and put those 0:06:36.440 --> 0:06:39.080 quarters on in and you could hear the ringing when 0:06:39.080 --> 0:06:42.280 they dropped down, and I asked for the dean of admissions, 0:06:42.279 --> 0:06:45.479 and I was put right through. And so he picks 0:06:45.560 --> 0:06:48.080 up the phone and I said, Hi, I'm Steve Schwartzman 0:06:48.160 --> 0:06:52.120 from Abington High School in Abington, Pennsylvania, and I'm on 0:06:52.200 --> 0:06:57.200 the waiting list and I'd really like to go to Harvard, 0:06:57.240 --> 0:06:59.760 So why don't you take me off the waiting list? 0:07:00.680 --> 0:07:04.440 And so he said, how in the world did you 0:07:04.480 --> 0:07:07.440 get through to me? He said, you're not allowed to 0:07:07.440 --> 0:07:11.440 talk to me. I don't talk to applicants. Um And 0:07:11.800 --> 0:07:15.080 I said, but we're talking and he said yes, he said, 0:07:15.560 --> 0:07:17.800 he said, you sound like a very nice young man, 0:07:18.440 --> 0:07:22.360 but unfortunately, we're not going to be taking anyone from 0:07:22.400 --> 0:07:24.880 the waiting list this year, you know, we are. Yield 0:07:25.000 --> 0:07:29.120 was was higher than we thought. And where where else 0:07:29.840 --> 0:07:32.679 were you accepted? I said, well, I've accepted at Yale. 0:07:33.160 --> 0:07:35.360 And he said, well, you'll have a very good time 0:07:35.400 --> 0:07:38.320 at Yale and you'll enjoy it. I said, I'm sure 0:07:38.320 --> 0:07:41.160 I would. I said, but that wasn't my objective for 0:07:41.200 --> 0:07:44.000 the phone call. He said, well, I understand that. I'm 0:07:44.040 --> 0:07:46.440 just so sorry. Did you ever see him again or 0:07:46.480 --> 0:07:50.560 hear from rom again in life? Ironically, it's really a 0:07:50.600 --> 0:07:55.560 great story. Uh. The CEO of Mackenzie was in my 0:07:55.680 --> 0:08:00.280 office twenty five years later, and he was on the 0:08:00.400 --> 0:08:06.200 Harvard Corporation. Uh and Um I told him this story. 0:08:07.000 --> 0:08:10.440 So he asked what year. And that dean of admissions 0:08:11.160 --> 0:08:14.440 UM was a close friend of his. He said, do 0:08:14.440 --> 0:08:16.880 you mind if I told him that I ran into you. 0:08:16.920 --> 0:08:19.840 I said, no, that's fine. Uh. And and so I 0:08:19.920 --> 0:08:23.480 got a letter two weeks later from that former dean 0:08:23.520 --> 0:08:26.840 of admissions. Uh. And he said, I remember getting that 0:08:26.920 --> 0:08:34.360 phone call in sixty four and he said, every time 0:08:34.400 --> 0:08:38.760 I see you in a newspaper, I realized I blew it. Uh. 0:08:40.360 --> 0:08:43.439 I wish I made all the right decisions, but as 0:08:43.480 --> 0:08:46.800 I told you at the time, there were no no 0:08:46.960 --> 0:08:50.280 beds at the end you Um then went to Harvard 0:08:50.280 --> 0:08:53.319 Business School? Yes? And did you enjoy Harvard Business School? 0:08:54.800 --> 0:08:57.800 Did you want to drop out? Yes? And what kept 0:08:57.800 --> 0:09:02.000 you from dropping out? I wrote a letter? Uh? There 0:09:02.040 --> 0:09:05.520 was no internet. Uh. I wrote a letter to Dick Jennerette, 0:09:05.520 --> 0:09:09.560 who was president of a firm called Donaldson Lufkin Jennerette, 0:09:10.000 --> 0:09:12.640 which is where I worked a bit right after I graduated, 0:09:12.679 --> 0:09:15.079 before I went into the army. And I said, Dick, 0:09:15.160 --> 0:09:20.200 it's called up here. The classes are highly repetitive. Uh. 0:09:20.240 --> 0:09:23.080 And I'd like to come back to work, and if 0:09:23.080 --> 0:09:25.280 you don't want me to d LJ, I'll do something else. 0:09:25.920 --> 0:09:28.480 What do you think? So, so he wrote me a 0:09:28.480 --> 0:09:32.080 six page letter and he said, that's just the way 0:09:32.080 --> 0:09:35.360 I felt in December of my first year, and I 0:09:35.440 --> 0:09:39.000 was going to transfer uh to to the Economic School 0:09:39.040 --> 0:09:43.000 and get a PhD. And I didn't drop out, and 0:09:43.120 --> 0:09:46.360 you shouldn't either. You should complete what you're doing. And 0:09:46.440 --> 0:09:50.800 I was so dumbfound that he was so kind and 0:09:51.000 --> 0:09:56.720 thoughtful and had similar feelings and and basically said, don't 0:09:56.720 --> 0:10:00.160 you do that. It's the wrong decision that I just 0:10:00.240 --> 0:10:02.959 listened to him and stay. You stayed. You must have 0:10:03.000 --> 0:10:05.920 done pretty well because you had lots of offers afterwards. Yes, 0:10:06.000 --> 0:10:08.160 so you interviewed with number of firms and the one 0:10:08.200 --> 0:10:10.559 you decided to go with was Lehman Brothers. Yes, why 0:10:10.559 --> 0:10:12.360 did you pick Lehman Brothers? So? I thought it would 0:10:12.400 --> 0:10:16.200 be the most interesting cast of characters. Uh. You know 0:10:16.360 --> 0:10:19.920 that was before m b a's went to Wall Street, 0:10:20.520 --> 0:10:23.560 uh and um so, so they just hired at random. 0:10:23.600 --> 0:10:27.160 And this was the first class of MBA's that Lehman 0:10:27.280 --> 0:10:29.600 was going to hire, and the people were fascinating you 0:10:29.640 --> 0:10:33.520 had x CIA agents, you had people who had worked 0:10:33.559 --> 0:10:38.080 on oil rigs, who who had all kinds of unusual 0:10:38.200 --> 0:10:43.000 people working at the firm. So I thought, for whatever 0:10:43.000 --> 0:10:45.680 the reason, it was the right personality fit for me. 0:10:45.920 --> 0:10:47.840 And you became a partner at an early age, I 0:10:47.840 --> 0:10:51.319 think thirty one, something like thirty one, thirty one years old. 0:10:51.320 --> 0:10:54.640 You're a partner at Lehman Brothers and life was going well. 0:10:54.679 --> 0:10:56.760 But then there's a problem at Lehman Brothers. And Lehman 0:10:56.800 --> 0:10:59.920 Brothers ultimately was sold is that right? Yes, that's right. 0:11:00.000 --> 0:11:03.320 I sold it, uh, and to American Express. And the 0:11:03.400 --> 0:11:06.719 problem was that in the trading side of the firm 0:11:06.760 --> 0:11:10.439 there was a position taken that really went wrong. So 0:11:10.480 --> 0:11:13.000 you then decided to join somebody who had been previously 0:11:13.040 --> 0:11:16.079 been the president of Lehman Brothers, but he was eased out. Um, 0:11:16.160 --> 0:11:19.240 that's Pete Peterson, previously also Secretary of Commerce and the 0:11:19.280 --> 0:11:22.000 Knick's administration. And you and he decided to start a 0:11:22.040 --> 0:11:29.000 new firm in Yes, and that firm's name was um Blackstone. 0:11:29.240 --> 0:11:34.079 So Blackstone starts two people, you and Pete Peterson. Uh. 0:11:34.120 --> 0:11:36.720 Where did you have to get the money for the firm? Well, 0:11:36.720 --> 0:11:39.840 it didn't require much. It was an advisory business, so 0:11:39.920 --> 0:11:42.160 you talk and people give you money. You each put 0:11:42.160 --> 0:11:46.079 in two hundred thousand dollars. The strategic plan for the business, 0:11:46.200 --> 0:11:49.640 which we announced in letter to everyone we knew, was 0:11:50.040 --> 0:11:53.120 first you know, the m and a advisory business because 0:11:53.120 --> 0:11:57.080 it required no capital. Right. Uh. The second was going 0:11:57.120 --> 0:11:59.880 into the private equity business. And you had never been, 0:12:00.640 --> 0:12:03.880 you or Pete privately invested before, and Peach that since 0:12:03.920 --> 0:12:05.800 we haven't been, we'll go out and raise a small fund, 0:12:05.920 --> 0:12:09.080 fifty million dollar fund. You said, if I recall the book, 0:12:09.120 --> 0:12:12.520 let's go raise a billion dollars. Billion dollars. So that's 0:12:12.559 --> 0:12:15.480 fairly audacious. Where were you gonna get a billion dollars? 0:12:15.240 --> 0:12:19.800 So we went to our top eight team prospects. Everyone 0:12:19.880 --> 0:12:23.880 said no, except Metropolitan Life in New York Life. One 0:12:23.920 --> 0:12:26.040 said I'll give you a fifty million. The other one said, 0:12:26.040 --> 0:12:28.520 I'll give you twenty five. But I don't want to be, 0:12:29.120 --> 0:12:30.800 you know, sort of a big part of the things 0:12:30.800 --> 0:12:34.080 that you have to raise at least five million dollars 0:12:34.200 --> 0:12:38.280 or else our commitments are worthless. And we had already 0:12:38.280 --> 0:12:41.240 gone to everybody we knew who was the best targets, 0:12:41.400 --> 0:12:43.200 and I sort of looked at that and I went, 0:12:43.480 --> 0:12:47.520 oh MG, we are going to fail. And we just 0:12:48.720 --> 0:12:52.559 met one more company is called Prudential Life Insurance Company, 0:12:52.600 --> 0:12:56.640 which was the number one financier in in those days. 0:12:57.280 --> 0:13:02.600 And we're over at Newark on a Friday, having uh 0:13:02.880 --> 0:13:07.079 lunch with the chief investment officer, and he was having 0:13:07.080 --> 0:13:11.120 a two nail and white bread cut across and I'm 0:13:11.160 --> 0:13:15.800 busy pitching this private equity fund and you can share 0:13:16.040 --> 0:13:20.040 part of our advisory profits as a merchant bank. And 0:13:20.120 --> 0:13:24.080 he keeps chewing and Adam's apples going up and down, 0:13:24.120 --> 0:13:28.160 and I keep doing my thing, finishes the first half 0:13:28.160 --> 0:13:33.480 of the sandwich, gets through the other half halfway, and 0:13:33.520 --> 0:13:36.200 he looks over at me and he says, I think 0:13:36.240 --> 0:13:39.240 that's a good idea. Put me down for a hundred 0:13:40.920 --> 0:13:45.760 and I just I can still remember that moment. Did 0:13:46.000 --> 0:13:50.320 did he actually say he's going to give us a 0:13:50.440 --> 0:13:54.640 hundred million dollars? The number one investor in the world, 0:13:55.320 --> 0:13:59.320 so if he gives us money, other people will follow him. 0:14:00.080 --> 0:14:05.640 I realized somehow in Newark on some dreary friday, and 0:14:06.440 --> 0:14:08.560 he gave us the money. I just didn't want him 0:14:08.600 --> 0:14:11.640 to choke on the rest of that Sandwich, make sure 0:14:11.679 --> 0:14:13.720 he lived to give you the money exactly. You did 0:14:13.760 --> 0:14:16.280 pretty well and your devise, your business is booming. You 0:14:16.360 --> 0:14:19.880 decided to get into um other businesses. The first one 0:14:20.080 --> 0:14:23.680 was ended up is black Rock with Larry Fink, and 0:14:23.960 --> 0:14:28.480 Larry brought people over and they were called Blackstone Financial, 0:14:28.880 --> 0:14:32.600 Blackstone Financial. And so you actually owned the firm, or 0:14:32.640 --> 0:14:37.000 own part of the Okay, so you owned fifty fifty 0:14:37.160 --> 0:14:40.760 and now black Stone financials now black Rock, which is 0:14:40.840 --> 0:14:44.080 managing like six trillion dollars I guess or something like that, 0:14:44.240 --> 0:14:46.760 six and a half six and a half trillion. Okay, 0:14:46.840 --> 0:14:49.960 So how did they escape from black Stone? Well, they 0:14:50.000 --> 0:14:53.520 didn't really escape. Uh. You know, we set up in 0:14:53.560 --> 0:15:00.240 an economic arrangement which ended up being inappropriate for a 0:15:00.280 --> 0:15:03.200 business that was growing as rapidly needed to add as 0:15:03.280 --> 0:15:06.920 many people. Uh. And I made a mistake, you know, 0:15:07.000 --> 0:15:09.240 I took the original agreement. I didn't want to change it, 0:15:09.280 --> 0:15:14.040 which was advantageous, uh, you know for my side. Uh. 0:15:14.080 --> 0:15:18.680 And uh, the black Rock people, Blackstone Pavior, Blackstone Financial 0:15:18.680 --> 0:15:22.360 people were frustrated with that. And and that was the 0:15:22.360 --> 0:15:27.160 the judgment of an amateur me. On two thousand seven, 0:15:27.400 --> 0:15:30.200 you decide maybe you should take the firm public. It's 0:15:30.200 --> 0:15:33.680 a private company. Why did you take the firm public? Well, 0:15:33.720 --> 0:15:36.080 I took a public for a lot of different reasons. 0:15:36.560 --> 0:15:39.480 I had a sixth sense that something terrible was going 0:15:39.520 --> 0:15:43.600 to happen in the environment. Money was so available, money 0:15:43.680 --> 0:15:48.680 was cheap, everybody was doing things, prices were crazy, and 0:15:49.120 --> 0:15:51.440 I just had a sense this was going to come 0:15:51.480 --> 0:15:53.560 to a bad ending and we should have a lot 0:15:53.640 --> 0:15:57.760 of capital to make sure we were bomb proof. So 0:15:57.760 --> 0:16:01.400 so that was one reason. A second reason is I 0:16:01.400 --> 0:16:04.000 thought it would be a great branding event for the 0:16:04.080 --> 0:16:07.680 firm on a global basis. Everybody would know who we were, 0:16:08.120 --> 0:16:11.360 and that would make as easier to raise money as 0:16:11.560 --> 0:16:15.400 as well as to um have people sell us companies 0:16:15.440 --> 0:16:18.360 and other assets. So ultimately what happened was the China, 0:16:18.680 --> 0:16:21.360 Chinese sovereign wealth from was the process of being created. 0:16:21.760 --> 0:16:25.000 They heard about your going public and they threw an intermediary, 0:16:25.080 --> 0:16:27.480 Actually somebody working for you said can we buy a 0:16:27.520 --> 0:16:29.160 big stake in the I p O? And you ultimately 0:16:29.200 --> 0:16:31.000 decided to let them do that. Right. I PO was 0:16:31.040 --> 0:16:34.240 going to be four billion dollars. They offered to invest 0:16:34.320 --> 0:16:38.560 three billion, which we didn't even ask them. Uh, and 0:16:38.600 --> 0:16:42.200 I hadn't been to China since, so this was it 0:16:42.360 --> 0:16:48.400 was shocking because um that China had not invested in 0:16:48.440 --> 0:16:54.840 another public company since since it was founded in nine 0:16:55.280 --> 0:16:59.800 So so this was a complete paradigm shift for for China. 0:17:00.160 --> 0:17:03.640 We were chosen by them. It was pretty heavy stuff. 0:17:03.840 --> 0:17:06.240 It worked out and UM ultimately you did the I 0:17:06.359 --> 0:17:09.719 p O and Chinese invested. And then after you did 0:17:09.760 --> 0:17:12.119 the I p O, let me mention two deals that 0:17:12.160 --> 0:17:15.600 you did. One was the biggest real estate deal in history, 0:17:15.680 --> 0:17:19.320 e OP real estate company built by Sam's l and 0:17:19.400 --> 0:17:22.480 you did a forty billion dollar buyout and effect is 0:17:22.520 --> 0:17:26.280 that right? Thirty nine actually? Okay, all right, thirty nine 0:17:26.320 --> 0:17:28.679 billion dollars. It was a bidding war. You won the 0:17:28.680 --> 0:17:31.480 bidding war, but the real estate market crumbled right after 0:17:31.520 --> 0:17:33.520 the deal was done. So how did you survive with 0:17:33.560 --> 0:17:37.320 that deal? Well, we worried because the same reason we're 0:17:37.359 --> 0:17:42.399 going public. I since we were in market top for 0:17:42.480 --> 0:17:47.720 real estate. So so just buying thirty nine billion dollars 0:17:47.720 --> 0:17:53.359 of real estate, UM, I thought it was dangerous because 0:17:53.400 --> 0:17:55.480 you had to pay a pretty good price to get 0:17:55.520 --> 0:17:59.320 it because it was competitive. So as soon as we 0:17:59.440 --> 0:18:03.000 decided we were going to actually raise our price enough 0:18:03.040 --> 0:18:07.280 to be the winner. Um, there were two or three 0:18:07.320 --> 0:18:11.919 of us sitting around saying, this deal is potentially dangerous. 0:18:12.600 --> 0:18:17.439 We've got to reduce the leverage, and we've got to 0:18:17.480 --> 0:18:21.719 take advantage of the crazy prices that people are paying. 0:18:22.119 --> 0:18:25.760 So we decided to sell half of what we bought 0:18:26.440 --> 0:18:29.640 the same day we bought it. So when I told 0:18:29.680 --> 0:18:33.920 people that, they just sort of looked at me and 0:18:33.920 --> 0:18:37.520 and said the same day I said, I don't want 0:18:37.520 --> 0:18:42.119 to take any risk that the world's going to change 0:18:42.119 --> 0:18:44.399 and we're gonna be stuck with all of this. So 0:18:44.440 --> 0:18:49.600 we basically had every conference room at the firm active 0:18:50.040 --> 0:18:53.199 one buying. But then we broke it up into all 0:18:53.280 --> 0:18:55.560 these pieces. But if you hadn't done that, you would 0:18:55.560 --> 0:18:58.640 have lost all your money. I think that's probably market creater. 0:18:58.880 --> 0:19:02.680 Virtually the next day because most of the people who 0:19:02.720 --> 0:19:07.960 bought from us basically got into enormous financial trouble or 0:19:08.440 --> 0:19:13.119 went in solvent. And so after we did that and closed, 0:19:14.359 --> 0:19:17.960 everybody went home. They've been sleepless. Three days later they 0:19:17.960 --> 0:19:24.560 came back and we said, let's sell half I've always 0:19:24.560 --> 0:19:30.200 got left now and be even more conservative. So everybody 0:19:30.200 --> 0:19:32.840 went back to work. And we ended up with one 0:19:32.920 --> 0:19:37.359 quarter of what we bought very conservatively priced so we 0:19:37.400 --> 0:19:40.639 could survive any kind of nuclear winner. We ended up 0:19:40.680 --> 0:19:45.920 making three times our money buying this, this giant thing 0:19:46.119 --> 0:19:48.920 at the top end. And there's never been more than 0:19:49.000 --> 0:19:54.600 ten billion dollars bought or sold by a group. We 0:19:54.720 --> 0:19:59.119 did seventy billion. So you also bought another company before 0:19:59.160 --> 0:20:02.720 the recession, the hit that was called Hilton, and that 0:20:02.800 --> 0:20:05.359 was a leverage buy out, some people might say, at 0:20:05.359 --> 0:20:09.520 the top of the market, and that deal went down 0:20:09.560 --> 0:20:11.639 in terms of the debt and maybe the equity, but 0:20:11.680 --> 0:20:13.720 then you ultimately did things that made it the most 0:20:13.720 --> 0:20:16.720 profitable buy out in the history of buyouts. What did 0:20:16.720 --> 0:20:20.200 you do, Well, that was pretty easy, actually looked hard, 0:20:20.560 --> 0:20:24.119 but uh, you know Hilton had not been integrated. They 0:20:24.119 --> 0:20:27.920 were running four different headquarters. Uh, and there was a 0:20:28.000 --> 0:20:33.119 huge modernization and and and and cost take out. Ultimately, 0:20:33.119 --> 0:20:36.359 you've sold it about a fourteen billion dollar profit. Yes, well, 0:20:36.560 --> 0:20:38.880 if we had held it, it would have been held 0:20:38.920 --> 0:20:41.720 it longer, would have been over twenty So so it 0:20:41.800 --> 0:20:46.080 was a good day because in recent years you become 0:20:46.080 --> 0:20:48.920 one of the nation's biggest philanthropists. You gave three and 0:20:49.000 --> 0:20:52.399 fifty million dollars to m I T for a computing center. 0:20:52.840 --> 0:20:55.119 And relating to artificial intelligence, you never went to m 0:20:55.160 --> 0:20:56.960 I T. You had no connection there. How did that 0:20:57.000 --> 0:20:59.919 come about? Well? That was that was really fascinating. Uh. 0:21:00.359 --> 0:21:04.040 I'm not a technologist. I had met the president of 0:21:04.160 --> 0:21:08.720 m I T, Raphael Raefe, and we started talking, uh, 0:21:08.720 --> 0:21:12.439 and you know, we were concerned that the US was 0:21:12.560 --> 0:21:16.520 just not investing enough in these technologies. And I said, 0:21:16.520 --> 0:21:21.520 do you have any interesting ideas? So he came back 0:21:22.000 --> 0:21:26.840 with a let's double the computer science faculty. Let's take 0:21:27.000 --> 0:21:31.240 our established a new department, in effect, a new school, 0:21:32.240 --> 0:21:34.800 called it a college, which is now going to be 0:21:34.880 --> 0:21:38.119 the m I T. Schwartzman College of Computing. And let's 0:21:38.160 --> 0:21:43.600 connect AI to all the other departments at m I T. 0:21:43.760 --> 0:21:47.160 So m I T will become the first AI enabled 0:21:47.280 --> 0:21:51.080 university in the world. And I said, now that's a 0:21:51.200 --> 0:21:54.359 vision I could buy in. On final question, I'd like 0:21:54.400 --> 0:21:57.240 to ask you it just deals with this um. If 0:21:57.280 --> 0:22:00.320 somebody is watching, we're reading your book and they want 0:22:00.320 --> 0:22:03.440 to be a leader, leader in business or philanthropy or 0:22:03.760 --> 0:22:05.480 or in government, what do you think is the key 0:22:05.560 --> 0:22:07.600 quality to be a leader, and what have you seen 0:22:07.600 --> 0:22:09.639 as your key quality enable you to be a leader. 0:22:09.880 --> 0:22:12.199 I think to be a leader you have to be 0:22:12.240 --> 0:22:16.760 a really good listener. Um. You have to understand what's 0:22:16.800 --> 0:22:22.480 going on around you. You have to be measured um, 0:22:22.560 --> 0:22:27.200 and you have to realize that everything you do is 0:22:27.320 --> 0:22:30.639 amplified in the minds of the people who are listening 0:22:30.680 --> 0:22:37.639 to you. So so care, nuance uh, kindness uh. But 0:22:38.320 --> 0:22:43.200 defining a culture, that's what a leader does. Steve, thanks 0:22:43.280 --> 0:22:46.240 very much for this time. I appreciate it. Thanks David. 0:22:46.720 --> 0:22:50.440 That's Blackstone Group Chairman and chief executive Officer Steven Schwartzman.