Blackstone's Stephen Schwarzman on Hiring Phenomenal People

Summary

In this insightful interview, Steve Schwarzman, CEO of Blackstone, reflects on his entrepreneurial journey and the challenges of building one of the world's largest asset management firms. He discusses the importance of having a clear vision, the value of persistence in the face of rejection, and the significance of creating a culture that fosters growth and innovation. Schwarzman emphasizes the necessity of integrity, adaptability, and the pursuit of excellence in both leadership and personal endeavors.

Takeaways

• 😀 The importance of persistence and resilience when starting a business, especially in the face of numerous rejections and challenges.
• 🚀 The value of having a clear vision and strategy when founding a company, and the need to offer something distinctive in the market.
• 🤝 The significance of building a strong team with exceptional individuals, referred to as 'tens', who can drive success and innovation.
• 💡 The concept of 'great fantasies' as a driving force for ambition, which involves setting high aspirations and working to realize them.
• 🛠️ The emphasis on creating intellectual capital and constantly building upon it as a core part of business growth and development.
• 🔑 The recognition that being a CEO requires a distinct set of skills, including the ability to articulate core values and provide autonomy to team members.
• 🔄 The necessity for a CEO to balance control with the delegation of responsibilities, allowing team members to feel a sense of ownership and importance.
• 💼 Insights into the hiring process, highlighting the importance of matching capabilities with personality, and the cultural fit within an organization.
• 👥 The understanding that people are not like parts of a deal and that managing a team requires a nuanced approach that respects individual dignity.
• 🏆 The personal motivation of the interviewee, driven by a desire for continuous learning, facing new challenges, and the pursuit of excellence in all endeavors.
• 🌐 The acknowledgment of the fear of failure as a motivator and the importance of maintaining a sense of vulnerability and adaptability in a leader.

Q & A

What was the initial challenge Steve Schwarzman faced when starting Blackstone?

Steve Schwarzman faced the challenge of starting Blackstone during a time when private equity was new and considered risky. He and his cofounder, Pete Peterson, had no track record in investing, which made it difficult to gain trust and support from potential investors and clients.

How did Steve Schwarzman approach the strategy for a new business?

Steve Schwarzman emphasized the importance of figuring out the business strategy before executing it. He and Pete Peterson would meet every morning for hours to discuss their vision, what they wanted to achieve, and why anyone should work with them, highlighting the need for a distinctive offering in the market.

What was the 'great fantasy' Steve Schwarzman mentioned in the context of starting a business?

The 'great fantasy' Steve Schwarzman referred to is the idea of having ambitious dreams or visions for what you want to achieve in life, and then working towards realizing them. In the context of starting Blackstone, this fantasy involved creating a business that would be successful in mergers and acquisitions and private equity.

What criteria did Steve Schwarzman and Pete Peterson establish for their business affiliates?

They established three criteria for their business affiliates: an amazing investment opportunity, attracting someone to run it who was exceptional (a 'ten' on a scale of ten), and ensuring that the affiliates would generate intellectual capital that enhances the existing business.

How did Steve Schwarzman handle the fear of failure in his entrepreneurial journey?

Steve Schwarzman acknowledged the fear of failure but stated that if one does not have that fear, they will stay asleep and fail. He emphasized the importance of having a remarkable human effort to overcome challenges and the importance of being fundamentally delusional to make things happen.

What was the significance of the first private equity fund raised by Blackstone?

The first private equity fund raised by Blackstone was significant because it was the largest first-time fund in history at that time. It was raised by two people with no prior investment track record, demonstrating the power of persistence and force of will.

How did Steve Schwarzman deal with dishonesty and rejection during the fundraising process?

Steve Schwarzman faced numerous rejections and dishonesty, including from individuals he had previously helped. He advised having a thick skin and being prepared for such setbacks, suggesting that the experience can make one a more humble and nicer person.

What is Steve Schwarzman's view on the role of a CEO?

Steve Schwarzman believes that being a CEO is about more than just being an entrepreneur. It involves a different set of skills, including the ability to articulate core values, provide growth opportunities for employees, and balance control with autonomy. He also emphasizes the importance of being careful with every move and ensuring that people feel secure and valued.

What advice does Steve Schwarzman give for maintaining a culture of excellence in a growing organization?

Steve Schwarzman advises to never stop articulating the core values of the business and to ensure that everyone in the organization understands and stands for those values. He also stresses the importance of surrounding oneself with phenomenal people who share the same value system and providing opportunities for growth and autonomy.

How did Steve Schwarzman apply his leadership philosophy to the early years of Blackstone?

In the early years of Blackstone, Steve Schwarzman applied his leadership philosophy by setting up a rigorous investment process where every deal was critically examined by the team. This approach helped to ensure that every investment was thoroughly evaluated and understood, reducing the risk of failure.

What personal traits does Steve Schwarzman believe are important for effective leadership?

Steve Schwarzman believes that effective leadership requires traits such as the ability to learn and adapt, a desire for creation and innovation, and an insatiable need to learn what's going on and see something new. He also values the ability to deal with complexity and problems and the enjoyment of being in charge and doing new things.

Outlines

00:00

😀 Founding Blackstone: Overcoming Early Challenges

The speaker reminisces about the founding of Blackstone in 1985, highlighting the difficulties of entrepreneurship, especially in the nascent private equity industry. He emphasizes the importance of having a clear strategy and offering something distinctive. The speaker and his co-founder Pete Peterson started without an office, meeting in a hotel to strategize their unique approach to finance. The conversation also touches on the high failure rate of new businesses and the necessity of resilience and persistence.

05:01

🤝 Building a Business with Distinctive Value

The speaker discusses the importance of creating a cohesive business environment and the challenges of scaling a firm from 550 to 30,000 employees. He shares insights on establishing 'affiliates' with the three criteria of an amazing investment opportunity, attracting top-tier talent, and enhancing existing business with intellectual capital. The narrative includes anecdotes about the struggle to gain recognition in the industry and the persistence required to establish Blackstone's reputation.

10:06

💪 The Power of Perseverance and Entrepreneurial Spirit

This section delves into the speaker's experience with rejection and the resilience needed to succeed in business. He recounts the story of their first private equity fund, which faced numerous rejections before becoming the largest first-time fund in history. The speaker reflects on the dishonesty and setbacks encountered while fundraising, underlining the importance of a thick skin and the ability to handle rejection as part of the entrepreneurial journey.

15:07

👴 Lessons from Experience: Adaptability and the Fear of Failure

The speaker shares personal anecdotes about the evolution of his business and the importance of adaptability. He talks about the fear of failure as a driving force and the necessity to constantly innovate. The speaker also discusses the importance of maintaining a sense of urgency and vigilance to avoid complacency, drawing parallels to historical examples of once-great companies that failed to adapt and lost their edge.

20:13

🛠 The Art of CEOship: Balancing Control with Autonomy

In this segment, the speaker discusses the transition from entrepreneur to CEO, emphasizing the different skill sets required. He talks about the importance of communication, the amplification of one's words as a leader, and the need for careful, strategic decision-making. The speaker also addresses the balance between maintaining control and providing autonomy to team members, ensuring they feel valued and capable of contributing to the organization's growth.

25:16

🌟 Embracing Leadership and the Entrepreneurial Mindset

The speaker reflects on his personal leadership philosophy, shaped by a history of taking charge and innovating. He discusses the enjoyment derived from tackling complex problems and the importance of being a leader who is not afraid to take risks. The speaker also emphasizes the value of learning from mistakes and the continuous evolution of his approach to leadership.

30:17

🤔 The 'Touchy Feely' Leadership Style: Emotional Intelligence in Business

The speaker addresses the concept of emotionally intelligent leadership, discussing the importance of creating a secure environment for team members to express their views. He shares an experience from an investment decision that led to a structured process for evaluating risks and fostering a culture of open critique. The speaker stresses the need for criticism to be impersonal and part of a process that ensures the ongoing success of the business.

35:22

💰 Motivations and the Journey from Aspiration to Fulfillment

In this part, the speaker explores his personal motivations, from the desire to learn and create to the aspiration for financial success. He recounts his early financial struggles and the drive to build a successful career. The speaker also reflects on the importance of finding a profession that aligns with one's passions, leading to a fulfilling and engaging life.

40:23

🎨 The Seduction of Excellence and the Pursuit of Perfection

The speaker concludes by sharing what matters most to him: excellence. He describes the pursuit of perfection in various aspects of life, from creating a beautifully designed room to executing a perfect investment strategy. The speaker emphasizes the joy derived from achieving excellence and the continuous pursuit of this standard in all endeavors.

Keywords

💡Entrepreneur

An entrepreneur is an individual who creates a new business, bearing most of the risks and enjoying most of the rewards. In the script, the interviewee is referred to as an entrepreneur, highlighting his journey of founding Blackstone with Pete Peterson, starting from a time when private equity was a new and risky asset class.

💡Private Equity

Private equity refers to an investment class consisting of equity securities in operating companies that are not publicly traded on a stock exchange. The interviewee discusses the challenges of starting in this industry in 1985 when it was still nascent and not well understood, emphasizing the risks and the lack of a track record in investing.

💡Mergers and Acquisitions (M&A)

Mergers and acquisitions involve the consolidation of companies or their assets. The speaker mentions being the head of the Merge and Acquisition Group at Lehman Brothers, indicating a background in corporate finance where combining or buying out companies is a strategic move to grow or restructure businesses.

💡Asset Management

Asset management is the professional management of various assets to meet specified investment goals of the investor. The interviewee is the CEO of Blackstone, one of the largest asset management companies, which underscores the company's role in handling and growing investments on behalf of clients.

💡Risk Minimization

Risk minimization is the strategy of reducing potential risks to an investment to the lowest possible level. The interviewee mentions being in the 'risk minimization business,' which reflects the approach of carefully considering and managing risks when dealing with investments and business ventures.

💡Track Record

A track record refers to a history of past performance or achievements, often used to assess the reliability or potential for future success. The script mentions the lack of a track record in investing as a challenge when starting Blackstone, indicating the importance of proven success in the investment industry.

💡Strategic Planning

Strategic planning is the process of defining goals and developing strategies to achieve those goals. The interviewee talks about the importance of figuring out what you're doing before doing it, which is a core aspect of strategic planning and essential for the success of a new business venture.

💡Intellectual Capital

Intellectual capital refers to the knowledge, skills, and expertise that an organization or individual possesses. The interviewee mentions the importance of manufacturing intellectual capital that enhances the business, emphasizing the value of knowledge and innovation in business growth.

💡Force of Will

Force of will is the determination and tenacity to achieve a goal despite obstacles. The interviewee shares the story of raising the biggest first-time fund in history through sheer force of will, illustrating the power of determination and persistence in entrepreneurship.

💡Leadership

Leadership is the action of leading a group of people or an organization. The interviewee discusses his personal leadership philosophy and how it has evolved over the years, particularly in the context of building and leading Blackstone, demonstrating the multifaceted nature of leadership.

💡Diversified Platform

A diversified platform refers to a business model that operates in multiple areas or markets to spread risk and increase opportunities. The script mentions that Blackstone has been built into a diversified platform with distinct business lines, showcasing the company's broad range of services and investments.

💡Innovation

Innovation is the process of translating an idea or invention into a good or service that creates value or for which customers will pay. The interviewee expresses his passion for starting new things and bringing them into reality, which is a testament to the importance of innovation in business and personal growth.

💡Rejection

Rejection is the refusal to accept or consider something. The interviewee talks about the numerous rejections he faced while raising funds for Blackstone, using this to illustrate the resilience required in entrepreneurship and the persistence needed to overcome challenges.

💡Adaptability

Adaptability is the ability to adjust to new conditions or changes. The interviewee emphasizes the need for adaptability in entrepreneurship, as well as in the evolution of his role from entrepreneur to CEO, highlighting the importance of being flexible and responsive to change.

💡Vision

Vision is the ability to think about or plan the future with imagination or wisdom. The interviewee discusses the importance of having a vision and the pursuit of excellence in delivering that vision into reality, which is central to the success of any entrepreneurial venture.

Highlights

Entrepreneurship is more rewarding after success but is challenging at the start due to high failure rates.

The importance of having a clear strategy and offering something distinctive in business.

The founders of Blackstone met daily for strategy sessions, emphasizing deep thought into their business direction.

The concept of 'great fantasies' as a driving force for entrepreneurial success.

The strategy of setting up 50/50 affiliate deals to attract top talent and create investment opportunities.

The significance of intellectual capital in business and the strategy to enhance it through new ventures.

The challenge of establishing credibility as a new entity in the market without a recognizable brand.

The experience of facing numerous rejections while raising the first private equity fund for Blackstone.

The value of persistence and force of will in overcoming business challenges and achieving success.

The importance of having a thick skin and resilience when facing dishonesty and rejection in business.

The evolution of leadership skills from an entrepreneur to a CEO and the learning process involved.

The CEO's role in articulating core values and ensuring they are understood and upheld within the organization.

Balancing control with providing autonomy to foster a sense of self-worth and importance among employees.

The motivation behind starting new businesses to provide growth opportunities for employees and maintain an entrepreneurial spirit.

The leadership philosophy that emphasizes the importance of being aware of one's emotional reactions and building deeper connections.

The personal leadership style that focuses on creation, learning, and feeling alive through engaging in new and complex challenges.

The pursuit of excellence and the pleasure derived from executing visions into reality in various aspects of life.

Transcripts

[MUSIC]

I'm particularly honored to be interviewing you today because, as many of

the students know I actually worked at Blackstone before coming to the GSB and

let's just say we were a few pay grades apart back then.

[LAUGH] So I'm thrilled to be sitting here with you and having a conversation for

the next 40 minutes.

>> Good.

>> So I wanna take this opportunity, and

along with all my classmates here to really get to know you more as a person,

as a leader, and as someone who has great insights about the industry.

And I wanna walk away from it, getting a few advice from you,

and that we can apply to our professional and personal lives.

To get started I wanna say that people here all know you as CEO of Blackstone,

one of the largest asset management companies here.

But most people might not know is, you're actually an entrepreneur.

I wanna take us back to 1985 when you were head of Merge and

Acquisition Group at Lehman Brothers, but you decided to leave and

start your own company with your cofounder, Pete Peterson.

That was during a time when private equity was very new and

considered a very risky asset.

And you and Pete, neither of neither of you had a track record in investing.

So can you talk about how did you overcome these early challenges?

[LAUGH].

>> Well that was some time ago but

immense pain keeps you in touch with that time.

And it's, being an entrepreneur is much better

after you're successful than when you're thinking about it.

And let alone thinking about it, doing it.

Because the beginning of most things is very, very difficult.

More difficult than you imagine because otherwise more people would do it and

the failure rate is quite high as you know.

It used to be like nine out of ten new enterprises fail.

I'm not sure cuz I'm, I'm not in the academic world exactly what the number is,

but it's high.

what, what we did is after, after I sold Lehman to

America's Press Company in 1984, I stayed for

a year and then Pete and I left to start our, our new business.

But what was interesting is I've, I've, I've found that,

that the most important thing about a new business is,

is figuring out what you're doing before you're doing it.

In other words, why does anybody need you?

There were plenty of people in finance when I was in it in 1985,

but you, you have to offer something that's, that's distinctive.

And to do that you have to think through what, what your strategy is and

so, so Pete and I used to meet every morning for

like three hours at a hotel because we, we, we didn't even have an office.

It's like your garage concept I guess.

And [LAUGH] and, and

you know, we'd think about what do we wanna be, what do we wanna do?

Why should anybody like wanna do anything with us,

other than the fact that we were friendly and

loveable, which apparently isn't enough to, to, to basically prove victorious.

Except in your own conference room.

Meeting only with yourself.

And where you always win by the way.

And it's still.

We're very successful in our own conference room.

that, that what we did is we tried to say, okay.

Here, here, here's.

I, I call this a, a great fantasy.

Right?

You, you have to have great fantasies in life and then realize them.

So our fantasy was, what did we wanna be when we grew up?

First we wanted to be in the M and

A business cuz they didn't wanna raise capital.

We wanted to keep owning the whole firm.

That was a cash flow business.

Why not just do that?

It's easy. We knew the people.

We found out it wasn't easy.

We did know the people.

But the, the second part was the,

at that point the private equity business was pretty much of a low, no-brainer.

Prices were low.

Capital was available.

Weren't many people in it.

That was a way of, of also raising management fees at that time because you,

you wanted predictable income.

Don't, don't, I'm always in the risk minimization business.

And the third thing, because the industry was restructuring was to,

to basically take advantage of the fact that there were like a host of

little firms to consolidate into only a few big ones.

And, and when I joined Leeman we had 550 people.

When it died it, it had around 30,000.

The difference between working in a place with 500 and

some odd people, is you know everyone by sight.

You may not know their names, you know them by sight.

It's possible to have a cohesive environment when you have 30,000 people.

It doesn't feel the same and I, I, I always liked the small feeling.

And so, so, I,

I figured if I liked the small pe feeling, a bunch of other people would too.

And so as the firms were, were consolidating you'd have

great people you never could normally attract, but they'd be there.

So the, the challenge was to figure out what these kinds of new areas was.

And we called them and I'm not trying to make this about Blackstone particularly.

I'm just giving you a sense of how to approach an entrepreneurial situation.

we, we called them affiliates and we set them up as 50/50 deals.

And, and we didn't know what they'd be.

But we knew they needed three criteria.

The first was an amazing investment opportunity.

So good even a non-manager like myself could not screw it up.

secondly, we wanted to attract somebody to run it who was a ten on a scale of ten.

Because you'll find in your careers if you're a ten, God bless you.

You'll be wildly successful.

If you attract tens, they always make it rain if you need rain.

And they just have an ability to sense problems,

design solutions, do new things, and that's what a ten does.

A nine is great at executing, can come up with good strategies, but

not great strategies.

A firm full of nines, that's a winning firm.

eights, they, they just sort of do stuff that you tell them.

And sevens and below, I don't know what they are.

[LAUGH] So, so, cuz, cuz we don't tolerate them.

So, so, it doesn't work in our industry.

It may work in other industries.

Doesn't work in our industry.

So, so, the third part of these affiliates which

are now folded into Blackstone was, was to make sure they’re manufacturing

intellectual capital that enhances the business we, we're already here in.

So, because you're in the constant intellectual capital building business.

Forget that we're called money managers or whatever else you wanna call us.

That's really our business.

Right?

And so it's just a question of waiting for one of those opportunities, and

then acting on it.

and, and that was our plan.

And at the time we did it,

there was no independent investment banking boutique didn't exist.

But we figured, with only you know, the arrogance that you can have when you're

young that if they were doing this huge amount of merge your own

acquisition business with us, when we were called Lehmann brothers, why wouldn't

the same two people do it when it was just some made up name like Blackstone?

And we just assumed we'd be successful.

By the way, that was not universally held as a belief

because we'd go to the same people and they wouldn't hire us.

And we said, why wouldn't you hire us?

We're, we're like the same people, and we have the same knowledge base.

And they said, well, we, we don't even know what you are, some little thing, why,

how can we hire you?

So you had to convince them that you could do the same thing you did the day

before you started.

Sort of odd, isn't it?

I mean, can you imagine if you were like a football player and

you were a Heisman trophy winner and you just changed teams and

nobody would let you play, cuz you only could play with the other uniform.

Just doesn't make sense.

But that was the world so, so, so that worked.

And we finally managed to convince the people and

we started all these businesses.

And now we're the biggest in the world at what we do because-

And we're still five.

Following the same basic plan.

But one thing, just as an entrepreneurial, you must be crazy thing.

When we did our first private equity fund,

we sent out 488 offering circulars to people we knew.

I, we, we ended up with 32 investors, and they all didn't come at the beginning.

So, I don't know how often you like to be rejected.

But try it that many times.

My math skills aren't that good,

but it's gotta be somewhere around 350 something, 450 something rejections.

People who look at you, and you have a meeting where they consider you.

And I don't know if any of you remember the movie Gladiator,

but the emperor sits there and he goes.

[LAUGH] And it's about you.

[LAUGH] It's, it's not a product, it's you.

You're a loser.

And how many times can you be told you're a loser?

The answer apparently is almost infinite.

[LAUGH] and, and, and, and, [LAUGH] and so anybody's who's been

through a process like that ends up as a much nicer, more humble person,

no matter where you started, because the world is telling you, you are a loser.

And we ended up raising the biggest first time fund in history,

with two people who'd never made an investment just by force of will.

So it does show you that force of will counts.

It counts.

And, and you'd be amazed at the number of

people who reject you who are completely dishonest.

One of my favorite ones.

And my [LAUGH] I have many favorite ones.

But one of my favorite ones was the head of one of the biggest banks in the world.

Who we'd saved on some disaster by restructuring it,

and, and it was a very difficult situation for them.

Anyhow, we thought they'd be nice, and

throw us $10 million, which is the time was a little, a lot of money.

And, you know, we had a meeting with him, he's a famous guy, and

you know, he would invite him out here, maybe he was here.

And he, he said to us, you know, you're, you're really good people,

we'd give you money but we, we just don't do this type of investing.

We're, we're a bank, we don't, we don't do this.

So, you know, sometimes you're defeated by structure.

And we sort of slunked out of his office and, and for some reason

this man forgot that my partner's wife was on his Board of Directors.

I, I don't know exactly how he forgot that.

And she told us that in fact,

they were regularly approving these types of investments.

You save the person, you save their job, the guy just lies to you.

It's stunning.

It's really stunning.

So for all of you people out there who wanna be entrepreneurs,

you gotta have a thick skin.

You, you, you, you almost need some friendly psychologist training

traipsing around with you, to buck you up from all the setbacks that you have.

It's always great after your [UNKNOWN] but it's not so

great, you know, if you file a chapter.

and, and the difference in that, you know,

Jack Setton, he almost did go down several times.

that, that scrambling ability, the ability to take that kind of abuse and rejection,

and believe in your basic plan, but be adaptable and just keep going.

It's, it's really difficult.

As you can see it's you know, that was quite some time ago, it was 29 years ago.

It's still a searing experience and

now, you know, we have this wonderful business with people like this and

you know, I couldn't even get hired at our firm now, I'm not smart enough.

but.

And it's, it's, it's fantastic.

We turn out these great results year after year after year, and it's easy now.

But these early years where you'll find that your own capabilities which you

think are remarkable, are, are, are perhaps not exactly suited for

purpose, and you have to hire someone else, you have to do something else.

You, you, you never sleep because of the fear of failure.

And if you don't have that fear, you'll stay asleep.

You will fail.

You know, because it takes these kind of remarkable human effort to

overcome a world that isn't as anxious for you as you are for it.

And if, you know, it's good that you have to be fundamentally delusional

to get out there on the field of battle, and make it happen.

And we invent new things all the time, I love it.

That's what I spend, I spend a lot of time doing a lot of things, but in terms of

stuff that I really enjoy is starting new things and bringing them into reality.

And, you know, the idea I'm running a, a really su, eh, consequential, big

company of some type is a bit of a mystery cuz I think it's all just a startup.

And, and one of the other things, is if you lose that sense, that,

that things have to be done right, that other organizations, people,

and so forth, are, are trying to you know, sort of succeed at, at your expense.

Then, your organization becomes vulnerable.

You become sloppy.

You become self-confident, and you can never, ever let that happen.

And there are examples that you study all the time.

I mean, that's why, I think, business schools exist is

to look at these sort of train wrecks of companies that used to be great.

That stopped being great, lost their,

their vision, wandered around, became self-confident.

And people came to work believing that things would be

fine the next day because they always have been.

It's, it, it's not necessarily like that.

You know, somebody's always invading.

Somebody's always trying to do better.

And if it's at your expense, then you're just a, you're just a victim.

And, and your jobs are not to be victims.

It's to have someone else be a victim.

>> That was very inspiring, Steve.

>> [LAUGH].

>> Thank you. At least I've, my takeaway from that was,

if I walk out and face rejections, I'll know Steve had faced more.

[LAUGH].

>> all, all jokes aside.

We actually want to now move forward, and as you mentioned-

>> Right. >> The 29 years you've built Blackstone.

And you've really built it into a diversified platform with many

distinct business lines and alternative investments.

So, a lot of people think it's actually very difficult to be a founder and a CEO.

And, Mike, because it actually takes different traits to do both.

But you've clearly succeeded in doing both.

So, my question to you, is, do you agree with that statement?

And if so, how did you make that transition?

>> I, I agree completely.

It, it, it's, these are different kinda skills.

Somebody once said to me that no, no one was born as a CEO.

That there's not a CEO gene,

it's a trained behavior not a necessarily an intuitive one.

And, you know, being an entrepreneur is, a different set of skills.

I, I've learned a lot, and I've, I've done this now for 29 years, so

there's a lot of evolution.

I made a, a whole bunch of mistakes earlier in

our business's history because I, I actually didn't really know what to do.

It's and I got a little coaching from my partner who had been a CEO twice before.

But there, there's a, a whole skill set of learning to be a skee, CEO.

First, first of all, I mean, I'm sure you have classes that teach this.

But, when it's done live it's it's, it's different.

One, one of the things that, that, that is,

that you have to recognize when you're CEO is people listen to you way more and

they, than you'd think and, and they amplify everything that you say.

And, and so you have to be exceptionally careful about what you say.

ev, even just sort of a joke can get misinterpreted.

People look for you know, your, your, your, your approbation your praise.

You, you can't give it unless it's deserved, but, but

if it's deserved you have to be really generous doing that because,

because people respond to it and it's important.

You have to realize that human beings are not like parts of a deal.

You know, in a deal, it's a, pretty much of a closed system.

What one person gets, the other one loses and that's the way it is.

With an ongoing team of really terrific people, you, you can't manage that way.

You, sometimes you see a problem and you have to game it out.

If, if, if people were just like, like chess pieces, you know,

you just sort of move em and, and it's over.

But they're not.

And, you know, sometimes you can see a problem and, and

you have to strategize it out so, so if you're moving people around,

you don't want anybody particularly to lose confidence in themselves.

You wanna be nice to everybody, but you want to accomplish the objective.

So sometimes it can take two years to do something that you

know should happen in ten minutes.

But if you did it, then you'd break so

much glass through the organization that you'd threaten the institution or

you'd threaten core people, and there's a way to work that out.

So, so time actually you know, as opposed to some,

some cartoon-like swashbuckling CEO.

It doesn't work that way.

You, you have to be careful with every move.

You have to give people dignity.

But you have to accomplish your objectives.

So time is something that you give up, sometimes, to do that.

and, you, you also have to articulate the core values of your business.

And you can never stop doing that, and you can never stop doing that enough.

Everybody has to know what you stand for, and they have to see you a lot as

a CEO, because that way, organizations don't lose their soul.

On the other hand, you have to surround yourself with phenomenal people,

who share that value system.

And there's a very interesting almost internal debate

you have to go through between control and ceding control.

Because nobody wants to work at a place if they're brilliant,

terrific people like we have, if they're so tightly controlled they don't,

they don't feel they have any autonomy, or, or, or dignity.

And that may be an issue in finance, not some other industries.

so, so you have to develop controls, and the, nobody can blow up the, the firm.

But autonomy enough so that everybody thinks that,

that they have self-worth and importance and can utilize their, their gifts.

It is very useful as a CEO to have plans to expand your business,

not for earnings per share reasons, interestingly.

It's so, everybody in the organization can grow up and not be forced out.

So you start new businesses cuz most people, in an audience of the type that

I'm speaking to don't wanna be subordinated work units.

That's what they called them in the 1980s.

You all wanna be at least, brigadier generals, if, if not more.

You, you don't want to be like a private or

corporal, you want to be in charge of your destiny.

You're not so unusual.

Most people would like to have ownership of their own growth.

So, so part of being a CEO is figuring out how can you provide that for everybody?

And one way to do that is to start new businesses where people can move up and,

and exercise, you know, their creative abilities, you know, so

that, you know, a firm is continually entrepreneurial.

so, so it, it was a big, step for me to slow down, cuz I was like a deal person.

And that's a different world.

And, and, and just learn how to do that.

And it's, it's a transition, and you make mistakes while you're doing that.

But after you've done it for a long time, I,

I actually have fun with, like people who are newly appointed CEOs.

So, they'll call me up and say, can I have lunch with you?

Can you tell me how to do this job?

And, because they don't know.

And the smart ones know they don't know and, and, you know, so none of us know

everything, but there are, there are like help, helpful hints as to how to do that.

>> Thank you, Steve.

I wanna switch gears a little bit and talk about your leadership.

Because View from the Top, as you know, is a series of leadership.

We wanna know, what was your personal leadership philosophy

that led you to lead bl, Blackstone over the past 29 years?

You know, I, I've have always been a leader.

You know, I was like one of those-

>> Apologies.

>> Student council, choose your high school people and,

you know, you know, president of your high school people, and

did stuff in college like that, did stuff in business school like that, so.

I don't, I don't know how I got that way.

I, I've always been like that.

I've always enjoyed being in charge of things and doing new things.

And, and I remember I brought a rock group that was, that was famous at the time to

my high school, and everybody said it couldn't be done.

I thought it would be fun, and, you know, sort of interesting.

So, I like doing new things, and I like being a leader, and

I like dealing with, complexity, and I, I like dealing with problems.

I like creating, and, and usually that's the best spot to be in.

>> So, here we have a course at the GSV, it's called Touchy Feely.

It many of you might have taken it here.

Basically, it's about how to be a leader by being more aware of

your emotional reactions.

And building deeper connection with people through self disclosure,

vulnerability, and really showing your authentic emotions.

So, we're actually trying to figure that out is,

how do we apply that in our leadership style and especially in a work place?

So what's your take on this touchy feely kind of leadership style?

>> well, I I, I went to a different business school.

>> [LAUGH].

>> This, this course potentially, at least when I went,

could have been antithetical to everything that people believe.

And [LAUGH], and it was, it was pretty rough.

But I understand where you're coming from.

I, I, I think it's-

>> Thanks for understanding.

>> Okay. >> [LAUGH].

>> Do, do we have a therapist in the group here?

Say, step up.

The I, I, I think it's important as, as I was saying before to

treat people in a way where they feel secure, or where they feel valued.

Where they, they feel that you must tell the truth.

And there are different ways of, of doing that.

But in our investment process, for example, we, we, I was gonna say something

like, we encourage that people come forward with different points of view.

In fact, we demand it.

It's not encouraging.

And, and that's because I did a,

I approved a terrible investment as the second investment we did.

And we lost money, and it was incredibly devastating to me.

because, as long as you're talking about emotions, I,

I had some investor who wanted to see us, and he started screaming at me.

I'd never been screamed at before and

nobody in my house had ever raised their voice.

And here's this person screaming for about, felt like an hour.

It was five minutes.

Completely outta control.

And I mean, I, I was I, I almost wanted to cry, actually because he was right.

I, I had made the wrong decision.

And that's because we didn't have as organized an investment process cuz

we were new.

So, so the best thing we did, retrospectively, although it was gruesome,

was, was to lose that money because we set up a process where everybody, in,

at the firm at that time, was just private equity, now we're doing a lot more things.

We had to go around the table and everyone had to express themselves.

And they had to do it with something negative about the proposed investment,

risks that people didn't see.

And so we got used to if you brought an investment, you knew you,

you weren't gonna get universal approbation.

The job of everyone around the table was to critique it so that we, we,

we got rid of the risk or understood it.

>> At the GSB we call that giving feedback.

>> Yeah but, it's, it's, it's giving feedback that gets people angry,

that's the problem right?

>> [LAUGH].

>> So, so, so you, you have to set up an environment where people feel secure that,

that, that act of criticism is not personal, it's impersonal.

It has nothing to do with you bringing the deal.

It has nothing to do with them pointing out the shortfalls in the deal,

because every deal will be treated exactly the same, and

every person will have that same role.

So what we tried to do as, as part of an overall I

don't know whether it's touchy feely or, or you know, it's,

it's more in, institutional comfort for individuals is to

have that direct conversation in a way that ma, made it, made it non-personal.

And, so, so the concept of worrying about these things which is, I think,

what you're actually asking, is, is, is, is really important to have an ongoing.

Successful business, but to have the people in it always feel protected.

and, and we set up processes like that and, and, you know, we have we have very,

very, very low turnover at, at our firm.

And I guess the last two or

three years we were voted like the best place to work in finance.

By Pension and Investment Age and some other stuff, and so forth.

So, care to these issues is, is really important.

>> You mentioned not, not keeping those criticism personal.

But I actually wanna get a little bit more personal with you.

Which is, I wanna learn more about your personal background and motivations.

So when you were first graduating from HBS, what motivated you back then?

And now, now what motivates you now?

And how has that changed over the years?

>> Well, there are a few answers to that.

When I, I remember interviewing at, [LAUGH] it's a shame this is video.

>> [LAUGH].

>> That, that, when I was graduating from college, I was interviewing with,

with some employer, and they said, well, what did you want to be?

Why do you want to work here?

I, and I said, well I, I, I wanna be a telephone switchboard.

And the person looked at me.

He said, what are you talking about?

I said, I wanna have all these inputs running up my arm,

going in my head, twist them around, and shoot them out some other place.

That's what I want to do.

As a process.

And the guy looked at me and said, you're wrong for us.

>> [LAUGH].

>> but, but what, what.

By the time I was a little more you know, sorta developed.

I graduated from business school.

I, I still wanted to do the same thing.

It's this insatiable need to learn what's going on and

see something new, and, and do something as a result of that.

And that's, that's never really stopped now.

That, that expresses itself in, in different ways.

I also wanted to make a lot of money.

I guess you're not allowed to say that anymore because that's unfashionable.

Or if you only have to do it through capital gains with new apps.

But, but, back,

back in the olden days you, you sorta did it, you know, with more current income.

And so I, I, I had, I had $1400 when I graduated.

from, from money that somebody, group of people, gave me on my bar mitzvah.

I didn't even know my parents had held it aside, and I, I was getting married,

so I saw this wonderful ring at Tiffany's for 1300.

So I sorta looked at it.

I said don't you have something a little better?

I might as well blow the whole thing.

So I spent 1400 I started at zero.

[LAUGH] So, I, I decided I, I, I needed fuel.

So that was one of my objectives.

But the, the basic objective was, was to put yourself in situations.

Where the, the learning curve was so

steep, and, and the outcomes were so consequential.

That it just was gonna be f, really fascinating and

interesting and fun, and I'm still doing that, and I love it.

It's great. I, it's yesterday I

had Henry Kissinger come over he was doing a video for

the Schwatzman Scholars and it's nice venue to do that.

He's, he's on our advisory board and

we were walking down the hall after he'd done this video.

And, and you know, he said something like, gee, Steve, you know, like, 91 and

a half, I still feel like I'm in my 30s.

And, and, he said, he said, I think you're the same.

I said, yeah, except I'm not 91 and a half, but, but, but, but I,

you know, feel exactly the same way.

And he said, you, you'd never retire, would you?

And I, I said well, why would I retire when my life's so

interesting, and I'm learning all the time.

And I'm traveling all over the world and it's great, it's fantastic.

And he said yes, so he said I do what, what I do, f, for, for no compensation.

And I said, yeah, I, I get it, I mean absolutely.

I mean it's as you'll find cause they're mostly young people in the audience.

That, when you find something you love and, and you're good at it and,

you know, you go to your touchy feely course and your self-actualized.

Right? I mean that's, that's what it's like.

That's the game.

It's, it's no, it's not about money.

It's about creation.

It, it's about feeling you know, you're totally alive everyday and

it's interesting.

And you run into heads of state or,

or finance ministers and my kinda industry or with unique transaction.

So doing things that are the biggest in the world with great returns and

doing unusual things.

You're always out on our front tier.

This type of life is completely seductive and, and it's, it's not age determinant.

It's really.

it's, it's really about you.

And remember when I was interviewing for a job just graduating from business school.

And I went to some firm and you meet a lot of people when you're interviewing.

It's very interesting.

And I was sitting in front of a guy who looked like he was in his 80s,

named, his name was Clifford Michelle.

And he had all these bound volumes of financings and things he'd done.

And the guy had these brilliant blue eyes, and he was sitting alertly,

and he's in his 80s, and the guy was amazing.

And I said, you know what?

I wanna be him. I wanna be somebody at that age

can do what he's doing cuz he's completely engaged, with life.

You can do that, and that's the fun of it, and that's what I wanted to do, and.

You know I was lucky, to be in an industry that

was going through enormous expansion at the time when I was a young person.

And so I was lucky, and I didn't blow myself up, that was good too.

And, and, I have one saying in.

To those of you who are interested in finances,

which is apparently like 12 people in your whole school now.

[LAUGH] You know that, that there are,

there are no brave old people in finance.

They usually get blown up by the time they're 40.

And if they're given authority by the time they're 45.

Because you always have to have balanced risk,

you always have to worry about your down side.

If I, if I could say just one thing, as a little commercial for

the Schwartzman Scholars program.

This is like really a wonderful thing we're doing.

It's like the Rhoades.

except, you get to go to Tsinghua University,

where we have a distinguished graduate.

and, and, and,

it's gonna be a marvelous introduction to China for one year, program.

where, you know, be taught in English.

It's the universal language.

And, you know, we have three different majors.

But we're going to start out with core courses everything about China and

have a leadership course.

Designed by the other business school.

Where they have cold weather.

On the other side, of the country, and then, you,

you'll have courses in your major.

Everybody will get a mentor, from the real world.

Some of the people, I haven't disclosed yet.

I mean, they're some of the most famous people in the world.

and, ya, you, you get to take trips, around China.

You'll meet the leaders of the country.

And, and then we'll have a study flow of really fascinating people that

come to Beijing doing this in a, a new building that we built.

That looks like a college at Oxford or

Cambridge, except it's looks like a Chinese building.

Same thing, residential college and

we're having some meeting, Rob, I think, later today?

Yeah, we are, I guess people are allowed to come?

So where is this mystery meeting?

>> Wallenberg Hall.

Okay, so I got my commercial in, which I wasn't supposed to do,

but then again, I am an entrepreneur.

[LAUGH] >> Thank you Steve.

Thank you for answering all the questions with such tremendous candor,

I really appreciate it.

At this point, I am going to have everyone here in

the audience have an opportunity to ask Steve any questions you want.

There are two mics going around the auditorium.

Ryan on the left, Caroline on the right.

We're also taking questions from Twitter, especially if you're sitting up there.

We don't have mics there, so please Tweet you questions to, GSB VFTT.

I'll start with a question from Twitter.

>> Sure.

So this is a question that came into Twitter.

As you grew Blackstone, how did you ensure you got the right people for

the right seats?

>> To the right people?

>> For the right seats at Blackstone.

>> How did, hiring is a wonderful exercise.

It's really fun.

What you're trying to do is,

is match people's capability with, with who they really are.

One thing we're doing with for the Schwarzman Scholars program is trying to,

to figure out who will be great future leaders.

And, and then give them a year to learn about China.

And, and people say, you know, ha, ha, how to you know who's gonna be good.

And you, you have to talk to them.

It, it's not a resume.

A resume, it’s like a building block.

Are they smart, or are they dumb?

If, if they're dumb you don't see them.

but, but smart people come in much different versions.

And, and you know, when, when, when people like myself meet other people I,

I, I don't know how to interview anybody.

They, they walk in to your room and they sit down and you look at them.

And somebody says something.

Or they have something on their resume that's interesting.

This is, you know, like the, somebody who's won the World Chess Championship and

still runs the 400 meters in less than four minutes.

And you go, when do you spend time to do all this stuff?

And you start a conversation.

And what you're trying to do is figure out how flexible their minds

are how emotionally stable they are.

How they will do under stress?

Are they self-reliant what,

what's their ability to express themselves?

Sometimes you can see fear in people's eyes.

This is usually not a good thing, right?

Fear. I mean like complete fear.

What are they doing sitting there?

I, I'm sorta easy.

They shouldn't be scared of me.

If they're scared of me, they're gonna be scared of somebody else,

and, and that's not good, at least from a sales perspectives.

You know, being scared.

So there are all kinds of things that people will tell you.

And you're trying to burrow into their head and predict future behavior.

And, and if you can do that and, and

you have certain criteria that they have to be nice.

We don't, we don't hire anybody that's not nice, or anybody that's political.

That's what happens, cuz they're a bunch of,

there's entrepreneur stuff in the air here.

So you don't have to hire anybody who's disagreeable,

just because they wanna be hired.

You don't have to do that.

So you can make whatever culture you want to make.

It's hard at the beginning cuz not everybody wants to join you

because you're not successful so you're desperate.

Right? But you'll find that you don't do well

unless you're hiring people who are consistent with your values.

So you've got to know yourself and you gotta stick to those kinda people.

Meritocracy.

Good thing.

You know, sorta being able to operate horizontally instead of being, you know,

sorta a controlled monster.

We, we can't do those.

You can't have those people around.

Even if they're smart.

Even if I see movies with people who are like that and smart.

It's, it doesnt work well as you get more mature.

You can have exceptions.

But basically you, you, you have to have people who you think can really adapt,

really have a gift, really are nice, really can communicate.

And you have to imagine them under big stress.

How will they behave?

Will they be honest?

Things like that.

>> Thank you. Do we have more questions?

Right there.

Thank you.

>> So, when you were first starting your business, all, all entrepreneurs have to,

sorta overcome an established order.

In your case, you mentioned that you had a great team wearing a brand new jersey.

And you found it hard to get people to, to deal with you, so to speak.

What motivates that sorta conservativism.

How did you overcome that?

And, and how did you sort of build Blackstone into today's establishment?

>> Finishing the last answer, one of the thing as you're hiring people that

people over 40 are their reputation.

Below that, they change, they adapt.

When they're over 40, if you're interviewing somebody, and

you think you're a good person.

But like five people tell you they're really not, don't believe yourself.

Believe the five people.

Who've had experiences with them.

Don't let your own perception,

somebody who's really a certain personality overrule the other stuff.

Every time I did it,I was wrong.

So I've learned some lessons.

The question about the world not accepting new things and how do you change it?

I've, I've, I've learned that, other than at Stanford and, you know,

this part of California, people basically don't like change.

As distressing as it is to imagine that, they don't like change.

Every time we've tried to change something, for

example, we renovate, we were renovating a,

a hotel in London that was called Claridge's, and it was very prominent.

And we bought in 1995 and it was quite run-down and

needed to be you know, sorta modernized in a variety of ways.

And I got these endless barrage of things.

Don't change it, right?

Don't change it, it's so wonderful.

Don't change a stick of furniture even though you

were sitting in a couch and your knees were over your eyes, right?

Don't change anything.

And, you know, you get sort of like protests and

so forth, so, so we change things.

But, but we, we didn't change it bad.

We changed them good.

And I had one particular person who was born there during World War II.

Who you know, really became very unhappy.

And so, so you know, we did the change with English heritage.

Everything was like beautifully done.

And at the end of that he wrote me this long letter saying

how wrong he was and, and how obnoxious he was.

And this is a famous person.

And it's absolutely wonderful and I just wanted to tell you I was completely wrong.

You usually don't get that satisfaction.

but, but change is really hard for a lot of people.

And, and so you have to recognize that whenever you start something new and

you go out of your way to make them comfortable.

Because you can introduce them to change.

At, at, at Blackstone it's not directly applicable.

We keep doing new things.

And as long as you, you really do good returns and people know

that you care about them, the investors, and you'll never do anything to hurt them.

And you're on their team, on their side.

And you're, you're just, like trying to make their lives better.

They have to understand your motives.

And if you can explain your motives, and your motives are direct and

pure, really, I mean, we wanna make money, but we, we only wanna do this for

the benefit of people we're investing for.

And if they never un, if they understand that you never

will introduce a product that, that is not terrific.

You believe completely in it, that's your business.

Then what happens is, they start trusting you and they should.

And that's building up in effect brand equity.

>> Steve, I wish we had more time with you but I've saved actually a last question

that I wanna ask of you and it has become a from the top tradition.

And it's a question we all had to answer when we applied to the GSB,

which is, what matters most to you, and why?

>> You all answered this?

[LAUGH]

>> And they, they all answered it very well, to be sitting here today.

[LAUGH].

>> what, what matters to, to me most is excellence.

And delivering sort of a vision into reality.

It could be commercial.

It could be, you know, in the art business.

It could be imagining something

that's never been done or beautiful and making that happen.

That's, that's what I really love doing and, you know, sitting in a,

in a room that's perfectly beautiful from every angle.

That gives me pleasure.

Having investments that are fantastic and work out right.

That gives me pleasure.

A perfectly hit tennis ball against a great player.

So they can't get it and they're better than you, that gives me pleasure.

All of these types of visualizations where you're

executing perfectly, give me pleasure.

So, you know, what was that so, psychology

course where they had the bird that kept hitting something to get, you know,

they put some electrode in its brain, and it would hit the bar to keep getting,

you know, stimulated with the with the pleasure, I do that.

Except I'm not a bird, I don't have that.

But, but basically, you know, people like that.

And, and there are a lot of different ways where you can create that scenario.

And I'd, I'd, I love a perfect sunset.

I love these just wonderful things that they all line up and they're,

they're just excellent.

Excellent, so that's what I like.

Maybe I wouldn't be admitted here.

[LAUGH] >> Well,

well to the pursuit of excellence, and thank you for your time here with us.

>> Thank you. [APPLAUSE]

[MUSIC]