Blackstone, United States, Army discussed on Yahoo Finance Presents


Thanks so much for joining us of course Steve in many ways your representative of the American dream you are on the Forbes list as the one hundred richest person in the world. You've built one of the most successful asset management companies and one of the biggest. You're sort of an unlikely story. You're the son of a dry good seller. You grew up in a middle-class background. You Chill Public School so I have to ask you this. If you're starting out today would you have what it takes to gain the same level of success well. You never can predict exactly what your path would be. When you start I I was born at a time. Where you know was was easier than it is. Today I was the second year the post World War Two baby boom so there weren't many people ahead of you so so I think I probably could've figured out a route in today's world but it was definitely easier when I was going to junior high school and high school in College and getting my first job now I just reading about you. Even when you're you were in high school you're always a leader or when you were in college or in the army or starting now on Wall Street. You always took these leadership. Roles addressed problems was that's. That's something natural to you or did you learn that quality knows natural. You know I I always liked to be in charge of something or lead. The way or fix something that was was not optimal or broken and it was it was comfortable. I sort of always wanted things to work well and so when I saw something that wasn't you know I could talk to the principal the school or you know sort of a colonel in the army or the dean of another another university. department and I always felt I was doing something. That was was good. you know for people. I worked with breath and just like that kind of role. That really stood out to me is that you wrote letters to people you would write letters to business leaders. He would actually invite you into their homes and have discussions with you. So do you experience that today and you find that young people reaching out to you and do you find ways to give back to them. I I have like a steady stream of people sometimes. When I go places somebody will come up at hand me a note you know. Could I talk to you or I'm I'm sort of at a point in my career where I could use some advice and I tried to do as many of those as I can but I can't do the mall so so there's a randomness to it but but none of us become successful because it's just us. Everybody needs someone to support report them. Everybody needs in effective mentor or more than Hey. My Mentor and relying on other people helped me. He you know sort of wind my way to wherever I've gotten and I think that we all have an obligation to other people to help with them on their journey as well when you start on Wall Street. This was a funny story. You told you caught the attention of senior leaders early on at Lehman Brothers. Lou Glucksman c'mon yelled at you for not sitting up straight and he later learned a lot of good things about you while she was smaller than do you think that's still the case now that young people can stand out early on amongst their senior leaders well. I think so all of us in a more senior capacity acidy are always looking around us to to see who's got something special and because if you're in any kind of you know a vocation that involves human beings you realize that people with real talent real drive you know have that certain special initial quality recall tens nines or not so bad either fell take you places a bill develop things that you haven't thought auto they'll they'll have a sense as they get older and you develop those people it's great for them but but it's also great for whatever institution you're in whether it's a for profit like blackstone or a not for profit. You just mentioned tens. How do you find a tin. What do you look for to find a ten. What does it take well It's it's part of interviewing. What what you find is. After the age of forty people are the reputation so if you meet someone and you're a little under impressed and everyone says they're amazing the chance the Thera- mazing is actually quite high but when they're younger than forty twenties and Mid Thirties and below. It's a little more challenging because they themselves have been trying out different approaches and different different print presentation styles so so I I like to spend time with people unstructured context usually when meet someone may give me resume usually buried in the resume is something like in the fourth grade they were the US national chess champion or something eh that they really want you to talk about because it's so odd and so I take that odd thing and I you know I acknowledged. Put it there and you know what happened to you with AD and and then you know we can talk about almost anything I'm trying to feel how smart they are. How how stable they are how curious curious they are and usually you can do that by just looking into their eyes and sometimes I'll walk in a room and talk about what I was just doing if it's exciting and if recoil with fever because it's different situation they probably won't be able to handle things that come at them in unpredictable way what you wanted to do was hold the table and to be pretty much of an equal because because they are just because you're senior all that means is that you've had more experience doesn't mean that you're better than anybody that you meet my now. It's really difficult difficult to get a job at blackstone. I was reading the stats in the book so I ask you this. Do you think if you're applying to a job at blackstone that they would hire you well. This is what I worry about because I don't think they would not because my grades wasn't as Soon Macao Audi or Magda. I wasn't even cum laude and and you know so so there are different modes of learning and I'm not so bad that some of this stuff but but it's not because I test to to a degree that a lot of the people we hire so so I I think it's important that we look at different factors here at the firm. The conservative way is always higher the brightest person. I think it's important to be involved in student government of some type Emperor Club or something where you demonstrate leadership I tend to like people who are athletes only because you can take pain if you're a good athlete that you push yourself to a point where it's not not pleasant well shifting gears. I you WanNa talk about the private equity business just broadly on but first. Let's talk about interest rates because they've been incredibly low and that's probably one of the most important metrics when it comes to your business so what's your outlook rates well. It's hard to go much lower and if you do it's not particularly productive because in most most of the country's economic system at the centerpieces or financial institutions banks and and countries grow when they extend credit to people businesses and people I if if their interest spread is so low because rates are so low that they have have trouble making money the way many in Europe do that then it hurts economic growth for the whole country so there are I view it as a law of diminishing finishing returns as rates go lower and lower and lower it also hurts people who save because they can't make much money either so so so you know now in Europe is about a third of the country's or negative interest rates in other words. You have to pay them to take your money seems to me. There's something wrong with that. Model title and those countries as individual countries aren't doing particularly well. Well people often ask you for advice. So what would would you recommend in these sorts of situations well. I think there are two things you can do. One of those is reform of an economic economic system and and another thing that you can do is use fiscal policies policies to spend more money to stimulate an economy but just forcing rates down into negative territory. I you know I I don't see Addison as a particular path to glory when you started blackstone in nineteen eighty five you wrote that you had two big tailwinds the the US economy and then the unraveling of Wall Street if you were a young person we're starting a firm like blackstone today. Do you think they'd have the same sort of success well. There's a lot of ways to be successful today. There are other advantages you you you. You have the chance of borrowing money very cheaply. You you have a huge number of new technologies. Were were you could become an expert where perhaps somebody isn't and that's a path to success that didn't exist when I was younger so whenever you have a big robust economy and government's printing lots of money you can usually get some money because there's so much around and and the changes in the economy in structural changes now vastly exceed anything when I was younger just two years into your career you made made what you described it as one of the biggest investment mistakes or the firm did and someone an investor berated unit almost made you cry and you often talk about failures as opportunities to learn so what did you learn from that experience and how did that change your investment process going forward that was that was perhaps is one of the defining moments of of the ferment my career. We basically bought a company where two partners disagreed one thought. It was is going to be a big winner. The other one thought it was going to go bankrupt. I picked the first partner. We didn't have any processes. We're just sitting in front of my desk. I thought I was King Solomon at at the age of thirty eight. Guess what I wasn't and we lost our money. This was totally traumatic. Because it was our third investment. and one of our investors asked me to come in and basically started screaming at me and in my family nobody. Nobody raised their voices. I I never heard the raise voice in my household so that makes me very sensitive the two two meaning when what other people are saying in this case this was like some some some sponges speakers turned up uh definitely and I I I left this thing I I almost started crying. The Sky was was was berating me with good reason and I basically said this never going to happen again. We're GONNA come up with the different system. we're going to assess risk. We need something something different and so what we invented is basically what we use today which which involves a team doing a written presentation listing Aliskhan listing all the risks other factors and giving it to a group of people to read two days before so they actually don't don't get hoodwinked by somebody going with flip charts right in front of them and then we get about depends different groups different number of people just say for example you have eight people around the table and the team walks in basically part of the rule that we developed back then it's adapted a little bit now was that every person at that table has to recite every person has to point out the risks and how what the probability of those risks should be in their view and how bad it would be if that happened and it's not about watching one smart person. Jason interrogated team and having seven others the a paid audience. Nobody's an audience and if the people who bring bring the proposal realize that they are basically going to be intellectually filleted every time they come in the room then it's never personal because it happens every time and it makes the team be much better prepared and it makes everyone who's at the table much better underprepared and then there's always questions you send them back. You do the same process again. By the time you finish. We have quite a good idea Kia of what the prospect of loss could be. There's real prospect of loss to it and then we price the deal and if we buy Elliot. It's not the fault of the team if it doesn't work out all the reason it isn't their fault about ninety percent of the time. It's one of those three variables one of those three risks that happen and we knew it was going to happen but we didn't think it would really happen or we didn't think it would be so bad and and so the team has the security of knowing that it's it's not their decision and it's not even their assessment of whether we should go forward. It's all of ours and so that way it's it's very secure fun here and lifetime learning and we're all exploring Lorde together and and that's what I learned that was the biggest change in our business was realized I wasn't so smart. I needed he's everybody. He said he said that psychology is one of your greatest strengths as investors at the characteristic that sets you apart but that's really helpful because my math isn't very very good as S..

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