June 9, 2017

How Blackstone’s CEO Made It Through Wall Street’s Most Turbulent Decade

Steve Schwarzman is the founder and CEO of Blackstone Group, the largest alternative investment firm in the world (AUM USD 300 billion).

An excerpt from an interview....

We’ve had a different strategy all along. One part was to be in the advisory business; it required no capital and generated cash, which we could use to hire more people without diluting. Second, to get into the private equity business; it was a great business and still is. And the third was to find other fantastic investment opportunities from a risk-reward perspective. So that was our strategy from Day One. I was sort of in the last generation of people in finance who did everything. It was before specialization. If you were in corporate finance at that time, like I was, you were doing mergers, IPOs, debt deals, debt for equity swaps, restructuring—anything that needed to be done you did. And because you were seeing the entire field in play, you realized that nothing lasted forever. There are no patents in finance. Everything has a decay curve, in terms of its margins. You had to be in the continual invention business to do well. I just took it for granted that we had to keep inventing new things all the time.

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When we went into the crisis, we already had the platforms. As the opportunities presented themselves, all of our businesses were in great shape. We didn’t have to deal with the world of problems. We were good underwriters, and the opportunities were profound—they were almost everywhere. And so that enabled us to enter those different business lines further. We basically raised very, very large-scale capital from everyone we could. The more successful the outcome, the more they wanted to give us. And it became a virtuous circle of doing well for them, looking for new opportunities whenever we could, and them giving us very large amounts of capital. Our timing was right for all of these different opportunities. The system we designed, of being able to see across asset classes and controlling risk, informed us where we should be and not be, which enabled us to grow very large-scale businesses with a small number of people. I think for people who weren’t set up like that, it was much more difficult.

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Read more at https://www.bloomberg.com/features/2017-blackstone-steve-schwarzman-interview

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