A conversation with Stephen Schwarzman, author of "What It Takes: Lessons in the Pursuit of Excellence"

Chris Schluep on September 18, 2019
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ss.jpgStephen Schwarzman is the billionaire co-founder of Blackstone, which manages over $500 billion. He is also a major philanthropist, having given away more than a billion dollars of his own money. His name is on the New York Public Library in Manhattan, and on college campuses across the world. He is a strong supporter of education—when we spoke a few weeks ago, he described education as a "sort of passport to the future."

Schwarzman is also now an author. His new book What It Takes was published yesterday and is already well on its way to being a best-seller. We talked about his life in Brooklyn, his rise at Lehman, the founding of Blackstone (which was pretty bumpy), and his charitable work. What came through, and what comes through in the book, is careful attention paid to maximizing opportunities of all types. He is also careful to consider what others want in a deal.

Ray Dalio, who wrote the last big book in this category, described What It Takes as “the real story of what it takes from a man who could turn dreams into realities." I would add that Schwarzman's book is both an inspiration and an education.

Read on to see what we talked about in our interview:


Chris Schluep: Do you have a perfect reader in mind for this book?

Stephen Schwarzman: Well, I tried to figure out who could profit from the type of things that I had learned. And the answer was all kinds of people. Students trying to figure out what to do. People just starting their careers, to people midway through their careers, to people running organizations. And starting organizations—I thought this would also be really good for entrepreneurs. So everybody at each stage of their life. And it wasn't just for for-profit—you know not-for-profits have similar kinds of issues. Everybody wants to be self-actualized and successful. Or more successful than they are. And how do you get there? How do you envision what it takes to move to another level, and use all your talents, and figure out in effect how to add value someplace, and dream of new things to do—which is really the way you create. And then there's the execution phase. So I sort of looked at this as I was starting out and said this can work for virtually anybody contemplating going into the workplace.

When you were in high school, there was an event that kind of distinguished you as a unique person: you got Little Anthony and the Imperials to play at your high school. Can you talk a little bit about that? What did that teach you?

Well, when I was elected president of the high school, I was interested in doing something that hadn't been done before, I just didn't know what it was. Because just doing the ministerial elements of a job has never appealed to me. I always like to remake something, or improve it, or make it more vital. And so I was taking a ride cross-country with my mother and my twin brothers, seeing the country; and I'd sit in the back when I wasn't driving—I was 16—and think about things we could possibly do that would be exciting. And then every time we stopped, I'd write it down on a postcard and send it back to the other officers who I'm sure were wondering what the hell was happening, because they were besieged by this endless avalanche of postcards. And by the time I finished going to California and back, I said Geez, we should do something that would really be great in the rock and roll area. Kids would love that. I would love it. Let's let's try and make it happen. The only problem, of course, was that it was like a big dream. Most people don't think about doing things like that, and we were lucky that we found a way to get to them and to Little Anthony and have them come to the high school. It was like, you know, it was like… huge. And it was fun.

You say it's just as easy to do something big as something small. I mean, that was one of your first experiences with that, right? 

Yeah, and you know, it was the same when I wanted my dad to expand our business. Like a Bed Bath and Beyond, which didn't exist then. But my dad's business had the same basic floor plan. So the way I thought about it was that if it was good enough in that one location, why not bring it national? You know, I was 14 at the time, I really don't know what I meant other than the fact that I thought it should be national. I wouldn't know how to execute that. But I know there was a need for that. It was after World War II, the suburbs are blooming. It's a natural. And so the way I tend to think is What's the best something can be?, and that's what warrants spending time. And the reason for that is that each of us can only be doing one thing at a time—I mean a thing that really absorbs us, that's a passion. It's like an entrepreneur: when you're doing that you don't have time to be, say, reading a lot of books. You're fully engaged working for your survival and the survival of your company. So I look at it all and say the most important thing in this type of exercise is to make sure you only commit to something that's worthy of your 110% commitment. You’ll miss other things if you're involved in something that ultimately takes your time, but doesn't really fulfill a big need in society.

That reminds me of when you were building your first fund. The idea was to do a smaller fund, but you wanted to do something bigger.

As long as you were calling on the same investor that was capable of writing a check for a hundred or two hundred million, why ask him to write one for 10 million? He's got to process it, too, and you know, that's the mechanic. But the reason for doing a bigger fund was that there was hardly anybody who had large funds. So I looked at it and said, why don't we be one of the top two or three in the world? Because that's differentiating and allows you to do more. I felt the investors were there who could be attracted, and it allows you to have more cash flow, which allows you to hire more people so you can cover more territory if you will. So why do you not do that? And the fact that we had never done those types of investments before, well I had been working as an investment banker before, working with a few groups in private equity that had been doing that, so I knew what the deals looked like. I just hadn't done one soup-to-nuts myself, but I didn't think that was a big deal and actually turned out to be correct. It wasn't that big a deal.

But you had to convince your co-founder, right?

He wanted to learn smaller things. But I said, look, the opportunity is here today. And we're not experienced with little companies; we usually work with big ones. So it doesn't match us. And the money is here, the interest is here. And in most organizations, when there's a moment like that, don't hesitate—you just go forward and you execute to the maximum degree possible. Because you don't know if those circumstances will remain as they are. They usually change.

Can we go back to Lehman for a second? You were a huge success in your thirties, at a very young age. What do you think separated you from your colleagues during those years?

Very good question. I could relate to CEOs very well at a very young age. I could imagine what was on their minds and how they would think about things. And it enabled me to, in effect, do things with them that I thought had high probabilities of success, and it ended up working out that way.

When you started Blackstone, you got your space, you opened up for business, you took out the ad in the New York Times and then no one came knocking initially. What was that like? I mean, that's an entrepreneur's worst nightmare, isn't it?

Yeah, I would characterize it as frightening. It was sort of all dressed up nowhere to go. And it was also not only frightening, it was shocking. Because I had been at Lehman Brothers and ended up as head of the merger department—it was the biggest department in the world, the busiest department. Goldman did more aggregate size, because they had bigger clients on the margin. But we were the busiest in terms of volume of deals. And so, you know to have people who used to hire you… like not even respond—this made me realize how far out on the risk curve we were. I thought we were taking no risks starting our business, which is like almost every entrepreneur. You believe you're taking no business risk, because why would you take risk? And retrospectively I didn't even figure out that we were the first M&A boutique that was created. Now there are lots of them, but at that point there were none—so we were doing something new. And, in effect, the potential clients were worried about the brand name and the wrapper, if you will, not the people who were doing it—who they knew. And so, you know, after nothing happening with 600 letters or whatever, that is truly, stunningly depressing. And so I said to my partner, now what do we do? He said, well, we wait a few weeks and we call them all again. Maybe we'll get lucky. That doesn't go down as a completely inspired business strategy, but I realized that that was the only option. And so, you know, we called them—fortunately somebody hired us for a $50,000 assignment, which was less than the legal work.

You are heavily engaged in philanthropy and trying to change things for the better. Maybe the most impressive is the Schwarzman Scholars. Can you talk about that?

I looked at history, and the rise of populism and anger across the world. People remain angry, and then they look for foreign devils—and that pattern of populism, you know, is historic. I figured it would repeat itself, and I thought that China was the logical foreign country to which anger would be directed, and I wanted to try and do something that would deal with the issue of just anger for no purpose being directed someplace. Anger, if not explained correctly, could jeopardize world peace and create other dislocations. I know that’s a grand conclusion, but it’s turned out to be true. That was in 2011. We announced the program in 2013 at the Great Hall of the People, with endorsements from both President Obama and president Xi, who was newly elected. The first major thing that he did was to endorse the Schwarzman Scholars program, the first time a Chinese president has endorsed an education program. So we started off with some real advantages. And we built a building that looks like an Oxford-Cambridge College. Except it's a Chinese building style, not gothic. We started with a hundred students roughly the first year. We're up 140. We're going to go to 200. We've got 40 percent Americans, 40 percent from the rest of the world, and 20 percent from China. The program is located in Schwarzman College Tsinghua University, which is the number one university now in China, and it's the university that President Xi had attended, as well as the previous president of China. And so the students get this remarkable introduction. Besides getting a master's degree, like the Rhodes program, they get to travel around China and experience it. They of course have well-known people who come in from the outside to talk to them. The classes are taught half by Chinese professors and half by foreign professors, who are really terrific as well. The students get to do a little apprenticeship at either a Chinese ministry or not-for-profit or company. And they all get mentors, who are very well-known from the Chinese world, who can take them home to share experiences that are not just academic. This has turned out to be quite a remarkable experience.

How do you view your approach to charitable work?

What I like to do with philanthropic things is create new organizations, just like creating Blackstone and all the new businesses that Blackstone does. I mean we started and we had one fund in one area. Now we have 50. Each one is like a new business with new opportunity that you have to assess and bring resources to in order to make sure that you have a really terrific outcome for your customers. Each of the philanthropic things that I tend to get involved with, the major ones, each involve addressing some issue or opportunity that manifests itself in a donation—but ironically the purpose isn't the donation. The donation is necessary to facilitate something that's groundbreaking, something needed to address a problem. So like at MIT, the whole issue of Artificial Intelligence ethics is really going to be an issue that is exceptionally impactful, as well as the development of computer science technologies. And MIT is without question one of the best places in the world to do that. And so that was about trying to jump start further growth, and we'll end up doubling the faculty in computer science and having MIT become the first AI-enabled university in the world, which I thought would create a bit of an arms race with other universities in the United States, and the money would pour in. The country would become more competitive, generally. So I had a reason beyond MIT to want to do that, and it all ended up creating a new college of computing at MIT. But to do all that, it takes is a heavy lift. It isn't just me coming in and saying you have money. That's not a very elegant way to spend your time with your financial resources. Because financial resources just facilitate each one of these big new things that somebody needs.



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