Richest PE Investor Schwarzman on Blacksone’s Origins, Process
Blackstone, the world’s largest private equity firm, in 1985, and has a net worth of
USD $12.3 Billion according to Forbes.
Stephen Schwarzman grew up in the suburbs of Philadelphia. He attended university at Yale, followed by Harvard Business School. Schwarzman joined Lehman Brothers in 1972, which he remembered as a “different world” during a recent Investors Archive interview (below).
Schwarzman learned a valuable lesson on his first day at Lehman brothers when a senior staffer told him, “You don’t get stabbed in the back at Lehman Brothers. We do it in the front.”
There were 40 people on Schwarzman’s corporate finance team then. Personnel at banks and in the investment industry have soared massively since.
The investment business favours specialists today, yet Schwarzman says he was trained as a generalist.
“We did literally every type of activity from rating agency presentations to private placements to equity offerings, debt offerings, mergers, anything that somebody needed, you did it. That was a really important element of my career because you sort of knew something about everything and that way you could sense trends and changes and so forth.”
He and Pete Peterson co-founded Blackstone 1985.
“What could we do that everybody else in the world wasn’t doing?”
On Blackstone’s process:
“We’re in the intellectual property generation business.”
“Opportunities have to be fantastic for the customers.”
“The idea of losing money really… I just can’t stand it.”
“Anything we’re going to buy, their has to be written analysis. It has to identify all the risk factors with the objective of deciding how you could lose money… then we put everybody around a table… if one person was criticizing the deal, then the person who brought the deal and was leading the team wouldn’t like that person, and they’d try and retaliate in some way, which stops everyone from being objective if it’s not such a good investment. So I insisted that everyone around the table speak and they could only speak about analytic weaknesses in the deal, and risks in the deal, so this was all geared to not losing money. What this does is, depersonalizes decisions making.”
“If everyone is attacking you, then no-one is attacking you.”
Says Blackstone has never had a serious confidentiality leak.
Why he took Blackstone public: Access to capital, de-risking his personal fortune, assisting a co-founder retire, uniting his team, the public markets X-factor, and interest from major investors.
The key to a great culture is to keep growing, so there is no ceiling.
“It’s so much better to make the pie bigger.”
“Being a CEO is a learned behaviour. No-one is born as a CEO… As a CEO, you have to be much more measured and thoughtful and caring and supportive of people and process and courage to do things and make changes. You define the culture. You define what you want people to be and want them to do and then you don’t budge on core principles… If you’re consistent and you’re there forever you don’t have political infighting…”
“If it were work I wouldn’t do it… It’s soo exciting…”
There's a treasure trove of value in the Investors Archive youtube library: https://www.youtube.com/channel/UCVJalJNQWimC2zWrIHR_bSQ/videos