The pursuit of excellence: the making of Blackstone’s Stephen Schwarzman

The billionaire founder of the world’s largest private equity firm on what it takes to be successful in business


One of Stephen Schwarzman’s guiding philosophies is that it is as difficult to achieve big goals as small ones. Therefore, he says, you should “reach for a fantasy worthy of your pursuit”.

For anyone interested in being an entrepreneur and achieving success in business, it’s worth paying attention to the former head of mergers and acquisitions at Lehman Brothers.

Schwarzman is a private equity titan and international political power broker. He has advised US President Donald Trump and other world leaders. He co-founded Blackstone with $200,000 of his own money and another $200,000 of seed money from his business partner, Peter Peterson, former CEO of Lehman Brothers, whom he had worked closely with there.   

Today, Blackstone has more than USD $550 billion of funds under management, 25 offices in all the major continents and employs more than 2,500 people. It is one of the world’s largest landlords, recently buying the iconic Las Vegas hotel and casino, the Bellagio, for several billion dollars.

’Go big’

So, it’s no surprise that when the Blackstone CEO, now 72, came to visit London Business School in October to discuss the key inflection points in an eventful career with LBS Professor of Accounting Florin Vasvari, the lecture theatre was packed.

In a frank interview beforehand, he revealed how unlike his father, who did not aspire for global, national, or even city-wide domination for his small but popular linens and curtains business, he has always taken a “think big” approach.    

Even early on his life, this is how he saw things.

As president of his high school student council, he decided that Little Anthony and the Imperials - at the time, one of the most successful rock bands in the country - should come and perform at the school. 

Fifty years later, he is hazy on the details of how he made that happen. But that band, whose iconic hit Tears on my Pillow was the soundtrack of high school of that era, did indeed perform live at Schwarzman’s alma mater Abington High School in Pennsylvania.

And in his recently published book, What it Takes: Lessons in the Pursuit of Excellence, already a New York Times bestseller, Schwarzman says he can still hear the music and everyone having a good time.

“If you want something badly enough, you can find a way.”

Stephen Schwarzman’s rules for work and life

The Blackstone CEO ends his book What it Takes: Lessons in the Pursuit of Excellence with 25 rules for work and life.

Here are five:

1. It’s as easy to do something big as it is to do something small, so reach for a fantasy worthy of your pursuit, with rewards commensurate to your effort.

2. The best executives are made, not born. They never stop learning. Study the people and organisations in your life that have had enormous success. They offer a free course from the real world to help you improve.

3. Write or call the people you admire, and ask for advice or a meeting. You never know who will be willing to meet with you. You may end up learning something important or form a connection you can leverage for the rest of your life. Meeting people early in life creates an unusual bond.

4. There is nothing more interesting to people than their own problems. Think about what others are dealing with and try to come up with ideas to help them. Almost anyone, however senior or important, is receptive to new ideas provided they are thoughtful.

5. Every business is a closed, integrated system with a set of distinct but interrelated parts. Great managers understand how each part works on its own and in relation to all the others.

‘The ability to take pain’

Schwarzman’s book is part memoir and part “how-to” guide to becoming a big success in business.  Filled with punchy anecdotes, engaging stories and life lessons, he focuses as much – and probably more – on the rejections, setbacks, failures and challenges on his journey to running the world’s largest alternative investment firm, than on his successes.

That’s because - as he says in his book - “failures…, can teach us more than any success.” 

His story, which includes walking away from a lucrative life at Lehman to make it on his own, is of failures overcome, opportunities seized and lessons learned.

One chapter is devoted to the early days of Blackstone as Schwarzman and Peterson struggled to raise money from any of their contacts, people who knew them well and with whom they had enjoyed solid relationships with during their Lehman days.   

He describes how efforts to source backers for their first fund were met with rebuff after rebuff (“horrible and humbling”) until eventually – and thankfully - Prudential offered to put in USD $100 million (£77.78 million) – smoothing the way for others to follow.

So what qualities do entrepreneurs need to keep going?

“One is the ability to take pain,” Schwarzman said, emphasising that things don’t usually go the way you anticipate when you’re starting out.

The second quality is that you “must have the finish line in view at all times and you have to find a way to get there. If you’re having resistance, you either change the structure or you change the way you’re describing something but you never give up.”

What is his advice for identifying and making the most of an opportunity?

It must be “sufficiently obvious that not only can you see it but you can explain it to everyone else, so they see it. That gives you an enormous first mover advantage.”

Once the opportunity is identified, it’s important to think first – and then act decisively.

“What I found in finance is that nothing stays the same for very long, particularly when you’re developing a new area or havei in effect a new product to address that new area,” he said. “As soon as you see something you have to think carefully, assess all the opportunities to create something terrific. But once you make that decision, you never hesitate and you must act pretty much immediately.”

Learning the hard way

The thinking and assessment part of that equation is something Schwarzman learned the hard way. In his book he recounts making a decision to buy a steel firm called Edgcomb based on the strong recommendation of a new partner (another partner was strongly opposed). It turned out to be a disaster, and Blackstone lost a lot of money.

As a result, Schwarzman changed the process for making investment decisions, so that the pros and cons of each decision were thoroughly discussed and considered by all parties first.

“Just inventing it on the spot is a terrible way to make decisions,” he said. The new process minimises the opportunity to lose money because it’s based on a careful evaluation of risk.

Though Schwarzman believes that periods of boom and bust are inevitable, he emphasised the need to recognise the top of an up-cycle, which he insisted was not as “difficult as you think”. He said you can always spot the warning signs.

“You should reach out to people who you know are wise or smart when you’re uncertain about what you should do with your life”

The important thing is to act on those signs, either “to reduce the number of things you’re doing and be prepared to bid prices where you lose,” or buy the kinds of companies that have so much growth potential that they won’t be too badly affected by a down cycle. 

Many people would like to emulate Schwarzman’s success. So, what’s his key piece of advice for starting a business?

“It has to have the potential to be really big,” he said. It also needs to be able to appeal to people – and the timing needs to be right. Once those elements are in place, “all you have to do is figure out how to action it.”

Obviously, that’s easier said than done – and what’s clear from the book is the huge amount of work Schwarzman has put into making his business successful. 

Yet he is keen to acknowledge the support of others. In conversation with Professor Vasvari, he recounted how a teacher at Yale helped him turn his grades around. Later, when he considered dropping out of Harvard Business School, the man who’d hired him for his first job wrote him a six-page letter explaining why he shouldn’t.

He is in no doubt that the willingness of these two men to offer their help put him on the path to success.

“You should reach out to people who you know are wise or smart when you’re uncertain about what you should do with your life,” he said.

At the end of the book, Schwarzman offers 25 rules for work and life. They range from, “No one person, however smart, can solve every problem” to “Worrying is an active, liberating activity”.

If he could choose only one of those rules, what would it be?

“Find something you love and then come up with something new in that field. If you can recruit a group that believe in you and in the mission, trust yourself to go ahead.”

What It Takes: Lessons In the Pursuit of Excellence by Stephen A. Schwarzman is published by Avid Reader Press, an Imprint of Simon & Schuster, Inc

Biography: Stephen A. Schwarzman is Chairman, CEO and Co-Founder of Blackstone, one of the world’s leading investment firms with $545 billion under management (as of June 30, 2019). He is an active philanthropist with a history of supporting education, culture, the arts and transformative innovation. In 2013, he founded an international scholarship programme, Schwarzman Scholars at Tsinghua University in Beijing to educate future leaders about China. Among his many accomplishments and achievements, Mr. Schwarzman is a member of The Council on Foreign Relations, The Business Council, The Business Roundtable, and The International Business Council of the World Economic Forum. In 2018, he was ranked in the Top 50 on Forbes’ list of the World’s Most Powerful People.