Highlights from What It Takes: Lessons in the Pursuit of Excellence by Stephen A. Schwarzman

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Blackstone co-founder and CEO Stephen A. Schwarzman’s memoir What It Takes: Lessons in the Pursuit of Excellence is what you might expect from a successful billionaire who exudes self-confidence and knows he has achieved most anything he’s set his sights on. Unlike, say, Disney CEO Bob Iger’s memoir The Ride of a Lifetime: Lessons Learned from 15 Years as CEO of the Walt Disney Company, Schwarzman doesn’t linger on internal struggles, moral crises, or any vulnerable moments. Instead, in a most straightforward and steadfast manner, he shares how he willed into being one of the most formidable companies in the world.

The book was a quick read and Schwarzman has a lot of very quotable excerpts. Below are a few of my favorite ones with some commentary.

In spring 1987, I flew to Boston to meet with the endowment team at the Massachusetts Institute of Technology. I was trying to raise money for Blackstone’s first investment fund and had set a target of $1 billion. This would make us the biggest first fund of our kind and the third biggest in the world. It was an ambitious goal. Most people said it was impossible. But I’ve always believed that it’s just as hard to achieve big goals as it is small ones. The only difference is that bigger goals have much more significant consequences. 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.

This is a recurring theme throughout Schwarzman’s book: if you’re going to put effort into something, why not go big and make it really worthwhile? I appreciate the audacity and self-confidence in such an approach, and Schwarzman’s narrative for his career is very much about thinking big and making it happen.

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.

This is why I enjoy reading and listening to memoirs by entrepreneurs. No journey is ever straightforward and there are so many “inflection points” that reveal a great deal about the person, the situation, and other factors that shaped the outcome.

Blackstone is a remarkable success because of our culture. We believe in meritocracy and excellence, openness and integrity. And we work hard to hire only people who share those beliefs. We are fixated on managing risk and never losing money. We are strong believers in innovation and growth—constantly asking questions in order to anticipate events so that we can evolve and change before we are forced to. 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. We have assembled an extraordinary team at Blackstone, driven by a common mission to be the best in the world at whatever we choose to do. With a benchmark like that, it’s always easy to measure where we stand.

One thing a founder and CEO needs to do well is to carry the torch for the company’s mission and core values. When done really well and with consistency over a long period of time, the story of what the company stands for and why it’s special becomes really clear and memorable. Schwarzman solidifies Blackstone’s narrative with his confident description of the company’s beliefs and the strength of its team.

“Listen,” he said laughing, “I’ll give you a call in two or three days.” He came through with an offer of a job. The starting salary was $10,000 a year.

“That is absolutely terrific,” I said. “But there’s only one problem.”

“What’s that?” “I need $10,500.”

“I’m sorry,” he said. “What do you mean?”

“I need $10,500 because I heard there’s another person graduating from Yale who’s making $10,000, and I want to be the highest-paid person in my class.”

“I don’t care,” said Bill. “I shouldn’t be paying you anything at all. It’s $10,000!”

“Then I won’t take the job.”

“You won’t take the job?”

“No. I need $10,500. It’s not a big deal to you, but it’s a really big deal to me.”

Donaldson started laughing. “You’ve got to be kidding.”

“No,” I said, “I’m not kidding.”

“Let me think about it.”

Two days later he called back. “Okay. $10,500.” And with that I entered the securities business.

This exchange between Schwarzman and his first employer on Wall Street highlights the type of person Schwarzman was – self-confident and unwilling to take no for an answer.

If ever I ran an organization, I promised myself I would make it as easy as possible for people to see me and I’d always tell the truth, no matter how difficult the situation. As long as you can be honest and rational and are able to explain yourself, there is no reason to feel uncomfortable. No one person, however smart, can solve every problem. But an army of smart people talking candidly with one another will.

Reflecting on his experience of trying to give feedback to the dean of Harvard Business School and getting shut down, Schwarzman took away the lesson that he needed to face reality and to make it easier for people to give him the truth, especially as he became everyone’s boss.

“Mr. Schwarzman,” said Putnam, interrupting me. “Can you please close your book?” I closed the book, nervously.

“Mr. Schwarzman, have you ever heard of the UJA?” The UJA, the United Jewish Appeal, three letters it never occurred to me would be crossing George Putnam’s lips.

“Yes, I’ve heard of the UJA.”

“Have you ever heard of card calling?” Card calling was a common practice at the UJA’s fundraising dinners. The chairman would call out the names of all potential donors, announce what they gave last year, and everyone would listen for what they were going to give this year. It was a way to create a level of expectation and apply peer pressure.

“Let’s start this meeting over, Mr. Schwarzman. You say, ‘Mr. Putnam, you’re the treasurer of Harvard University, and I’m starting the largest—what will be the largest—student loan lending business in the United States, and I’ve got you down for $20 million.’ Now, say that.” I said it.

“That’s a great idea, Mr. Schwarzman,” he said. “I’m in for twenty.” He had read up on the company before I walked into the room and would not be convinced by me one way or the other on its merits. He just wanted my help in making a quick decision on how much to invest. “Now what you do is take your book, get on the train, go to New Haven, and see Mr. So and So at Yale, and say, ‘Mr. So and So, I’m raising money for the Student Loan Marketing Association, which is going to be the biggest lender to students in the United States. I’ve got Yale down for $15 million.’ Try that. See what happens. After that, get back on the train, go to Princeton. Ask them for $10 million.”

The above is a story from Schwarzman’s meeting with George Putnam, who was Harvard’s treasurer when Schwarzman came as a Lehman Brothers banker helping the Student Loan Marketing Association with their IPO road show. Schwarzman learned a great lesson from this exchange with Putnam: “Investors are always looking for great investments. The easier you make it for them, the better for everyone.” Also fun to note the inherent pecking order amongst the Ivy schools.

In my relatively short career, I had learned that deals ultimately come down to a few key points that matter most to each side. If you can clear everything else away and focus on these points, you will be an effective negotiator. You cannot let all the voices, paperwork, and deadlines overwhelm you.

Reflecting on his time as a young banker, Schwarzman recalls working on a Tropicana deal that he was able to distill down to its simplest form to explain clearly to his client and to make a deal with the buyer. This is useful advice for anyone engaging in some kind of negotiation – being able to identify the key points, explain them clearly, and make decisions with focus.

I didn’t just try selling whatever it was I had to sell. I listened. I waited to hear what people wanted, what was on their mind, then set about making it happen. 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.

A lot of people fail because they start from a position of self-interest. What’s in this for me? They will never get to do the most interesting and rewarding work. Listening closely and watching the way people talk puts me much closer to answering the question I’m always asking myself, which is: How can I help? If I can help someone and become a friend to their situation, everything else follows.

There is nothing more interesting to people than their own problems. If you can find out what they are and come up with solutions, they will want to talk to you no matter their rank or status. The harder the problem and the scarcer the solution, the more valuable your advice is. It’s in those situations, where everyone is walking away with averted eyes, that the field clears and the greatest opportunity awaits.

Being a good listener and looking for ways to help others is at the core of Schwarzman’s lifelong success. He knows that by being helpful and useful to others, the opportunities for his own gain will come naturally. I’ve seen this in action when observing people who’re successful in sales. They’re great listeners who focus on the needs and wants of the prospect, never pushing an agenda or trying to win business. Instead, they ask smart questions, keep the conversation engaging, and help uncover deeper issues or challenges. They are also very honest about the ways in which they can help and are quick to offer a referral or some other resource if they aren’t in position to solve the prospect’s problems.

A classic LBO works this way: An investor decides to buy a company by putting up equity, similar to the down payment on a house, and borrowing the rest, the leverage. Once acquired, the company, if public, is delisted, and its shares are taken private, the “private” in the term “private equity.” The company pays the interest on its debt from its own cash flow while the investor improves various areas of a business’s operations in an attempt to grow the company. The investor collects a management fee and eventually a share of the profits earned whenever the investment is monetized. The operational improvements that are implemented can range from greater efficiencies in manufacturing, energy utilization, and procurement; to new product lines and expansion into new markets; to upgraded technology; and even leadership development of the company’s management team. After several years, if these efforts have proved successful and the company has grown considerably, the investor can sell it for a higher price than he or she bought it, or perhaps take the company public again, earning a profit on the original equity investment. There are a lot of variations on this basic theme.

I wanted to excerpt this because I always appreciate it when people who’ve reached the top of their industry take the time to explain aspects of their profession in the simplest and most basic terms. This is as clear a definition of leveraged buyout (LBO) as I’ve seen and it’s a shame that many people, especially outside of finance, never get exposed to a more understandable definition, instead assuming the only definition is the most politicized aspect of “LBO” and “private equity” – the observation that seeking efficiencies can sometimes lead to job cuts and/or jobs being sent overseas.

When you disagree, it’s important to get your opinions on record so you aren’t blamed later when things go wrong.

Schwarzman reflects on a situation during his Lehman days when a client was desperate to sell an asset cheaply but he disagreed and felt they should ask for a much higher price. The asset was sold to another company which then took it public and made a lot of money, angering the client’s investors who blamed Lehman for the missed opportunity. I’ve seen this type of situation happen multiple times during the course of our client dealings, so it’s something I try to remind myself and to share with our team members: keep documentation, especially when there’s been some disagreement or potential for misinterpretation, preferably in the form of some communication that the client will also have to keep (e.g. an email recap summarizing why we disagree with the client’s decision on a certain issue that they ultimately ruled over our objections).

Pete and I thought of the people we wanted to run these new business areas as “10 out of 10s.” We had both been judging talent long enough to know a 10 when we saw one. 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. We imagined that once we were in business, the 10s would come to us with ideas and ask for investment and institutional support. We’d set them up in fifty-fifty partnerships and give them the opportunity to do what they did best. We’d nurture them and learn from them in the process. Having these smart, capable 10s around would inform and improve everything we did and help us pursue opportunities we couldn’t even imagine yet. They would help feed and enrich the firm’s knowledge base, though we still had to be smart enough to process all this data and turn it into great decisions.

As Blackstone expanded from an M&A advisory business into private equity, real estate, and beyond, Schwarzman and his co-founder Pete Peterson sought out driven and entrepreneurial individuals to come in and build out new business lines. This approach of first finding the right people and then having them take the lead in generating ideas, solutions, and game plan would be a powerful platform for Blackstone to expand into a financial powerhouse.

This excerpt is probably the most memorable part for me in the entire book. It’s a concept that I’ve been contemplating for a while and have observed first-hand. When you have the right people–especially ones who really hit the 9s and 10s–the attention shifts from “can we do the job right” to “what are the opportunities we can seize.”

When you’re presenting yourself, the whole picture has to make sense, the entire, integrated approach that gives other people cues and clues as to who you are. The wrong aesthetics can set everything off kilter. Our business cards were an early step in establishing who we wanted to be.

This is a simple yet important lesson on paying attention to the details and making sure you’re presenting the best version of yourself. At the most basic level, it could be something like having a professional photo of yourself on LinkedIn. To go a step further, it could be making sure that you’re groomed and dressed professionally at all times and conducting yourself in a manner that aligns with the image you’re trying to project. Another piece–and this is something I’ve been trying to work on–is to really refine the words used when introducing yourself, giving proper context to your title, role, achievements, affiliations, and whatever else might help the other people get a fuller picture of you. My mistake has often been to downplay this last part mistakenly associating the downplay with modesty and  missing out on a chance to give the other parties a confident, clear, and positive representation of myself.

As an investment banker and later as an investor, I found that the harder the problem, the more limited the competition. If something’s easy, there will always be plenty of people willing to help solve it. But find a real mess, and there is no one around. If you can clean it up, you will find yourself in rare company.

One way I thought about this quote was in the context of positioning for a services firm. Does the firm have the depth and expertise to take on a unique challenge that would be of great value to a client? This could be something horizontal (depth in skills that cut across various industries) or vertical (many skills that apply to a single industry/sector). Chasing harder problems is another way of saying that the company is differentiated and can take on challenges that not every other service provider can. For Blackstone, I think the sheer complexity and scale of the deals helped it reach rarified air in terms of competition.

As a salesman, 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.

A couple lessons in this statement: the first is the power of persistence. If you truly want something to stick and taken seriously, you need to keep at it, employing both strong rationale and persuasion. The other lesson is that it takes time and repetition to fully construct a vision in someone else’s mind. Just because it’s clear and powerful in your own mind doesn’t mean that it’s easily grasped by someone else. It takes work, refinement, and a lot of repetition.

The rejections were horrible and humbling. The setbacks seemed endless. We met people who lied to us or never showed up for appointments even after we had traveled across the country. People we knew well in positions of authority rejected us. Pete and I talked throughout these struggles. He was not someone who failed. He hated failure. But at the same time, he was sixty years old. He was at a different place than I was, with a different mentality. If I had the drive, he had the patience and equanimity. He picked me up and kept me going. He assured me that when you believe in what you’re doing, overwhelmed or not, you have to keep moving forward, even when the quest feels hopeless. Which it did.

Schwarzman and his partner Pete Peterson went from being on top of the investment banking world to enduring hundreds of rejections when they started Blackstone. Schwarzman reflects on how Peterson’s experience helped to encourage and support their efforts when things got hard.

People in a tough spot will often focus on their own problems when the answer may lie in fixing someone else’s.

Reflecting on a deal with a Japanese company to structure to a win-win situation where they would fund Blackstone in exchange for M&A expertise, Schwarzman hits on a theme that comes up many times in his career — that focusing on the problems of others is often the best way to make progress on whatever challenges you may have yourself.

Solutions often come when you’re not so zeroed-in on the problem and obsessing about how to solve it head-on.

You often find this difference between different types of investors. Some will tell you that all the value is in driving down the price you pay as low as possible. These investors revel in the transaction itself, in playing with the deal terms, in beating up their opponent at the negotiating table. That has always seemed short term to me. What that thinking ignores is all the value you can realize once you own an asset: the improvements you can make, the refinancing you can do to improve your returns, the timing of your sale to make the most of a rising market. If you waste all your energy and goodwill in pursuit of the lowest possible purchase price and end up losing the asset to a higher bidder, all that future value goes away. Sometimes it’s best to pay what you have to pay and focus on what you can then do as an owner. The returns to successful ownership will often be much higher than the returns on winning a one-off battle over price.

Schwarzman’s philosophy on investing and winning deals comes through in his story of an early Blackstone real estate deal where he was confident enough in the long-term upside that he didn’t mind outbidding a competitor on price. He takes a dig at investors who are rigid on price and need all assurances upfront of the value where as he likes to view investments as opportunities to add further upside through ownership, a mentality that’s especially necessary for a private equity firm.

For all our entrepreneurial strengths, our drive, our ambition, our skills, and our work ethic, we still weren’t building Blackstone into a great organization. Failures are often the best teachers in any organization. You must not bury your failures but talk about them openly and analyze what went wrong so you can learn new rules for decision making. Failures can be enormous gifts, catalysts that change the course of any organization and make it successful in the future.

A deal gone wrong taught Schwarzman the importance of having systems in place to ensure that Blackstone didn’t make disastrous investment decisions. One of the lessons he learned was that it was possible to get swayed into an investment by emotions, especially if he felt bad for a partner whose ideas had been continually shot down and wanted to give that partner a shot. Schwarzman moved towards instituting an investment committee structure that would systematically stress test any deal proposal by asking every committee member to focus on the deal’s weaknesses. This way, the vetting process would be more rigorous and decoupled from any relationship or emotions.

But I made the mistakes of an inexperienced CEO: I let the differences between us brew. I stood my ground on the dilution of our equity because I considered it a moral principle to respect the terms of the original deal. Instead, I should have recognized that when a situation changes and a business is doing extremely well, sometimes you have to make accommodations.

Schwarzman laments how he let his stubbornness over initial deal terms get in the way of Blackstone and BlackRock (formerly Blackstone Financial Management), now the world’s largest asset manager, existing as one company. He realized that he should have accommodated Larry Fink and his team as their feelings on the value of their contributions changed over time.

The contract may legally bind you to something but the enforcing party has the power to let things go if there’s a better alternative. And when the potential pie is so much bigger than what’s at stake with the contract, it may be worth tearing the old contract up.

When you start a company, you are usually happy to find anyone of quality willing to go on the journey with you. But as you grow, you realize that some people are like wide receivers in football with hands of stone. You throw to them, and the ball just bounces off them. Others have hands like glue. As a decent person you think your role is to coax the bad ones along, to find workarounds. As employees, these are 6s and 7s out of 10. If you keep them, you will end up with a dysfunctional company, where you do all the work, staying up all night with the few people who can make it happen.

You have two options: 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.

Coaxing underperformers to do better is a recipe for disappointment, and worse, wasted opportunities. While “clearing out the mediocrity you created” is no easy task, it’s a necessary step if you truly want to take your company to the next level. I think a big takeaway for us at Barrel is to really hone in on the characteristics and values of team members who are 9s and 10s, establish processes to recruit such talent, and be persistent in finding ways to add them to the team. Great talent goes such a long way and likewise, lackluster talent can really weigh a business down. This is probably where I spend the most time fretting and stressing about work, that I am spending too much time with underperformers but too scared to make the bold moves.

The fund’s managers wanted us to look at investing in assets that regulators were forcing banks to sell in the wake of the crisis. It was a curious request, 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.

This lesson is applicable outside of finance as well. When a client in our line of work asks for something new, it’s possible that there’s another business that will need the very same thing. I’ve seen this play out several times and we’ve mostly been reactive to such requests, treating each as one-offs, but there are a handful of times when we’ve really taken the time to productize and streamline processes, which have worked really well. The key is having the discipline not only to recognize but to put in the time to turn a new service offering into something that can be marketed and easily repeated.

I also remind those promoted to senior roles of the message I give to our analysts every year on their first day of work at Blackstone. You are not alone here, so don’t wear the weight of the world. Every tough decision has been made at Blackstone by someone. What may seem new to you, won’t be new to the institution. Just ask for help. We make decisions as a team, and we own the outcome as a team. That applies just as much to the people running our biggest businesses as it does to our most junior staff.

This is a message that I think I can do a better job of repeating to our team and making sure our leaders do the same as well. When we’re not explicit with this message, that it’s okay to ask for help, people might take that as a sign that they’re on their own and must prove they can handle it.

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.

This reminds me of something Harvard Business School Professor Clayton Christensen wrote: “I tell the students about a vision of sorts I had while I was running the company I founded before becoming an academic. In my mind’s eye I saw one of my managers leave for work one morning with a relatively strong level of self-esteem. Then I pictured her driving home to her family 10 hours later, feeling unappreciated, frustrated, underutilized, and demeaned. I imagined how profoundly her lowered self-esteem affected the way she interacted with her children. The vision in my mind then fast-forwarded to another day, when she drove home with greater self-esteem—feeling that she had learned a lot, been recognized for achieving valuable things, and played a significant role in the success of some important initiatives. I then imagined how positively that affected her as a spouse and a parent. My conclusion: Management is the most noble of professions if it’s practiced well. No other occupation offers as many ways to help others learn and grow, take responsibility and be recognized for achievement, and contribute to the success of a team.”

Instilling self-confidence is not just about getting great performance, it’s setting up that person for a much better life. It’s a huge responsibility.

We have been able to turn $400,000 of start-up capital in 1985 into over $500 billion of assets under management in 2019—a growth rate of about 50 percent a year since we started. The scale of our business today is incredible—we own approximately two hundred companies, employing over 500,000 people, with combined revenues of over $100 billion, over $250 billion in real estate, as well as market-leading activities in leveraged credit, hedge funds, and other business lines.

I love this flex because it’s about multiple things: starting from relatively very little, the staying power of the business over decades, and the sheer scale and reach of the company, a reflection of the ambition and hard work that was the vision of its founder.

It seems that the larger my separate worlds become, the more they overlap. A lifetime of listening to others, forging relationships and constantly asking how I can help has compounded to the point where many of the biggest challenges and best ideas now find me. In politics and philanthropy, it has been my privilege to conceive and help bring to life many remarkable projects and create institutions that will influence generations for years to come.

Schwarzman is talking about true network effects that have benefitted him because he’s cultivated relationships at the upper echelons of business, politics, and culture. When we prioritize listening to and helping others, this is a surefire way to accrue goodwill and opportunities over time.


As you can see, I had a field day highlighting this book and thinking about the various takeaways. Say what you will about Schwarzman’s politics, his insane wealth, and his work in a much vilified space, but the man was also able to do what many of us would love to achieve ourselves: he dreamed up an ambitious plan, worked his butt off, and built something of global scale and impact that he could be proud of.

1 Comment

  1. The lessons are great to achieve excellence. Apparently, when running a business or investing in a company, we have to evaluate the following to succeed:

    1. If the product is truly transformative (e.g. iPhone, Windows)
    2. If the service is truly transformative (e.g. Amazon, LinkedIn)
    3. If the method to run the operation is transformative (e.g. digital transformation, automation, re-engineering the processes).

    Most companies fail because they did not innovate enough. Innovators should focus to create the initial wealth and diversify to sustain it. Focusing in one line, as Stephen A. Schwarzman said, is not enough. It can be explained by what H. Igor Ansoff stated long time ago that no company is immune to obsolescence, saturation of demand, and socio-political discontinuity.

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