What It Takes

Stephen A. Schwarzman, co-founder, chairman, and CEO of Blackstone, the world's largest manager of alternative assets (a category including private equity, real estate, hedge funds, and credit), recounts his career through formative episodes and the lessons they taught him. Rather than a comprehensive autobiography, the book selects key inflection points across decades of deal-making, institution-building, philanthropy, and political engagement.

Schwarzman opens with a scene from spring 1987. He and co-founder Pete Peterson, a former Lehman Brothers CEO and US commerce secretary, traveled to MIT to raise money for Blackstone's first fund. The endowment team failed to show up, and the two ended up stranded in the rain, a humbling contrast to their former prestige. He draws a core principle: Pursuing big goals requires no more effort than pursuing small ones, so one should always aim high.

He traces his ambition to his childhood in Philadelphia, where he worked in his family's store and imagined expanding it nationally, though his father refused. His track coach, Jack Armstrong, instilled a tolerance for pain. At a championship relay, Schwarzman tore his hamstring but kept running, and his teammates rallied to win.

Schwarzman arrived at Yale in 1965 feeling isolated. An instructor, Alistair Wood, taught him to write and think, lifting him from failing grades to the dean's list. He created a ballet society bringing dancers to campus, built a recruitment program for inner-city students, and overturned centuries-old rules banning women from overnight stays in dorms.

After Yale, he took a job at securities firm Donaldson Lufkin Jenrette (DLJ) but received no training. Army Reserve training and Harvard Business School followed. He concludes that HBS taught him one essential idea: Everything in business is interconnected.

Schwarzman joined Lehman Brothers in 1972, drawn to its eclectic culture. He learned finance through painful experience: A senior partner berated him for a misplaced comma in a fairness opinion (an assessment of a deal's pricing); he ruined a deal book (the financial materials prepared for a board presentation); and he raised nearly $100 million for the initial public offering (IPO) of the Student Loan Marketing Association, the precursor to Sallie Mae. Pete Peterson arrived as chairman, and the two formed a complementary partnership.

In late 1978, Schwarzman executed his first major merger alone, advising Tropicana's board on a $488 million acquisition by Beatrice Foods. He flew overnight to Florida with no sleep and no partner. Felix Rohatyn of the investment bank Lazard Frères called the next morning to congratulate him.

Lehman's fortunes turned when Lew Glucksman, the volatile head of trading, forced Peterson out as CEO and made a catastrophic secret trade that wiped out the firm's equity. Schwarzman arranged a sale to Shearson American Express for $360 million. Forced to sign a noncompete agreement, he negotiated the term from three years down to one.

In April 1985, Schwarzman and Peterson designed Blackstone as a three-part business: mergers advisory, leveraged buyouts (LBOs, in which an investor buys a company using mostly borrowed money, improves it, and sells it), and future business lines. They invested $200,000 each and launched in October 1985. The early months were bleak: Over 400 introductory letters produced almost no business. A breakthrough came when CSX, a railroad company, hired them to resolve a greenmail situation, in which a hostile investor buys stock to extract a premium. Schwarzman devised a threat that forced the investor to sell, establishing Blackstone's reputation.

Raising the first buyout fund proved agonizing. Schwarzman insisted on $1 billion despite having no track record. Prudential's chief investment officer committed $100 million, and Japanese brokerage Nikko Securities pledged another $100 million. General Motors and General Electric followed. They closed the fund at $850 million in October 1987, four days before the Black Monday crash.

Blackstone's first LBO, the transportation division of USX, returned 26 times its $13.4 million equity investment. In 1988, Larry Fink, who co-created the mortgage-backed securities market, joined to launch a fixed-income venture. Disputes over equity dilution later led to a sale to PNC bank; the business, renamed BlackRock, grew into the world's largest traditional asset manager. A failed investment in a steel milling company prompted Schwarzman to overhaul the investment process, requiring collective evaluation by senior partners, advance memos, and focus on weaknesses.

By 2001, Blackstone had opened a London office staffed by young culture carriers from its first class of MBA hires. Tom Hill, Schwarzman's former colleague from the Army Reserves and Lehman, built Blackstone's hedge fund unit into the world's largest discretionary investor in hedge funds. In 2002, Tony James joined from DLJ as chief operating officer and overhauled the firm's management.

In fall 2006, reports of tenfold land-price increases in India and massive condo oversupply in Spain convinced Schwarzman a global real estate bubble was forming. He eliminated housing exposure and cut deal volume. Simultaneously, he bought the world's largest office company, Equity Office Properties, for $39 billion, planning to resell most properties before prices fell. On closing day, Blackstone sold roughly $30 billion to pre-arranged buyers.

In June 2007, Blackstone went public, raising over $7 billion, including a $3 billion investment from China's nascent sovereign wealth fund, a state-owned investment vehicle. When the financial crisis hit, Schwarzman advised Treasury Secretary Hank Paulson to ban short selling of financial stocks and inject capital directly into banks. The Troubled Asset Relief Program (TARP), a $700 billion emergency measure, passed Congress on its second attempt after a sharp market drop.

Blackstone's stock fell from $31 to $3.55. Recovery was driven by operational improvements at Hilton, which ultimately earned investors over $14 billion; the creation of Invitation Homes, which acquired over 50,000 foreclosed single-family homes; and the launch of Tactical Opportunities, a fund for unusual assets that grew to over $27 billion.

Schwarzman's philanthropy expanded in parallel. He gave $100 million to the New York Public Library. Inspired by the risk that US-China rivalry could lead to conflict, he founded Schwarzman Scholars at Tsinghua University in Beijing, a one-year master's program modeled on the Rhodes Scholarship. He pledged $100 million and made roughly 30 trips to China to oversee construction. The first class of 110 scholars enrolled in 2016.

Under Presidents Obama and Trump, Schwarzman served as an informal intermediary on economic policy. He helped negotiate during the 2012 fiscal cliff crisis, a standoff over automatic tax increases and spending cuts, and assembled a business advisory forum for President Trump that disbanded after the Charlottesville riots. He facilitated trade talks with China, Mexico, and Canada, helping produce the United States-Mexico-Canada Agreement (USMCA).

In Blackstone's later years, its scale created a virtuous cycle of deal flow and innovation. Jon Gray, who joined in 1992 and built the real estate business from $5 billion to over $136 billion, succeeded Tony James as president. Joe Baratta, from Blackstone's first class of MBA hires, raised the largest private equity fund in history at $26 billion.

Schwarzman closes with three major philanthropic gifts: the Schwarzman Center at Yale, the MIT Schwarzman College of Computing for artificial intelligence, and the Schwarzman Centre for the Humanities at Oxford. At the MIT launch, he received a standing ovation, a contrast to the 1987 trip when the endowment team left early. He reflects that Blackstone has grown from $400,000 to over $500 billion in assets and expresses confidence that the best is yet to come.