Book Notes #16: “What It Takes” By Stephen Schwarzman

by | Aug 15, 2023

I didn’t think I’d like this book as much I would. Reading about high finance can be a bit of a snooze, but Schwarzman’s story and his dogged determinism are incredible to behold. By reading the book, you get a much better sense of what goes on at Blackstone and how its success was forged.

What It Takes: Lessons in the Pursuit of Excellence
By Stephen A. Schwarzman

Here are my main takeaways.

  • Take big bets
    You might as well shoot for the moon. We all have a limited amount of time on earth, so go for things that are truly worth your time.In Schwarzman’s case, he and his co-founder Pete Peterson set out to raise their first private equity fund. Peterson thought they should ask for $50 million, but Schwarzman wanted to go for $1 billion. Peterson thought they should start small, prove their success, and then build. Schwarzman realized that they have to ask the same people for money.The only difference is that the amount they ask for would change. They agreed to go for $1 billion, and they hit their goal. Private equity is a business in which you can take significant leveraged bets. By the way, the story of how they raised significant amounts of capital from Japanese investors is entertaining.

    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.

    …if you’re going to commit yourself to something, its as easy to do something big as it is to do something small. Both will consume your time and energy, so make sure your fantasy is worthy of your pursuit, with rewards commensurate to your effort.

  • More than Economics
    Schwarzman is a student of people and patterns. As a “master of the universe” who founded and runs one of the largest private equity firms, you’d think he was an economics wizard. But, in fact, he never took an economics course. He learned on-the-job with an insatiable curiosity.

    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 realities. Finance provided to be the means for me to learn about he world, form relationships, tackle significant challenges, and channel my ambition. It also allowed me to refine my ability to simplify complex problems by focusing on only the two or three issues that will determine the outcome.

  • Moxie
    Schwarzman didn’t get into Harvard, so he called the head of admissions and tried to convince him to let him in (but that didn’t work).While at Yale, Schwarzman made a name for himself by becoming a ballet impresario where ballerinas came to college to perform (Yale was male-only at the time).What’s more, he led the initiative to stop parietals (the rule prohibiting women from visiting men in university dormitories). The story made the front page of the student newspaper. “It was my first lesson in the power of the media,” he observed.When he was in the Army Reserve, he went directly to the colonel and claimed the food situation was unbearable. The colonel was impressed with Schwarzman’s directness. Turns out young officers were stealing food, and they were removed after being discovered.
  • Interview advice
    Schwarzman provides practical advice on how to give and participate in interviews. He provides a bit of context for each of the below points.

    1. Be on time

    2. Be authentic

    3. Be prepared

    4. Be candid

    5. Be confident

    6. Be curious

    7. Avoid discussing divisive political issues unless you are asked

    8. Mention people you know at an organization only if you like and respect them.

  • Mastering Finance

    Like any other craft, you have to learn finance and learn the intricacies. The best people Schwarzman ever came across spent their time doing the bottom-up fundamental analysis and honed their craft. He was just 36 when he sold Lehman Brothers.

    They learned by doing the fundamental analysis. They established strong foundations for their careers by discovering that the smallest things matter and suffering the indignity of their early mistakes.

    Schwarzman does a good job of explaining private equity, how it works, and he walks through several deals (Blackstone IPO, Hilton, for example) with vivid details and amusing stories. He contends that success of most investments depend on timing – where you are in the business cycle.

    One practical tip is that only invest in an asset or situation when itΒ  has recovered 10 percent from the lows. It’s hard to time the lows. Give up the first 10 to 15 percent so that you can be more confident when making an investment.

    His number one rule for managing money: don’t lose money! This has led to a rigorous and disciplined investment approach at Blackstone.

  • Who’s Who
    Schwarzman’s book reads like a who’s who of international finance, politics, and entertainment. He taught Jack Welch about finance. He worked closely with Lou Gerstner. He did business with Sam Zell. He was a good friend of Jimmy Lee (who he tried to recruit). He seeded Larry Fink’s BlackRock. Schwarzman went to university with President George W. Bush, and they were in the same secret society together.As Chairman of the Kennedy Center in DC, he’s met many entertainers. He mentions being at an event and Beyonce and Jay Z were waving at him from across the room. Mentions of Barack Obama, Tim Cook, Bill Gates, Felix Rohatyn, Bill Harrison, Jamie Dimon, Hank Paulson, Frank Sinatra, and more.

    Wall Street and business are small worlds. If you start at a great school or a big firm, crossing paths with the best people of your generation, you’ll keep running into them. Many of the friends I made at Yale, Harvard Business School, the Army Reserves, and in those early years on Wall Street have remained my friends.

  • How can I help?

    I learned this
    , in part, from my father. This resonated deeply with me. Most people approach life trying to solve their own problems. Few people try to help others fix their own problems. That’s where you can build relationships and discover opportunities. Amen. Schwarzman has privately counseled presidents, ministers, heads of states. He was providing solutions to officials during the great financial crisis of 2008.

    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.

    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.

  • Philanthropy
    Schwarzman is an impressive philanthropist, giving to many organizations. He rolled up his sleeves to create the Schwarzman Scholars program, which is modeled on the Rhodes Scholarship but for students to study at Tsinghua University in China. The scholarship is designed to help emerging leaders learn more about China. He sees this program as a solution to a perhaps Thucydides trap that could emerge between the US and China. It was remarkable to see how Schwarzman went about creating and evangelizing this program.
  • 25 Life RulesThe book ends with a list of 25 rules for work and life. Some of them include writing or calling the people you admire and setting up a meeting. Another is that information is the most important asset in business. Worth reading this list.It’s also worth reading the book’s acknowledgements. He’s comprehensive and detailed with his gratitude.