Common sense at times means more than financial acumen.
I graduated from Yale in 1969 and entered Harvard Business School the following year. In the interim, I spent seven months at a midsize investment bank called Donaldson, Lufkin & Jenrette—DLJ. It was my doorway to Wall Street.
After graduation, I was committed to six months of military service. While I was casting about for something to do before reporting for duty, fate brought me into contact with one of the bank's founders, Bill Donaldson, a man who would later serve as chairman of the U.S. Securities and Exchange Commission.
The Manhattan office hummed with energy. It felt glamorous and alive, a place of ambition, money and possibility. After several days of interviews with other executives, all arranged at Bill's urging, the word came down from Bill himself: DLJ wanted to hire me.
"We're gonna pay you $10,000," he said.
It was a great deal of money in 1969, especially for someone who had none. Yet I made a counteroffer. "I need 10-five," I said. "Ten thousand five hundred." I had heard that another member of my Yale class was going to be paid $10,000 and I wanted to be the highest-paid person in my graduating class. My drive to be No. 1 was already present.
Bill was incredulous. "What are you talking about?" he said. "Why would I give you $10,500? I just offered you $10,000."
I explained my reasoning. He was unimpressed. "I don't care about that," he said. "That's not relevant to me. Frankly, you're worth almost nothing and we're paying you $10,000."
I told him I would not take the job at $10,000. He was astonished. This was not what he had expected. He said he would think about it.
The next day, he called back. "I don't know why I'm gonna do this," he said, "but I'll pay you the 10-five."
My good fortune ended there. I had not studied economics in college. I could not read a financial statement. A colleague would drop a company's annual report on my desk and say, "Why don't you analyze this?" But I had not even known such a thing as an annual report existed.
I opened it and found terms like balance sheet, common stock and preferred stock.
"Geez," I thought. "This is really complicated."
At DLJ, no one bothered to teach me anything. It was one of the most frightening experiences I had ever had. I became afraid of being asked to do anything. I spent my days trying not to look anyone in the eye. What I learned at DLJ was how to avoid people. I was nervous all the time and I was in a hopeless situation.
So I made a vow: I would never allow another person under my control to be put in that kind of situation. Ever. Ever.
That experience later shaped Blackstone. We built a serious training system and we held to a simple principle: If you do not know how to do a certain type of analysis, do not try to bluff your way through it. Ask someone who knows. This is not a university.
The seven months at DLJ were bleak and depressing. Yet there is one thing from that time I can take pride in. I saw a company's bankruptcy coming. It was called National Student Marketing. It rented small refrigerators to college students and sold them life insurance.
I knew at once that the business could not last. Students kick refrigerators, throw them around and break them in no time. And a 20-year-old believes he will live forever; he has no interest in life insurance.
A visit to the company confirmed my suspicions. No one there seemed to know who was sitting in the next room. It looked like a growth company only because the number of students kept rising. Internally, it was out of control. I went back to the office and wrote a report concluding that the company would, in time, go bankrupt. Soon after, it did.
You may not be able to read a financial statement, but you can still recognize madness and folly. When weighing an investment, there are questions one must ask. Does the company have a real reason for being? Are people going to get excited about its products? Are the people running it authentic and focused, or are they merely salespeople trying to persuade you of something that is not real?
As my time at DLJ drew to a close, Bill Donaldson, the man who had hired me, took me to lunch. As we were parting, I worked up the nerve to ask him the question that had been on my mind.
"Why did you ever hire me?" I said. "I was completely untrained. I had no skills. I didn't make any real contribution."
"I had a hunch," Bill said.
Then he told me something astonishing: "There is something about you," he said. "One day, you will be the head of my firm. I have a sixth sense about these things."
It was not flattery.
Thirteen years later, in 1982, after I had risen through the ranks at Lehman Brothers, I received a phone call from Dick Jenrette, one of DLJ's three founding partners. I went over to see him.
"I'd like to ask you if you would be the president of DLJ," he said.
I told him I was not qualified to lead such a large securities firm.
"I think you've got it," he said. "You've always had it."
I declined, pleading the rawness of my 34 years. But I thought of Bill's prophecy and it moved me more than I can say.
Originally published in the Nikkei, October 2026