All achievers

Stephen A. Schwarzman

Chairman and CEO of The Blackstone Group

We're not talking about brain surgery here. This is finance — add, subtract, multiply and divide.

Stephen Schwarzman was born in Philadelphia, and grew up in nearby Abington, Pennsylvania, where he attended public schools. From an early age he worked alongside his father in his grandfather’s drapery and linen business. In high school, he ran track and was elected president of his student body. He studied social sciences at Yale University: psychology, sociology and anthropology, but not economics. As graduation approached, he was still uncertain what he wanted to do for a career. During a homecoming weekend, he met Yale alumnus Bill Donaldson, and after graduating in 1969, he joined Donaldson’s investment banking firm, Donaldson, Lufkin & Jenrette. In his six months with the firm, he developed a taste for corporate finance, but became keenly aware that he needed more training before he could make a career in the field. After fulfilling his military service obligation in the Army Reserve, he entered Harvard Business School, graduating in 1972.

1985: Stephen Schwarzman sits between Roger Altman and Francois de Saint Phalle. All made significant profits from their Lehman shares. (© Magnum photos/Erich Hartmann)
1985: Stephen A. Schwarzman sits between Roger Altman and Francois de Saint Phalle. Schwarzman was head of the global mergers and acquisitions team and Altman and de Saint Phalle ran the investment banking division at Lehman Brothers, one of Wall Street’s oldest and most powerful investment banking firms. All made significant profits from their shares when Lehman Brothers was acquired by Shearson/American Express  for $360 million in 1984. In 1985, Stephen Schwarzman founded The Blackstone Group, a global private equity firm, with Peter G. Peterson, Secretary of Commerce under Richard Nixon and a former chairman and C.E.O. of Lehman Brothers.

Schwarzman interviewed with a number of investment banking firms before deciding corporate finance was his true interest. He joined Lehman Brothers, where he developed a formidable expertise in mergers and acquisitions, and made a favorable impression on the firm’s new chairman, former Commerce Secretary Peter G. Peterson. By the time of Lehman Brothers’ 1977 merger with Kuhn Loeb, Schwarzman was a rising star in the firm, and at age 31, he became the managing director of Lehman Brothers, Kuhn Loeb, Inc. In his last two years with Lehman, Schwarzman chaired the firm’s Mergers and Acquisitions Committee. Peterson was pushed out of the chairmanship in 1984, and Schwarzman managed the acquisition of Lehman Brothers by American Express. Not long after the merger was completed in 1985, he left the company to embark on a new venture with his former boss and mentor, Pete Peterson.

Stephen Schwarzman speaking to student delegates at an outing in Mount Vernon during the American Academy of Achievement's 1999 Summit in Washington, D.C.
Stephen Schwarzman talks to Academy delegates at Mount Vernon during the 1999 Summit in Washington, D.C.

Schwarzman and Peterson proposed to build an investment firm of their own, The Blackstone Group. With two employees and only $400,000 of their own money, they set out to compete with industry giants Salomon Brothers, Goldman Sachs and Morgan Stanley. In the mid-’80s, there was widespread interest in leveraged buyouts, the buying of companies with borrowed money. Schwarzman wanted to start big and raised nearly a billion dollars for Blackstone’s first private equity fund. Private equity funds invest in privately held companies, those whose shares are not traded on the public stock exchanges. In this opportune moment, Blackstone prospered, as Schwarzman applied his expertise in a merger-friendly environment.

March 2007: Fortune magazine hailed Stephen Schwarzman as "The New King of Wall Street."
2007: Fortune hailed Schwarzman as “The New King of Wall Street.” That same year he was named TIME’s “100 Most Influential People” and donated $100 million to the New York Public Library on whose board he now serves.

In 1991, in the depths of a recession in the real estate market, Schwarzman took the plunge into real estate. Again, he had chosen the perfect moment, acquiring highly lucrative properties at depressed prices. In the following years, Schwarzman and Blackstone invested in a wide variety of industries, including health care, high tech and communications. At first, most of the group’s investments were concentrated in the United States, Britain and Germany. In 2004, Schwarzman picked up the German chemical company Celanese, when most investors were avoiding the chemical industry. He took Celanese public in the U.S. at a time when interest in chemical stocks was rising, and reaped a windfall.

In addition to its private equity operations, Blackstone manages hedge funds and provides restructuring advice to corporate clients. In the 1990s, these consulting and advisory services took Blackstone’s activities farther east, to Japan and India. The firm has assisted in some of the largest mergers ever transacted between Japanese and American companies, and since the late ’90s, has been a principal adviser to Sony on its foreign acquisitions. Under Schwarzman’s leadership, Blackstone has also led the bankruptcy restructuring of troubled businesses such as Enron and Global Crossing.

Stephen Schwarzman, Chairman and CEO of The Blackstone Group. (Courtesy of the John F. Kennedy Center for the Performing Arts)
Stephen Schwarzman serves as the Chairman Emeritus and Trustee of The John F. Kennedy Center for the Performing Arts in Washington, D.C. and served as the Chairman of the Board from May 2004 through 2010.

In 2007, in the biggest leveraged buyout in history, Blackstone acquired Equity Office Partners for $34 billion, taking possession of 540 office buildings around the United States. The deal was quickly followed with the acquisition of the Hilton Hotel chain.

At the height of its success, Schwarzman made the unprecedented decision to take Blackstone public, a first for a private equity firm in the United States. For the preceding five years, Blackstone’s real estate and private equity funds had earned more than 30 percent a year for their participants, primarily institutional investors such as public and corporate retirement funds. Taking the firm public enabled ordinary individual investors to participate in Blackstone’s unparalleled earnings. In the largest initial public offering (IPO) in history, Blackstone entered the market at a value of over $40 billion. This innovative move set off a wave of IPOs by other private equity firms. At the time, Blackstone controlled nearly 50 companies, businesses ranging from orthopedic devices, Gold Toe socks and Michael’s art supplies stores to Vlasic Pickles and Aunt Jemima pancake mix.

Stephen Schwarzman is a board member of the New York Public Library, and he made headlines in 2008 when he committed $100 million to help fund the library’s massive expansion project. It was the largest gift to a cultural institution the city has ever recorded. Schwarzman said that the library was helpful to lower- and middle-class citizens to reach toward the American Dream. The main building has been renamed the Stephen A. Schwarzman Building and holds traditional book collections as well as historically and culturally relevant documents.
Stephen Schwarzman is a board member of the New York Public Library, and he made headlines in 2008 when he committed $100 million to help fund the library’s massive expansion project. It was the largest gift to a cultural institution New York City has ever recorded. Schwarzman said that the library was helpful to lower- and middle-class citizens to reach toward the American Dream. The Library’s main building has been renamed the Stephen A. Schwarzman Building and holds traditional book collections and historically and culturally relevant documents.

At the end of 2007, it was estimated that Blackstone had access to credit of $125 billion to acquire new companies. Stephen Schwarzman’s management of Blackstone’s investments had made him a billionaire several times over. His personal shares in the Blackstone Group were valued at $7.7 billion, and he was earning well over a million dollars a day.

The following year, the collapse of the U.S. housing market brought about an unprecedented contraction of credit and the downfall of many of the country’s largest investment banks, including Schwarzman’s old firm, Lehman Brothers. Although Blackstone had anticipated the subprime mortgage meltdown, it was not invulnerable. The firm continued to post a profit in the first half of the year, but in the third quarter of 2008, it reported losses of over $500 million. As the company marked down the value of its holdings, its own stock price fell to a fraction of its former value. In the midst of this turmoil, Blackstone’s financial advisory business continued to show a profit, as troubled corporations, including insurance giant AIG, turned to Blackstone for counsel.

Stephen Schwarzman and his wife, intellectual property attorney Christine Hearst Schwarzman, attend a gala at the Kennedy Center. (Courtesy of the John F. Kennedy Center for the Performing Arts)
Schwarzman and his wife, Christine Hearst Schwarzman, attend a gala at the Kennedy Center in Washington, D.C.

Schwarzman and his wife, intellectual property attorney Christine Hearst Schwarzman, maintain their principal residence in New York City. An enthusiastic supporter of the arts and culture, Stephen Schwarzman is a longtime director of such major cultural institutions as the New York Public Library and the New York City Ballet. From 2004 to 2010, he also served as Chairman of the John F. Kennedy Center for the Performing Arts in Washington, D.C. In 2008, he donated $100 million to the New York Public Library to finance the renovation of its main branch building on 42nd Street and Fifth Avenue. The 100-year-old Beaux Arts landmark has been renamed in his honor.

May 2015: Stephen Schwarzman, left, the Chairman and Chief Executive of The Blackstone Group, at Commons with Peter Salovey, President of Yale University. Schwarzman gave $150 million for a performing arts center at Yale. (Christopher Capozziello/The New York Times)
Stephen Schwarzman in Yale’s historic Commons building with Peter Salovey, President of Yale University. In 2015, Schwarzman donated $150 million to Yale University to establish the Schwarzman Center. He holds a B.A. from Yale University and an M.B.A. from Harvard Business School. Stephen Schwarzman has served as an adjunct professor at the Yale School of Management and on the Harvard Business School Board of Dean’s Advisors.

He has also been a generous benefactor of his alma mater, Yale University. In 2015, he made a gift to the university of $150 million to establish a new center for cultural programming and student life. This was the second-largest gift made to Yale in its 300-plus-year history. An even more ambitious project is the creation of Schwarzman College at Tsinghua University in Beijing, China. Every year, approximately 200 university graduates from the United States, China and other countries are to be given the opportunity to earn graduate degrees in public policy, economics and business, or international studies. The one-year program, conducted in English, is intended to prepare a new generation of leaders for a world in which China is destined to play an increasingly large role. As the Rhodes Scholars of the 20th century played a major role in aligning the interests of the English-speaking nations, it is Stephen Schwarzman’s hope that the Schwarzman Scholars of the 21st century will build a network of relationships that foster peaceful cooperation among China, the United States and all the nations of the world.

February 2017: President Donald Trump meets with his business advisory council, the Strategic and Policy Forum, for the first time in the White House’s State Dining Room. Seated next to President Trump is the chairman of the council, Stephen A. Schwarzman, and Mary Barra, Chairman and CEO of General Motors. Topics of discussion included tax and trade, regulation, infrastructure, women in the workforce, education, and immigration. In attendance were 17 high-powered executives along with Vice President Mike Pence and the president’s top aides.

By 2016, Stephen Schwarzman had amassed a personal fortune of more than $10 billion. His income of $734.2 million from Blackstone in that year alone made him far and away the most successful executive in the private equity sector. Shortly after the 2016 election, President-elect Donald Trump named Stephen Schwarzman to chair a new business advisory council, the President’s Strategic and Policy Forum. The Forum draws on the experience of the nation’s leading business executives to assess the impact of government policy on economic growth, job creation and productivity.

Inducted Badge
Inducted in 1999

At age 31, Stephen Schwarzman was Managing Director of Lehman Brothers, one of Wall Street’s leading investment banking firms, but after merging Lehman with American Express, he chose to strike out on his own. With one partner, two employees and less than half a million in start-up cash, he set out to compete with Wall Street’s reigning giants.

From these unpromising beginnings, Schwarzman built America’s leading private equity firm, The Blackstone Group, and made brilliant strategic investments in almost every sector of the economy. After completing the largest leveraged buyout in history to acquire some of America’s most profitable real estate, he took his firm public in the biggest initial public offering recorded to date, giving ordinary investors a chance to participate in Blackstone’s unprecedented success.

Schwarzman’s investments made him a very rich man, but they also made the American economy more efficient and productive, rescuing troubled companies from insolvency and building small companies into big ones. Although Blackstone and its holdings declined along with the rest of the economy in the global credit crisis of 2008, the firm and its chairman remain major figures in the world financial scene. In addition to his achievements in finance, Stephen Schwarzman is one of his country’s leading patrons of the arts and culture; in recognition of his generosity, the main branch of the New York City Public Library now bears his name.

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The decisive moment in your career was probably when you left Lehman Brothers to found The Blackstone Group. Was that a difficult decision to make? There was a lot at stake.

Stephen Schwarzman: Yes and no. I didn’t view it as particularly bold. One has to understand context, I think, on this.

Keys to success — Courage

In 1984, Lehman Brothers, where I had worked for my career, had been sold to American Express. I actually was the person handling that transaction. I was 36 years old, or 35, I forget which. I had a non-competition agreement, and as part of my wanting to do that deal, I wanted to leave for a variety of reasons. I didn’t like what ethically had happened with the firm. I didn’t want to be with the people — not all the people, but the leadership people — so I worked out a situation where I joined the former chairman of the firm at Lehman, who had been pushed out, which necessitated the need for the sale. He and I had always worked very closely together. So all we were trying to do by forming Blackstone was sort of re-forming our own working relationship. We didn’t view it — and on this, I’m sure I was sort of colossally naive — as that big a step. I knew we had always been successful doing almost everything together, commercially, and I didn’t understand why we wouldn’t be. The fact that we had no phone, no office, no company, that small little companies like this were not successful in investment banking, in fact they didn’t exist at all — there was only one of them that existed, which was a small firm founded by a fellow named Jim Wolfenson. Jim’s currently the head of the World Bank, but even Jim had never done any larger mergers until that time. We just assumed that we would be accepted as the sort of equivalent of a Salomon Brothers or a Lehman Brothers or a Goldman Sachs or Morgan Stanley, and I guess that’s the height of ridiculous hubris. Because we were too silly to understand that people might be worried about that, we went ahead, and it worked out.

March 10, 2009: Stephen Schwarzman, Chairman and CEO of the private equity firm The Blackstone Group, speaks at the Japan Society in New York, on "The Global Impact of the Financial Crisis." (James Leynse/Corbis)
March 2009: Schwarzman speaks at the Japan Society in New York, on “The Global Impact of the Financial Crisis.”

It sure did! It worked out pretty well.

Stephen Schwarzman: Pretty well. I must say, for those who haven’t the experience of doing start-up businesses, at least in the mid-’80s, it wasn’t quite as amusing as apparently it is in 1998 or ’97 in the Internet, where there’s tons of money available now. That was not the case then.

In New York, which may be atypical in the United States, people are only happy if someone they know well is failing. Particularly when you’re more vulnerable in a smaller setting, like we were at Blackstone, I know there were many former colleagues who were staying at big firms, who were looking at what we were doing, and some were hoping that we’d make it. But you know, we were somewhat of a threat if we could make it just in a small organization and end up making a good deal more financially than the people who stayed at the large one. That was, in effect, a threat to a system. We were not aware of this, of course.

Keys to success — Courage

All we were trying to do was pay the rent. We had more modest expectations at the beginning. But we took a number of large leaps at the firm, and part of that is — you asked a question earlier, “What makes someone successful?” and I think that another answer is sort of feeling what’s going on around you, seeing what’s going on around you, and taking a big step to take advantage of that. One of those steps, for us, is the second year we were formed, we decided to go forward with a plan we had when we started, to go into the leveraged buyout business, and neither my partner or I had ever done a leveraged buyout, which one might think would be a liability when raising money.

Christine Hearst Schwarzman and Stephen Schwarzman meet singer Dolly Parton prior to the 2006 Kennedy Center Honors. Stephen Schwarzman is the Center's chairman, Dolly Parton was one of the year's honorees. (Courtesy of the John F. Kennedy Center for the Performing Arts)
Christine Hearst Schwarzman and Stephen Schwarzman meet singer Dolly Parton prior to the 2006 Kennedy Center Honors. Stephen Schwarzman is the Center’s chairman, Dolly Parton was one of the year’s honorees.

There’s a certain pattern of this in your life.

Stephen Schwarzman: My partner is a very experienced, capable fellow, previously Secretary of Commerce and Chairman of Lehman Brothers. He wanted us to raise $50 million to do our fund and start doing smaller deals, learn, and then raise something larger. I had been over visiting one of the large firms, and I looked at their balance sheet — it actually was a company called First Boston — and at that point in history, they had a billion dollars of equity. I said, “You know what? I think it would be fun to have a billion dollars of equity without all the people,” and I said, “I think we could do that. “

Keys to success — Vision

I went back and met with my partner, and I said, “We’re going to raise a billion dollars,” and at that time, there were only two other organizations on the planet that had a billion dollars, and he said, “How can we do that? We don’t have any experience.” And I said, “I know we can.” I said, “The time is right.” We’re in the ’80s — it’s sort of 1986. There’s enormous momentum. Leveraged buy-outs are becoming very popular. They’re going on the covers of magazines, on the front pages of newspapers. There aren’t enough vehicles to take advantage of this. We’re well-known people. And he said, quite intelligently, “That’s a long way from a billion dollars,” and I said, “I just know we can do this, and in fact, if we tell people that we want a billion dollars, then if they were going to just give us $10 million for a small thing, they’ll give us 50 million, okay, because we’ll have scaled-up expectations.” And he said, “You know, I’m going to be a good partner, but I think we’re biting off more than we can chew,” and he was probably right. We ended up raising $850 million, going through enormous amounts of difficulty. We subsequently raised another 100 million from one of those investors. So we got to 960 actually, at the end, and it launched the firm in a scale where we always did very big things, because that’s what I wanted to do. It’s also what my partner wanted to do. He just didn’t know that that was achievable. And you know, none of us knew, but he was a good enough partner and a smart enough man to also back my vision of what I thought was achievable.

Now that’s just an instinct, and one has those types of instincts in my type of business. I don’t know how one describes how you would know that that could happen, but it’s from reading the newspaper, seeing what’s going on, feeling what people are talking about, and just knowing that ought to be possible.

November 2012: Stephen A. Schwarzman Building. Schwarzman is a board member of the New York Public Library, and he made headlines in 2008 when he committed $100 million to help fund the library’s massive expansion project. It was the largest gift to a cultural institution the city has ever recorded. Schwarzman said that the library was helpful to lower- and middle-class citizens to reach toward the American Dream. The main building has been renamed the Stephen A. Schwarzman Building and holds traditional book collections as well as historically and culturally relevant documents.
November 2012: Stephen and Christine Schwarzman on the steps of the New York Public Library on Fifth Avenue. Schwarzman committed $100 million in 2008 to go toward the the library’s $1 billion expansion project. It was the largest gift to a cultural institution New York City has ever recorded. Schwarzman said that the library was helpful to lower- and middle-class citizens to reach toward the American Dream. The New York Landmarks Preservation Commission agreed to change the name of the library’s main building to the Stephen A. Schwarzman Building. The New York Public Library holds traditional book collections and historically and culturally relevant documents.

Can you recognize that in a young person who’s interested in becoming part of this world?

Stephen Schwarzman: Oh sure. Sure. There are certain ways that people think, patterns of thought. In our firm, we’ve gone into a lot of new businesses, and we’re subsequently quite big. We’re one of the biggest investors in what are now called alternative assets — which is leveraged buyouts, real estate, hedge funds, mezzanine debt — in the world, and every time we have one of these new perceptions that there’s a really interesting thing to be done, you just do it. It’s sort of like a basketball player who only shoots when they get a real good sense that they’re in the zone, okay? It’s not like a player who keeps forcing because they’re throwing them the ball, that they’ve got to put it up, they have a cold hand, and they’re throwing up bricks and they have to keep doing it. This is a game that you play only when you have a really strong feeling. It’s like fishing in a pond that’s been deeply stocked with giant trout. Now, you know that that pond is stocked, but other people don’t necessarily agree with you, and there is a certainty that comes when you just know that things are lining up. You don’t have to be very smart about this either. We went into the real estate business in 1991. I never bought any real estate. I didn’t even understand it. I always felt uncomfortable with real estate, because buildings don’t move and neighborhoods change. So can’t you make a bad decision? Companies can at least change their products. Buildings don’t move. There they are.

Keys to success — Vision

We were in the recession, and real estate was collapsing. Everybody wanted to sell real estate, and somebody brought us a deal which had a 15-percent yield on it, a bunch of apartment buildings. An — ironically — Little Rock, Arkansas, bankruptcy of a savings-and-loan. I don’t know if it was the same one that was involved with, you know, the more popular things of the time, and we could borrow money off of that 15-percent yield and earn about 23, 24 percent at the bottom of a recession with apartments that were close to new. And I said, “Well, what can go wrong here? The economy can’t go any worse than it is now. If the economy gets stronger, then rents will go up. It’s hard to borrow money now…” (at that time). And even with the difficulty of borrowing money, we were earning 24 percent on our equity. So I figured when times got better, money would be more available, interest rates would be down further, you could borrow more on the property, and so there was no downside, there was only upside. The present moment we were doing it was really already excellent. So why not just buy as much real estate as you could possibly find? And there was a whole country of real estate to be found at that time. Now to me, this doesn’t go into the blinding insight mode. Anybody, when told those same facts, I would assume, would act rationally and would be buying real estate. In point of fact, the problem was everybody who would normally be buying real estate had already lost a fortune and was in no position, because most of them were either bankrupt or undergoing enormous difficulties with their existing properties. They couldn’t go ahead, and if they went to a bank to borrow money, they were creating bankruptcies for the same banks, so the banks didn’t want to talk to them, and we were sort of there alone with two or three other groups of people who had never been in real estate and saw the same things.

January 2016: Blackstone Group CEO Stephen Schwarzman, at his Manhattan offices. (Natalie Keyssar / The Wall Street Journal)
January 2016: Blackstone Group CEO Stephen Schwarzman, at his Manhattan offices. (Natalie Keyssar/WSJ)

You become the managing director of Lehman Brothers at age 31. You must have been pretty good at it. What do you think was propelling you forward?

Stephen Schwarzman: I think investment banking is pretty easy. The reason why I was probably pretty good at it is that it’s very easy to get the sort of fundamental base for it. After that, it’s anticipating what’s going to happen, figuring out new things, new relationships, solving problems that people haven’t focused on in the right way. I don’t know if that describes it. Here’s just one thing I can remember, just sort of at random, which I was proud of at the time. It seemed pretty simple to me.

Keys to success — Vision

There was one of these development institutions, like the World Bank — it had a different name — and they had a variety of bonds outstanding, and each of those bonds had what’s called covenants, which are really restrictions in them. The bank wanted to do something, but wasn’t able to because some of these issues forbid them, and they still wanted to do something, but they couldn’t get those bonds in. They couldn’t call them. They were stuck with it. It was an important initiative, and everybody was real concerned. They didn’t know what to do. So nobody could solve the problem, and I was one of the people working on this, and I remember going home at night, and I often think of things when I’m sleeping. I don’t sleep real deep REM stuff, and I woke up, and I said, “You know what? What’s the problem here? The problem is that these bond-holders want to be protected for something, and what’s the worst that can happen to them? The worst that can happen is, if you did the bad thing and it didn’t work out, they’d lose their money, right?” So, I said, “Why don’t we just take a bunch of money” — because banks always have money — “and just dedicate that money behind those bonds and go ahead and do whatever we want to do. Because the worst that can happen is that they lose their money, and if we assure them that they could never lose their money, then they don’t have to worry. And if they don’t have to worry, they have no cause for damages against the institution for going ahead and doing something. So I came in with some elaborate sort of proposal to do that for large amounts of money — at that point, large amounts were hundreds of millions, now it would be tens of billions — and everybody just sort of sat there and went, “Geez, no one’s ever done this,” and I said, “Well, so what? Aren’t we addressing the problem?”

They all said, “Yeah, but it’s not legal.” I said, “Forget the legal part for the moment. It’s not technically legal, but if we went to all the bond-holders and asked them for a vote and said there’s no conceivable way you can lose money, because the money to pay off the bonds and their interest is already dedicated, and we got a pretty high percentage of the vote,” I said, “that seems to me like a risk you can take, because you’re doing nothing unethical. You’re protecting the bond-holders better than they are today, okay? Today, they just have to rely on the general credit of the institution, and we’re making it even better. We’re putting a few hundred million dollars’ worth of cash behind to guarantee the payment. I said, “Who could be unhappy?” So they did that.

March 2016: Members of the Academic Advisory Council at the spring meeting at Schwarzman College,Tsinghua University. Chairman, CEO and Co-founder of Blackstone, Stephen A. Schwarzman, founded the Schwarzman Scholars program in order to give the most talented future leaders the power to change the course of history. An active philanthropist, Mr. Schwarzman has personally donated $100 million to this effort and is leading a campaign to raise more to fully endow the program — the single largest charitable effort in China's history coming from largely international donors.
March 2016: Members of the Academic Advisory Council at Schwarzman College, Tsinghua University, in Haidian District, Beijing, China. Stephen Schwarzman founded the Schwarzman Scholars program in order to give the most talented future leaders the power to change the course of history. An active philanthropist, Stephen Schwarzman personally donated $100 million to this effort and is leading a campaign to raise more to fully endow the program — the single largest charitable effort in China’s history coming from largely international donors. With the inaugural class enrolled in 2016, the scholars program gives the world’s best and brightest students the opportunity to develop their leadership skills and professional networks through a one-year Master’s Degree.

You didn’t get the Pan Am response. At the end, they bought in.

Stephen Schwarzman: Right. They bought in because they had a problem, and they wanted that problem solved.

Keys to success — Passion

I’ve always found, in investment banking, that there’s real logic to everything, and I don’t understand why somebody else didn’t come up with that. They probably would have, at some point, but you know, I’ve always found — and I really didn’t specialize in doing financings like that. I really did merger things with most of my career, and that’s just another derivation of solving problems. In the merger business, there’s also the ability to sort of go out on a limb and sort of invent things, sort of creatively imagine “What would this company buy?” before they might even think about it. And then sort of go to them and convince them, and then convince the other side to do something, or negotiation, which is — you know, a lot of people don’t like really being in zero sum games, and you try and make a zero sum game not a zero sum game. But you know, that’s your first level of solving of problems. But at the end of the day, if money’s being paid, usually it’s out of somebody’s pocket into somebody else’s pocket. So that is a zero sum game at the end of the day, and usually that generates huge amounts of conflict and tension. A lot of people don’t like being in situations like that, and for whatever the series of reasons, that didn’t bother me. I don’t always enjoy it, but it didn’t bother me.

It would be normal for the other person to get angry if you were demanding a lot of money or something. That would be a normal response. If I were on the other side, it would just be the opposite. I found that I was pretty well adapted for this stuff, in large part because finance has much to do with understanding what’s on the other person’s mind, and if you can understand what’s on their mind, in effect, that’s the problem to solve. There’s a zone of fairness where you can solve that for that person, and at the same time not disadvantage the other person you’re representing. So that was probably what made me pretty good. You don’t even have to meet with the other people to know what’s on their mind, because you say, “Well, if I were them, what would I want?”