Finance and Philanthropy: An Afternoon with Steve Schwarzman

Friday, April 6, 2018

“No one is born a CEO or manager.”

An odd statement, perhaps, from the chairman, CEO, and co-founder of one of the world’s largest global asset managers, but it’s one of Steve Schwarzman’s key business beliefs.

Speaking to a standing-room only crowd, Schwarzman says that while a leadership mindset may be innate, being able to read business situations and act in a company’s best interest is a skill that takes years to develop. Aspiring CEOs need real-world experience with difficult situations – and to make a few mistakes – before they can deal with things instinctively.

Schwarzman credits his company Blackstone’s success, in part, to hiring the right people and then developing them with an eye toward what the company needs. He says the firm maintains an awareness of any gaps in its experience and expertise, and hires people to specifically fill those gaps, always with an eye toward future transition and succession plans. He points out that, in addition to moving people up the ranks, Blackstone has on occasion even developed new lines of business to capitalize on individuals’ talents.

As a multinational alternative asset management firm, Blackstone specializes in private equity, credit, and hedge fund investment strategies. Schwarzman puts it more simply, saying, “We buy assets and make them better.” But with Blackstone’s average growth rate for assets at 50 percent faster than the S&P, such a modest description is clearly an understatement.

Not that all is rosy in the alternative sector. Geopolitical forces and regulatory changes are two of the challenges Schwarzman cites. Close behind is the nature of alternative investments. Unlike a stock purchase, if an alternative investment turns out to be a flop, the investor is frequently stuck with it. One way Blackstone mitigates this risk is by buying more assets with a lower rate of return. That way, if any single asset goes bust, the impact to the larger portfolio is minimized.

With respect to finance and investing, Schwarzman is distinctly pragmatic. Speaking about the European economic rebound and current expansion in Asia, Brazil, and beyond, he says it’s important to remember that growth is cyclical. “When everything’s growing, people think it will grow forever,” he says. “But smart investors understand that the best time to buy an asset is when no one else wants it.” The sweet spot in investing, says Schwarzman, is just after a company hits rock bottom. “Wait for it to go off the bottom 10 percent, maybe 15, and then you just buy.”

Schwarzman’s practical approach extends to his many philanthropic efforts as well. He founded his Schwarzman Scholars program in 2016 because he saw the rise of the middle class in China as an economic opportunity for U.S. investors. He developed the one-year master’s degree program at Tsinghua University to develop future business leaders from around the world – including five UNC-Chapel Hill alumni to date – and ensure that they had a firm grasp on the Chinese market and its role in the global economy. The rigorous program provides field trips throughout the region as well as internships, mentoring and access to high-profile leaders, “if you’re lucky enough to get admitted,” says Schwarzman, adding, “I couldn’t, that’s for sure.”

It’s just one more ordinary statement from an extraordinary businessman, investor and philanthropist.

Learn more and register for upcoming Dean’s Speaker Series events hosted by the Kenan Institute here.