What It Takes: Lessons in the Pursuit of Excellence

by Stephen A. Schwarzman

In any conversation with someone you don’t know, you should always be patient and keep asking questions until you find a place of common ground.

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. By addressing the developer’s concern about falling rents, we got the space I wanted.

Many of our partners had become complacent. Sometimes they didn’t work on Fridays or refused to spend enough time training and mentoring their junior people. In 2000, I had tried to reenergize the firm by adding five new partners, all in their early thirties, to our existing twelve.

He instituted 360-degree performance reviews to assess everyone at the firm. He overhauled the compensation system toward one based on group bonus pools, written feedback, and open reviews.

I have never understood the idea of people wanting to be “serial entrepreneurs.” Doing it once is hard enough.

First, your idea has to be big enough to justify devoting your life to it. Make sure it has the potential to be huge. Second, it should be unique. When people see what you are offering, they should say to themselves, “My gosh, I need this. I’ve been waiting for this. This really appeals to me.” Without that “aha!” you are wasting your time. Third, your timing must be right. The world actually doesn’t like pioneers, so if you are too early, your risk of failure is high. The market you are targeting should be lifting off with enough momentum to help make you successful.

either run a middling company going nowhere or clear out the mediocrity you created so you can grow. If you are ambitious, you have to fill your company with 9s and 10s, and give them the difficult tasks to do.

The turbulence of starting a firm must at some point permit systems to be implemented that allow other people to help drive the organization forward.

Cheap, readily available credit was now virtually borderless, flowing around the world in pursuit of opportunity. If we were seeing real estate bubbles in Spain and India, chances were that it was happening elsewhere. This was no time to reach for high-priced real estate deals in overheated markets.

In 2005, 70 percent of our investments had been in cyclical businesses. By the following year, this share had fallen to 30 percent.

“Well, there’s the set of numbers for the bank, there’s the set of numbers for taxes, there’s the set for when you’re raising equity. Then there are the numbers you believe.” I looked at the guy. “You’ve got four sets of numbers? You would actually tell somebody something you don’t believe? At Blackstone, we have one set of numbers. For the banks, for the limited partners, for taxes. They’re what we believe. We tell them what we believe. We’re not in the con job business. We do the right thing.

Ordinarily in deals like this one, potential buyers will negotiate a breakup fee with the seller, meaning that the seller will agree to compensate a potential buyer for all the expense of a bid—the time and the legal, accounting, and diligence work—in case he decides to sell to someone else.

The standard fee in transactions like this is 1 to 3 percent of the total deal size.

By going public in the Netherlands, they had also avoided some of the reporting required in the United States.

To resolve the two issues of control, they found we could remain a limited partnership while issuing publicly traded units, the equivalent of stock. Outsiders wouldn’t be given a vote on appointing the general partner or the board. That would be up to me.

The speed with which official China acted showed me that this decision was more than just financial. This had profound political and diplomatic ramifications. We were the Chinese government’s first foreign equity investment since World War II. They had come in before their new state investment company was even operational.

“I don’t know about markets,” I said. “But there are times when you just have to stand up and write a check. You have to show customers that you own this, because if you don’t, they’re not going to trust you ever again.”

Instead, he told them how lucky they were to have this historical meltdown to learn from right at the beginning of their careers. If they were smart, they would learn from it and apply the lessons over their entire professional lives. Success breeds arrogance and complacency, he said. You only learn from your mistakes and when the worst happens.

“Because we’re like farmers,” I said. Zhu had spent time on farms growing up with his family and later as a political exile. “When we buy companies and real estate, it’s like planting crops. You put seeds in the ground, you water, and the seeds start growing, but you can’t see the crop yet. Then they grow very high, and it will be a great crop, and you will be very, very happy.”

but as an entrepreneur, I’ve learned that finance is a simple business. When somebody asks you for something new, the odds that he or she is the only person on the planet at that point of time who would find that of interest is zero. When you get one of those inquiries, it’s potentially a huge opportunity. Those who are asking don’t know that. They are just looking at their own needs. But if those needs make sense and you create the right product to fit those needs, you can roll it out more broadly and your competitors will be left wondering how you figured it out.

Tactical Opportunities, as we would call our new fund, was my long-sought answer. We applied our usual three tests for a new line of business. It must have the potential to be hugely rewarding for investors. It must add to Blackstone’s intellectual capital. And it must have a 10 in charge of it.

When Pete and I raised our first buyout fund in 1986, we went one for seventeen with potential investors. Since then, everything had gotten a lot easier as Blackstone built a record of great performance. I had gotten used to showing up to prescreened investors knowing there was a 90 to 100 percent chance I would close them.

World leaders are no different from anyone else. If you talk about what’s on their mind and have something to offer, they will listen, Democrats, Republicans, princes, or prime ministers.

Finally, I reminded Kathleen that she had been promoted because she was terrific at what she did. We all knew she had the talent to be successful, to grow as a person and as a professional. And she had my complete confidence. It is so important that people understand how much you appreciate them and that you make them feel good about themselves. That self-confidence is the basis for great performance.

I don’t feel a day over thirty-eight, the age I was when I started Blackstone

I sleep the same five hours I always have

25 RULES FOR WORK AND LIFE 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...