What It Takes: Lessons in the Pursuit of Excellence

by Stephen A. Schwarzman

Since you can tackle only one personally defining effort at a time, it’s important to pursue a goal that is truly worthy of the focus it will require to ensure its success.

Every entrepreneur knows the feeling: that moment of despair when the only thing you are aware of is the giant gap between where you find yourself and the life and business you imagine. Once you succeed, people see only the success. If you fail, they see only the failure. Rarely do they see the turning points that could have taken you in a completely different direction. But it’s at these inflection points that the most important lessons in business and life are learned.

“The best executives are made, not born. They absorb information, study their own experiences, learn from their mistakes, and evolve.”

There are no patents in finance. A good business with high profits today can be a poor business with low profits tomorrow. Because of competition and disruption, if all you rely on is a single line of business, your organization may not survive.

For me, the greatest rewards in life have come from creating something new, unexpected, and impactful. I am constantly in pursuit of excellence. When people ask me how I succeed, my basic answer is always the same: I see a unique opportunity, and I go for it with everything I have. And I never give up.

If you want something badly enough, you can find a way. You can create it out of nothing. And before you know it, there it is. But wanting something isn’t enough. If you’re going to pursue difficult goals, you’re inevitably going to fall short sometimes. It’s one of the costs of ambition.

if you’re going to commit yourself to something, it’s as easy to do something big as it is to do something small. Both will consume your time and energy, so make sure your fantasy is worthy of your pursuit, with rewards commensurate to your effort.

Being a strong and accurate assessor of talent is perhaps one of the most critical skills required of any entrepreneur.

Investors are always looking for great investments. The easier you make it for them, the better for everyone.

the most important asset in business is information. The more you know, the more perspectives you have and the more connections you can make, which allow you to anticipate issues.

The fix, I found, was to focus on my breathing, slow it down and relax my shoulders, until my breaths were long and deep. The effect was astonishing. My thoughts became clearer. I became more objective and rational about the situation at hand, about what I needed to do to win.

‘What would I want if I were in their shoes?’

I rarely take notes in meetings. I just pay very close attention to what the other person is saying and the way he or she is saying it. If I can, I try to find some point of connection, an area of common ground, a shared interest or experience that turns a professional encounter into a more personal one. It sounds like common sense, but apparently in practice, it’s relatively rare.

THE HARDER THE PROBLEM, THE MORE LIMITED THE COMPETITION

it’s as hard to start and run a small business as it is to start a big one. You will suffer the same toll financially and psychologically as you bludgeon it into existence. It’s hard to raise the money and to find the right people. So if you’re going to dedicate your life to a business, which is the only way it will ever work, you should choose one with the potential to be huge.

Three things had struck me about their business. First, you could gather assets and earn income from recurring fees and investment profits whatever the economic climate. Second, you could really improve the companies you bought. Third, you could make a fortune.

Eights just do the stuff you tell them. Nines are great at executing and developing good strategies. You can build a winning firm with 9s. But people who are 10s sense problems, design solutions, and take the business in new directions without being told to do so. Tens always make it rain.

The culture we would need in order to attract these 10s would by necessity contain certain contradictions. We would have to have all the advantages of scale, but also the soul of a small firm where people felt free to speak their mind. We wanted to be highly disciplined advisers and investors, but not bureaucratic or so closed to new ideas that we forgot to ask, “Why not?” Above all, we wanted to retain our capacity to innovate, even as we fought the daily battles of building our new firm. If we could attract the right people and build the right culture at this three-legged business, offering M&A, LBO investments, and new business lines, all feeding us information, we could create real value for our clients, our partners, our lenders, and ourselves.

success is about taking advantage of those rare moments of opportunity that you can’t predict but come to you provided you’re alert and open to major changes.

I’d learned you can’t just pitch once and be done. Just because you believe in something doesn’t guarantee anyone else will. You’ve got to sell your vision over and over again. Most people don’t like change, and you have to overwhelm them with your argument, and some charm. If you believe in what you’re selling and they say no, you have to presume that they don’t fully understand, so you give them another opportunity.

DON’T MISS THE CAN’T MISS OPPORTUNITIES

We believed that businesses were made up of people who deserved to be treated with respect. If all you did as an acquirer was slash costs and take out money until a business collapsed, you would be hurting employees, families, and their communities. Your reputation would suffer, and decent investors would be scared off. But if you invested in improving the companies you bought, not only would their employees benefit from working for a stronger company, but your reputation would be enhanced and you would earn much higher long-term returns—“Friendly

invest only when values have recovered at least 10 percent from their lows. Asset values tend to increase as economies gain momentum. It’s better to give up the first 10 to 15 percent of a market recovery to ensure that you are buying at the right time.

While most investors say they are interested in making money, they are actually interested in psychological comfort. They would rather be part of the herd, even when the herd is losing money, than make the hard decisions that yield the greatest rewards. Doing what everyone else is doing seems like a way to avoid blame. These investors tend not to invest aggressively near market bottoms, but instead do it at market tops, where it makes little sense.

Cycles are ultimately powered by all types of supply and demand characteristics. By understanding and quantifying them, you can be well positioned to identify how close you are to a market top or bottom. In real estate, for example, building booms are stimulated when existing buildings are being valued at significantly more than replacement cost because developers understand that they can build a new building and sell it for more than they paid. This is a brilliant strategy if only one building is being constructed. But almost every developer can see the same opportunity to make what they think will be easy money. If a large number of them start building at the same time, you can easily predict that supply will overwhelm demand and the value of buildings in that market will decline, most likely precipitously. The idea that no one can see bubbles, as one former chairman of the Federal Reserve once announced, simply isn’t true.

Decisions are much better made through systems designed to protect businesses and organizations than through individuals. We needed rules to depersonalize our investment process. It could never again rely on one person’s abilities, feelings, and vulnerabilities. We needed to review and tighten our process.

We would obsess about the downside of every potential deal until we were certain we could not miss.

Once this group dissection process concluded, whoever was running the deal now had a list of problems to address and questions to answer. What would happen to the company they were proposing we buy if a recession hit? Would its profits decline gently or plummet? Were the best managers likely to stick around following a buyout? Had we thought hard enough about the likely response from competitors? Or the effect on profitability if commodity prices collapsed, as they had after we bought Edgcomb? Did their financial model take account of all these eventualities? The presenter’s team would go back and find answers to our questions, and in doing so, they could implement fixes or figure out how to manage the downside, or they might uncover new risks, new probabilities of loss that they might never have seen before. And back they would come for another round of discussion. By the third round, we hoped, there would no longer be any nasty surprises lurking in the deal.

The final change we made to depersonalize and derisk our investment process was to encourage a greater sense of collective responsibility. Every partner on our investment committee needed to participate in assessing the risk factor of a proposed investment. In this way, the internal team presenting could not target the senior person at the table or lobby him or her for a positive decision. Everyone in attendance would share responsibility for whatever decision was made. And we made every decision in the same predictable manner.

We train our professionals to distill every individual investment opportunity down to the two or three major variables that will define the success of our investment case and create value.

There is no “us” and “them,” no seeking of approval from a group of elders. Instead, there is only a collective sense of responsibility for identifying the critical drivers of a deal and analyzing the extent to which those drivers could affect the financial performance of an investment in various scenarios.

At Blackstone, investment committees are about discussion and discovery, not about getting a deal approved. Because the decision to move forward or not is made together, no one feels pressured to sell a deal just because he or she brought the idea. Similarly, there is no pressure to approve a suboptimal deal as consolation for a deal team’s hard work in sourcing and analyzing the investment in question. If we make an investment and it goes wrong, we all got it wrong, and we are all responsible for fixing it. And when we are right, which is more often the case, we reap the rewards together.

excellence and integrity. If we delivered excellent performance for our investors and maintained a pristine reputation, we would have the opportunity to grow and pursue ever more interesting and rewarding work. If we invested poorly or compromised our integrity, we would fail.

when a situation changes and a business is doing extremely well, sometimes you have to make accommodations.

It was the one thing they taught at Harvard Business School: everything in business is connected.

excellence, integrity, and care for all the people associated with us, those we employ and those whose money we invest.

I was never going to settle on offices that were less than perfect. The rewards of having a beautiful space that attracted the best people and gave our clients greater confidence in our abilities would far exceed the cost of paying a little extra to close the deal. And the best way to get what you want is to figure out what’s on the mind of the person who can give it to you.

Ken arranged for me to meet the board. I asked them about the center: its goals, its challenges, and what it needed from a chairman. Ken called me later and said the board was surprised. They thought they were supposed to be interviewing me, but instead I had interviewed them. My objective, I told Ken, had been to learn. I wasn’t trying to persuade anyone I was right for the job. It was the same way I thought about interviews at Blackstone. If both sides could be easy, open, and direct with each other, the fit, or lack of it, would become apparent. From our conversations that day, it seemed the fit was there.

“Listen, we agree on virtually everything. There’s only one disagreement we’ll ever have. I only like to do big things. I don’t like getting diverted. I like taking on huge opportunities and making them happen. You have a different philosophy. You like doing what works. You’ll do huge things and small things. You don’t care as much about scale, as long as they’re well constructed and you can make them work.

We are in the business of buying, fixing, and selling. We are managers and owners as much as we are investors. We try to improve the companies we buy and help them grow faster. The faster a company grows, the more someone else will pay for it. The perceived problems arise when we buy a company that is poorly managed and we have to fire people to make room for better ones, or change strategy. Even once we’ve improved the company, grown it, and hired more people than it ever had before, the people we fired tend to stay angry at us and become our critics.

Changing your behavior in the face of changing information is always hard. But when people are doing well, they don’t want to change. They choose to ignore the discordant notes and the tunes you are hearing. They feel threatened by bad news and dread the uncertainty of change and the hard work it demands. This tendency makes them passive and rigid at the very moment they should be most active and flexible.

I have always regarded worry as an active, liberating kind of activity. Worrying allows you to articulate the downside in any situation and leads to action to avoid it.

In the 2016 Rio de Janeiro Olympics, my grantees won four gold, three silver, and two bronze medals.

“In China, we aspire for greatness,” he told me. “If it does not happen the first time, we simply continue until we achieve greatness.”

education is the passport to a better life. A good education has the power to affect whomever it touches for the better. We all have a duty to not only preserve the knowledge that is handed to us but also develop it in a way that improves its relevance and impact for future generations.

1. It’s as easy to do something big as it is to do something small, so reach for a fantasy worthy of your pursuit, with rewards commensurate to your effort. 2. The best executives are made, not born. They never stop learning. Study the people and organizations in your life that have had enormous success. They offer a free course from the real world to help you improve. 3. Write or call the people you admire, and ask for advice or a meeting. You never know who will be willing to meet with you. You may end up learning something important or form a connection you can leverage for the rest of your life. Meeting people early in life creates an unusual bond. 4. There is nothing more interesting to people than their own problems. Think about what others are dealing with, and try to come up with ideas to help them. Almost anyone, however senior or important, is receptive to new ideas provided they are thoughtful.

5. Every business is a closed, integrated system with a set of distinct but interrelated parts. Great managers understand how each part works on its own and in relation to all the others. 6. Information is the most important asset in business. The more you know, the more perspectives you have, and the more likely you are to spot patterns and anomalies before your competition. So always be open to new inputs, whether they are people, experiences, or knowledge. 7. When you’re young, only take a job that provides you with a steep learning curve and strong training. First jobs are foundational. Don’t take a job just because it seems prestigious. 8. When presenting yourself, remember that impressions matter. The whole picture has to be right. Others will be watching for all sorts of clues and cues that tell who you are. Be on time. Be authentic. Be prepared. 9. No one person, however smart, can solve every problem. But an army of smart people talking openly with one another will. 10. People in a tough spot often focus on their own problems, when the answer usually lies in fixing someone else’s.

11. Believe in something greater than yourself and your personal needs. It can be your company, your country, or a duty for service. Any challenge you tackle that is inspired by your beliefs and core values will be worth it, regardless of whether you succeed or fail. 12. Never deviate from your sense of right and wrong. Your integrity must be unquestionable. It is easy to do what’s right when you don’t have to write a check or suffer any consequences. It’s harder when you have to give something up. Always do what you say you will, and never mislead anyone for your own advantage. 13. Be bold. Successful entrepreneurs, managers, and individuals have the confidence and courage to act when the moment seems right. They accept risk when others are cautious and take action when everyone else is frozen, but they do so smartly. This trait is the mark of a leader. 14. Never get complacent. Nothing is forever. Whether it is an individual or a business, your competition will defeat you if you are not constantly seeking ways to reinvent and improve yourself. Organizations, especially, are more fragile than you think. 15. Sales rarely get made on the first ...

If you see a huge, transformative opportunity, don’t worry that no one else is pursuing it. You might be seeing something others don’t. The harder the problem is, the more limited the competition, and the greater the reward for whomever can solve it. 17. Success comes down to rare moments of opportunity. Be open, alert, and ready to seize them. Gather the right people and resources; then commit. If you’re not prepared to apply that kind of effort, either the opportunity isn’t as compelling as you think or you are not the right person to pursue it. 18. Time wounds all deals, sometimes even fatally. Often the longer you wait, the more surprises await you. In tough negotiations especially, keep everyone at the table long enough to reach an agreement. 19. Don’t lose money!!! Objectively assess the risks of every opportunity. 20. Make decisions when you are ready, not under pressure. Others will always push you to make a decision for their own purposes, ...

21. Worrying is an active, liberating activity. If channeled appropriately, it allows you to articulate the downside in any situation and drives you to take action to avoid it. 22. Failure is the best teacher in an organization. Talk about failures openly and objectively. Analyze what went wrong. You will learn new rules for decision making and organizational behavior. If evaluated well, failures have the potential to change the course of any organization and make it more successful in the future. 23. Hire 10s whenever you can. They are proactive about sensing problems, designing solutions, and taking a business in new directions. They also attract and hire other 10s. You can always build something around a 10. 24. Be there for the people you know to be good, even when everyone else is walking away. Anyone can end up in a tough...