What It Takes: Lessons in the Pursuit of Excellence
Tags: #business #finance #leadership #entrepreneurship #investment #philanthropy #success #memoir
Authors: Stephen A. Schwarzman
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Overview
My book, What It Takes, is not just a business book, it is a practical guide to success in any field. I share the principles and strategies I have used throughout my career to build Blackstone into one of the world’s leading investment firms, and more recently, to help solve challenging issues in politics, education, and culture around the world. I don’t claim to be the smartest person in the room, but I am a good listener and I know how to identify patterns, analyze risks, and get things done. My book is for anyone who wants to make a difference in the world. It doesn’t matter what your background is, or what you want to do. Whether you’re starting a new business, leading an established organization, or navigating a career transition, the principles and skills I discuss can help you succeed. It’s not about money, or power, or prestige. It’s about finding your passion, pursuing it with commitment and integrity, and never giving up. I also discuss the importance of ethics and integrity, of being a friend to the situation, and of giving back to your community. I believe that we all have a responsibility to make the world a better place, and I hope my book will inspire readers to do just that.
Book Outline
1. Made, Not Born
This chapter introduces my background and core values growing up in a middle-class family. I learned the values of integrity, hard work, and achieving goals, big or small. It also sets the scene for the founding of Blackstone, covering its basic structure, principles, and investment philosophy as well as what makes it a success today.
Key concept: “You build, buy, fix, and sell companies and real estate. The companies we invest in employ more than 500,000 people, making Blackstone and its portfolio companies one of the largest US–based employers and one of the largest employers anywhere in the world. We find the best hedge fund managers and give them money to invest. We also lend money to companies and invest in fixed-income securities.”
2. Go Big
In this chapter, I discuss the importance of ambition and going beyond your comfort zone. As a child working in my family’s linen store, I could see its potential to grow and become a national brand. My father disagreed. He was content with things as they were. This lesson has stayed with me throughout my career: if you’re going to commit yourself to building a company, you should choose one with the potential to be huge.
Key concept: “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.”
3. Remove the Obstacles
This chapter covers my years at Yale and finding my feet in a new and unfamiliar environment, far from home. I discuss the importance of finding the right fit, academically and socially, and how taking on challenges and surviving them, whether at sea or college, can build self-confidence.
Key concept: “The best executives are made, not born. They absorb information, study their own experiences, learn from their mistakes, and evolve.”
4. Everything is Interconnected
I discuss the valuable lessons I learned from my early years on Wall Street. Working my way up from the bottom rung of a securities firm, I was trained in all the details of finance, any one of which, done wrong, could have devastating consequences. I learned that preparation and asking the right questions could mean the difference between success and disaster. Equally, I learned how to stay calm under pressure. The more I understood the interconnectedness of finance, the more patterns I could identify and make sense of complex situations.
Key concept: “But what I lacked in basic economics, I made up for with my ability to see patterns and develop new solutions and paradigms, and with the sheer will to turn my ideas into reality.”
5. Don’t Miss the Can’t-Miss Opportunities
I discuss the importance of tenacity and pushing through even when things get tough. My experiences in the Army Reserves, training alongside young men from very different backgrounds to mine, taught me to respect the commitment and sacrifice of our service members. It also reinforced my suspicion of hierarchies and my belief that sometimes you have to break through them if you want to get things done. Most of all, it reinforced my belief in the importance of luck and the randomness of fate.
Key concept: “If you’re going to pursue difficult goals, you’re inevitably going to fall short sometimes. It’s one of the costs of ambition.”
6. All Deals are Crises
I discuss how to manage fear and deal with uncertainty. Drawing on my experience of closing my first big M&A deal, selling the orange juice company, Tropicana, to Beatrice Foods, I explain the importance of mastering your craft and how to stay calm in high-stress situations. Ultimately, it taught me that deals come down to a few key points that matter most to each side, and if you can clear everything else away and focus on these, you will be a more effective negotiator.
Key concept: “The price sounds okay. In terms of the structure, it’s a matter of taste.”
7. Money is a Poor Cure for a Bad Situation
This chapter focuses on the importance of risk mitigation and trusting your instincts. Drawing on my experience of selling Lehman Brothers, the investment bank where I was a partner, I explain how even successful businesses can be destroyed by internal conflict and bad decisions made by its leaders.
Key concept: “People will steal from the cash register.”
8. The Best Way to Learn is by Doing
I explain the importance of building relationships and finding good mentors, people who will not only teach you but also support you when you need help. I explain how asking for advice from an up-and-coming entrepreneur I had just met led to us raising the $100 million we needed to make our first leveraged buyout, of a transportation company being sold by USX.
Key concept: “It’s not that hard. You build a model of why this is a good investment. Everything’s a spread.”
9. Hold the Table: Advice on Interviews
I explain my strategy for interviewing people and identifying talent that will fit our company’s culture. At a minimum, this includes the airport test: Would I want to be stuck waiting at the airport with you if our flight were delayed?
Key concept: “The airport test: Would I want to be stuck waiting at the airport with you if our flight were delayed?
10. Pursue Worthy Fantasies
I explain the origins of our company’s culture and how we found the right business model for our ambitions. We wanted to build a financial institution strong enough to survive multiple generations of owners and leadership and that required us to be flexible and innovative.
Key concept: “If you’re going to dedicate your life to a business, which is the only way it will ever work, you should choose one with the potential to be huge.”
11. Call, Then Keep Calling
This chapter focuses on the importance of persistence and never giving up. After the initial excitement of our company’s launch faded, we found ourselves struggling to get clients and close deals. This was one of the most stressful periods in my career, and it taught me that success can be ephemeral. The moment you think you’ve arrived, you’re vulnerable to attack.
Key concept: “The moment you start to become big and successful, challengers will appear and do their best to take your customers and defeat your business. You are never more vulnerable than at the moment you think you have succeeded.”
12. Go Where Others Aren’t
This chapter focuses on the process of raising our first leveraged buyout fund. I discuss the importance of market timing, and why in any business, if you’re going to commit your life to it, you should start by going big. I explain why investors are typically more receptive to big funds raised by experienced people with a track record, even if they haven’t yet done a deal. I also discuss the importance of urgency in closing deals to avoid the risk of nasty surprises.
Key concept: “Time wounds all deals. The longer you wait, the more nasty surprises can hurt you.”
13. Cycles: Investing Through Ups and Downs
I discuss how to identify and invest through market cycles. I explain the indicators that signal market tops and bottoms and discuss how to avoid common mistakes investors make when markets decline.
Key concept: “The way to avoid this type of situation is to invest only when values have recovered at least 10 percent from their lows.”
14. There are No Brave, Old People in Finance
I discuss the importance of risk assessment and building a robust investment process to avoid making bad decisions. I tell the story of how an over-reliance on my own judgment nearly led Blackstone to make a disastrous investment in a steel company, Edgcomb. Edgcomb’s failure forced us to rethink our approach to decision making and create a framework for identifying and analyzing risk that would serve the company well for years to come.
Key concept: “There are no brave, old people in finance.”
15. Don’t Lose Money!!! Developing an Investment Process
This chapter focuses on decision making and effective meetings. I discuss the importance of constructive confrontation in the deal-making process. I explain how we developed a process to force everyone around the table, from the most senior to the most junior person, to be fully engaged, to challenge assumptions, and to identify weaknesses in any proposed investment. I also explain why it is important to encourage a greater sense of collective responsibility. If we all make decisions together, there is less risk of anyone feeling pressured to approve a suboptimal deal simply to save face or to reward a deal team for their efforts.
Key concept: “Focus less on impressing the interviewer and more on being open and striving for an honest conversation.”
16. Spinning the Wheel Faster
I discuss the challenges of building a successful company culture, from recruiting and training the right people to creating an environment that enables them to succeed, and the lessons we’ve learned about the importance of mentorship and feedback.
Key concept: “People think they’re great and tell you they’re great, never that they failed at their last job, only that they are looking for ‘more opportunity.’”
17. Expand
This chapter focuses on seeing around corners and the importance of adaptability. I discuss the importance of challenging conventional wisdom and thinking for yourself. In business, if everyone is doing the same thing, it’s probably wrong. I discuss the signals that helped us identify the housing bubble in the mid-2000s and avoid making investments that would have lost billions of dollars.
Key concept: “But when people are doing well, they don’t want to change. They choose to ignore the discordant notes and the tunes you are hearing.”
18. Seeing Around Corners
I discuss how to turn a crisis into an opportunity and the importance of courage, persistence, and creative problem solving. Drawing on my experiences during the 2008 financial crisis, I describe how we were able to successfully invest billions of dollars in distressed assets at a time when our competitors were struggling to stay afloat.
Key concept: “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.”
19. Ask for Help When You Need It
I describe my efforts to befriend the situation during the 2008 financial crisis, the conversations I had with Hank Paulson and others in the US government, and the lessons I learned about the power of clear communication, building relationships, and the willingness to offer help.
Key concept: “‘You’re not bailing anybody out. You’re lending them money, which is going to be repaid. It’s just a bridge loan where the taxpayers are going to get all their money back, with interest and probably with a big profit when the banks recover.’”
20. Be a Friend to the Situation
This chapter focuses on the importance of engaging with the world and doing something to help others achieve their dreams. I discuss how the skills and experience I developed as an entrepreneur enabled me to expand my philanthropic activities in education, culture, and international affairs.
Key concept: “If you have passion for pursuing your dreams; if you persevere; and if you are committed to helping others, you will have a full and consequential life and always have a chance at greatness. And the benefit of your enormous gifts will accrue to yourself, the people you love, and to society at large.”
21. Turn Crisis Into Opportunity
I discuss the importance of having a multi-pronged business model and not being afraid to adapt and evolve in response to changing market conditions.
Key concept: “The key to all investing is using every tool at your disposal.”
22. Load the Boat
I describe the process of taking Blackstone public and the challenges we overcame along the way. I discuss how our IPO helped solidify Blackstone as a market leader and allowed us to expand into new markets and business lines.
Key concept: “The Chinese government had made a huge deal of its investment in Blackstone. To my surprise, I was a minor celebrity.”
23. Answer When Your Country Calls
I discuss the importance of befriending the situation and finding solutions where others see only problems. In the years following the financial crisis, Blackstone expanded into new areas, such as buying up single-family homes to rent out at a time when every other investor was running away from the residential real estate sector. Understanding the political dimension to what was going on was essential to closing the deals we needed to transform this part of the market.
Key concept: “You put seeds in the ground, you water, and the seeds start growing, but you can’t see the crop yet. Then they grow very high, and it will be a great crop, and you will be very, very happy.”
24. Spin the Virtuous Cycle
I discuss the advantages that come with scale. Our growth allows us to see deals that other firms don’t. I discuss the evolution of Blackstone’s investment process and why it is important for companies to adapt and be flexible in order to survive. I describe how we have changed and expanded the business by bringing in talented people with new ideas and giving them the resources they need to succeed.
Key concept: “The moment you think you’ve arrived, you’re vulnerable to attack.”
25. Engage
I discuss how to create something new and unexpected. Taking on ambitious philanthropic projects, such as building a college for the world’s future leaders at Tsinghua University in Beijing, has enabled me to apply the skills and experience I developed in business to a new set of challenges.
Key concept: “In China, we aspire for greatness. If it does not happen the first time, we simply continue until we achieve greatness.”
Essential Questions
1. What is the core of Blackstone’s investment philosophy and how does it contribute to the firm’s success?
The foundation of Blackstone’s success is its carefully crafted and rigorously enforced investment process. This process involves meticulous risk assessment, identifying key variables for value creation, and leveraging the collective wisdom of senior partners through constructive confrontation and rigorous debate. This approach, though demanding, has proven to be incredibly reliable in mitigating risks and ensuring profitable investments, serving as a cornerstone of their corporate culture. It underscores the importance of having a structured approach to decision-making, particularly in the fast-paced and high-stakes world of finance and technology.
2. What role do relationships and mentorship play in Schwarzman’s approach to business and life?
Schwarzman attributes much of his success to his ability to cultivate strong relationships and learn from influential figures. From his early mentors like Coach Armstrong and Bill Donaldson to world leaders like Angela Merkel and Xi Jinping, he emphasizes the value of seeking advice, being a ‘friend to the situation,’ and building a network of trusted advisors. This highlights the interconnected nature of business, politics, and global affairs, underscoring the importance of building bridges and understanding different perspectives. In the field of AI, this could translate to collaborating with diverse stakeholders, understanding the societal impact of technology, and fostering trust with users and regulators.
3. How did Schwarzman approach the 2008 financial crisis, and what key lessons can be learned from his experience?
Schwarzman’s experience navigating the 2008 financial crisis highlights the importance of staying calm under pressure, identifying key variables, and making bold decisions when others are paralyzed by fear. He emphasizes that crises often present unique opportunities for those who are prepared to seize them, underscoring the need for foresight, liquidity, and the ability to adapt quickly to changing circumstances. This is particularly relevant in the field of AI, which is characterized by rapid innovation, dynamic market conditions, and the potential for disruption. Schwarzman’s approach can serve as a model for navigating uncertainty and turning challenges into opportunities.
4. What are Schwarzman’s views on building a strong team and organizational culture, and how do these views apply to the field of AI?
Schwarzman argues that while technical skills are important, the ability to attract, develop, and retain top talent is crucial for building a successful organization. He stresses the need to identify ‘10 out of 10s’ – individuals with exceptional talent, vision, and drive – and create a culture that empowers them to excel. He emphasizes the importance of training programs, mentoring, and open communication in fostering a positive and productive work environment, elements that are equally crucial in the AI industry where talent acquisition and retention are key challenges.
5. How does Schwarzman approach philanthropy, and what lessons can be learned from his efforts, especially in the context of AI and technology?
Schwarzman believes in leveraging his business expertise and network to make a positive impact beyond the financial world. His philanthropic initiatives, including Schwarzman Scholars at Tsinghua University, the renovation of Yale Commons, and the establishment of the MIT Schwarzman College of Computing, demonstrate his commitment to education, cross-cultural understanding, and addressing global challenges. This highlights the potential for individuals in positions of influence, particularly in the AI field, to leverage their resources and expertise to tackle societal issues, promote responsible innovation, and contribute to the greater good.
Key Takeaways
1. Think big when starting a business.
Schwarzman emphasizes that it’s just as difficult to launch a small business as it is to launch a big one, both demanding immense effort and resources. Therefore, entrepreneurs should aim for ambitious goals and strive for transformative impact.
Practical Application:
In the development of a new AI product, this principle could be applied by identifying a core problem that the product aims to solve, but then broadening the scope to consider potential applications in other related fields. For instance, an AI system designed for medical diagnosis could be adapted for use in areas like environmental monitoring or financial forecasting.
2. Encourage collective responsibility in decision making.
This approach democratizes decision-making, mitigates individual risk, and encourages intellectual honesty. This fosters a culture where everyone feels responsible for the outcome, both successes and failures.
Practical Application:
In a professional context, this means actively seeking feedback from team members, even the most junior ones, and creating an environment where constructive criticism is welcomed. In product design, this involves seeking diverse perspectives and feedback from users to uncover potential flaws and blind spots that might not be apparent to the core design team.
3. Emphasize risk mitigation in every decision.
Schwarzman emphasizes the importance of proactively identifying and addressing potential risks. This involves asking ‘what-if’ questions, understanding the potential downsides of a decision, and developing strategies to manage them. It’s especially crucial in volatile environments like finance, technology, and global affairs.
Practical Application:
In the context of AI development, this could involve anticipating the potential ethical implications of a new technology and implementing safeguards to mitigate potential harm. For example, in developing an AI-powered hiring platform, it’s crucial to consider the potential for bias and implement measures to ensure fairness and equal opportunity for all applicants.
4. Prioritize building a strong company culture.
Schwarzman believes that a company’s culture is its most important asset. He advocates for a culture based on meritocracy, excellence, openness, and integrity. He emphasizes the need to hire people who share these values and foster an environment that encourages collaboration and innovation, critical for navigating competitive environments like Wall Street or the technology sector.
Practical Application:
In the context of AI, building a strong culture could involve promoting ethical principles like transparency, fairness, and accountability in the development and deployment of AI systems. It also means fostering a culture of continuous learning and collaboration to ensure teams stay at the forefront of this rapidly evolving field.
5. Constantly adapt and evolve.
Schwarzman emphasizes the need for companies to constantly adapt and evolve to survive in an ever-changing market. He believes in staying ahead of the curve, anticipating challenges, and diversifying business lines to ensure stability and future growth.
Practical Application:
In the context of AI product development, this principle could involve anticipating how user needs and preferences might evolve over time and designing products with built-in flexibility to adapt to those changes. For example, an AI-powered virtual assistant could be designed with a modular architecture to allow for the integration of new features and capabilities as user needs evolve.
Suggested Deep Dive
Chapter: Don’t Lose Money!!! Developing an Investment Process
This chapter offers a deep dive into the inner workings of Blackstone’s decision-making process, highlighting a highly structured, analytical approach to risk assessment that resonates with the principles of building robust and reliable AI systems. It provides valuable insights into how to create a culture of collective responsibility, challenge assumptions, and de-risk complex investments, which are all crucial considerations in the development and deployment of AI products.
Memorable Quotes
Made, Not Born. 4
“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.”
Made, Not Born. 6
“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.”
Go Where Others Aren’t. 92
“Time wounds all deals. The longer you wait, the more nasty surprises can hurt you. I like to finish work quickly. Even if tasks are not urgent, I like to get them done to avoid the unnecessary risks of delay.”
Go Where Others Aren’t. 108
“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.”
Don’t Lose Money!!! Developing an Investment Process. 164
“Finance is full of people with charm and flip charts who talk so well and present so quickly you can’t keep up. So you have to stop that show. Decisions are much better made through systems designed to protect businesses and organizations than through individuals. ”
Comparative Analysis
“What It Takes” stands out for its deeply personal and candid narrative style. Unlike many business books that offer generic advice, Schwarzman grounds his insights in specific anecdotes and experiences, making the lessons more relatable and impactful. His emphasis on building a strong culture and attracting top talent resonates with the core principles of many successful tech companies, particularly those in the AI field who are constantly seeking to innovate. While other books on leadership and entrepreneurship may cover similar ground regarding risk assessment and decision-making frameworks, Schwarzman’s insights gleaned from navigating financial crises and high-stakes negotiations offer a unique perspective that’s particularly relevant in the volatile and fast-paced world of AI and technology.
Reflection
“What It Takes” offers a compelling narrative of entrepreneurial success, interwoven with valuable insights on leadership, decision-making, and building a resilient company culture. However, it’s important to view the book through a critical lens. While Schwarzman emphasizes ethical conduct, some might question the ethical implications of certain financial practices like leveraged buyouts. Additionally, his account is inherently subjective, reflecting his own perspectives and experiences. Readers should consider the potential for biases and seek out diverse viewpoints to form a balanced understanding of the complexities of finance and business leadership. Despite these caveats, the book’s enduring value lies in its practical wisdom, its emphasis on the human element of business, and its exploration of the evolving relationship between finance, technology, and global affairs. It’s a must-read for anyone seeking to understand the dynamics of modern business and the role of finance in shaping the world we live in.
Flashcards
What does Schwarzman mean by ‘being a friend to the situation’?
Being a ‘friend to the situation’ involves understanding the other person’s perspective, finding common ground, and focusing on how to help them achieve their goals, even if it means putting aside your own self-interest. This approach often leads to more successful outcomes and stronger relationships.
How does Schwarzman define ‘excellence’?
Schwarzman defines excellence in a practical way: It means 100 percent on everything. No mistakes.
What does ‘seeing around corners’ mean in the context of business?
It means getting ahead of the curve, anticipating problems before they arise, and making the necessary adjustments to stay ahead of the competition. It also requires a willingness to challenge conventional wisdom and embrace new ideas.
What is Schwarzman’s number one rule for investing?
Don’t invest unless you are convinced you can generate a significant return and diversify your portfolio to reduce risk.
What characterizes people who are ‘10 out of 10s’?
They have a strong desire to excel, a willingness to take risks, and an ability to motivate and inspire others. They also tend to surround themselves with other talented people.
How does Schwarzman approach stress management?
It involves approaching challenges with a calm and analytical mindset, breaking down complex problems into their essential components, and focusing on the most critical variables that will determine the outcome.
What is a Leveraged Buyout (LBO)?
A leveraged buyout (LBO) is the acquisition of a company using a significant amount of borrowed money. The assets of the company being acquired are often used as collateral for the loans, along with the assets of the acquiring company.