Market Views

Steve Schwarzman on Lessons Learned

Blackstone Chairman and CEO Steve Schwarzman participated in a fireside chat at the Harvard Association for Law & Business (HALB). Read more in the below article, or on the Harvard Law School website:

Making complicated things simple
‘Corporate titan’ Stephen Schwarzman brings business acumen to the public sector




On April 5, the Harvard Association for Law and Business (HALB) hosted Stephen A. Schwarzman, chairman, CEO and co-founder of the Blackstone Group — the largest alternative asset management firm in the world — to discuss lessons from his long career in business, and his many years of work as a philanthropist. Jeff Cui JD/MBA ’17 moderated the discussion, which ranged from Schwarzman’s early professional career to his current position as chairman of the President’s Strategic and Policy Forum, a roundtable of business executives formed in December 2016 to provide insights to the new administration as it implements its economic agenda.

Dean Martha Minow kicked off the event by welcoming Schwarzman, calling him “a leader in every sense of the word,” and thanking HALB for inviting him to the law school as part of their series of fireside chats, held throughout the academic year. In his introduction, Cui said that Schwarzman is not only a corporate titan but also a game changer in the public sector — both in the U.S. and on the world stage. “HALB board members believe Steve embodies our mission of educating students with an interest at the intersection of law and business,” he said.

Schwarzman opened the forum by discussing his early professional career, and attributed part of his success to an “ability to operate under conditions of complete fear.” He recalled entering the boardroom of Tropicana as a young Lehman Brothers banker in 1977, having been specifically recruited to advise on and close a $488 million merger deal despite his relative inexperience. After closing the deal, Schwarzman asked the President of Tropicana why he was chosen as the lead banker. “I asked ‘Why me?’ And he said, ‘Because you have the ability to make complicated things simple.’”

40 years later, Schwarzman is staying true to his belief in extracting simple logical conclusions from the world’s noisy data. Every Monday morning, Blackstone connects its global offices by videoconference to discuss the latest trends. “For us to do well, we have to know what the cyclical and geopolitical forces are,” Schwarzman emphasized, noting that the meetings also allow junior associates at the firm to participate in an open discussion about the critical drivers that affect the market. “Investing isn’t that different from playing hockey, as described by the great Wayne Gretzky,” Schwarzman said. “You need to ‘skate to where the puck is going’ to be in the right place at the right time.”

Schwarzman uses that ability to anticipate the future to stay one step ahead of the competition. He entered the fields of M&A and private equity when they were still emerging, and he and his firm make investment decisions based on similar themes. For instance, in the early years of internet shopping, Blackstone realized that the logistics sector was on the rise, and that e-commerce companies’ needs for warehouses near major cities would eventually skyrocket. “We had an intellectual construct, a point of view, that the rent will explode when Amazon gets to town and needs warehouse space,” Schwarzman said. Unsurprisingly, Blackstone has since been able to sell this portfolio at attractive prices. The firm’s rigorous process and aggregate investment acumen enables it to play out market trends while limiting much of the usual risk inherent in making investment decisions.

Schwarzman acknowledged that foresight and talent alone did not bring his success. They were supported by his strong work ethic. “The standard for professionalism is 100%,” Schwarzman emphasized, “You cannot make mistakes.” Cui, the moderator, noted that between meetings, Schwarzman fully utilized his time. “After a long day of back-to-back meetings, Steve was on his way to the airport,” Cui recalled. “The first thing he did after getting in the car was to turn on his computer. I was beyond impressed. This showed me how disciplined and hardworking Steve was even at his level.”

One of Schwarzman’s more recent areas of focus is his Schwarzman Scholars program. Described as the “first scholarship created to respond to the geopolitical landscape of the 21st century,” the program hosts up to 200 students for a one-year Master’s Degree at Tsinghua University in Beijing.

Schwarzman’s interest in China started when he visited the country in 1990 and later witnessed its fast growth. In 2007, when China Investment Corporation bought into the Blackstone IPO with approximately $3 billion, many critics argued that Blackstone should stop the deal. “I got this shock that there were very strong attitudes toward China.” Schwarzman cited the Thucydides Trap, a Greek metaphor describing that, when a rising power challenges an incumbent, the tension often escalates to a war despite both sides’ reluctance. The Schwarzman Scholars program is his effort to help stop history from repeating itself. “If the scholars developed into thought leaders, they would become a layer of protection against this Thucydides Trap,” Schwarzman noted.

Schwarzman’s dedication to public service led him to take the position as the Chairman of President’s Strategic and Policy Forum. The Forum includes some of the country’s top CEOs and business leaders and creates an environment where they can provide candid insight to the Trump administration on economic matters. “The basic substance of what they are trying to do,” Schwarzman said referring to the current administration, “is to create the preconditions for dramatically increasing growth.” He believes that lowering tax and increasing employment rate are the outcomes that everyone in the U.S. will benefit from. “The question is, can you accomplish that?” During his chairmanship of the Forum, Schwarzman will facilitate the sharing of its members’ views to President Trump through a non-bureaucratic exchange of ideas.

After the event, Cui noted that Schwarzman’s vision, courage, and tenacity left a strong impression on him. “Steve’s intellectual capacity is simply staggering. Sitting next to him, I could vividly sense his innate craving to be the best at whatever he did and a personal appreciation for those who share a similar thirst for excellence.”

The event was organized by the Harvard Association for Law and Business under the leadership of Co-presidents Kisho Watanabe and Daniel Wertman, Executive Vice Presidents David Kafafian and Jianjian Ye, Vice President Brooke Stanley, Symposium Chair Loren Shokes, Private Equity and Venture Capital Chair Jeff Cui, and HALB photographer Jerry Ting.