Billionaire's playbook for success, Blackstone CEO Stephen Schwarzman

please welcome Julia LaRoche and Stephen Schwarzman [Music] Steve Schwarzman CEO of the Blackstone Group and the best-selling author of what it takes it's so great to be back with you again good to see you again all right well Steve the last time we talked you gave me an answer to a question that I asked you about that you didn't think that you would be hired at Blackstone if you were to apply today so my follow-up to that is do you worry the Blackstone and maybe other firms might be missing out on the next Steve Schwarzman well I think it's always hard to know exactly who to pick when you have a qualified pool I I'm quite sure unfortunately I wouldn't be picked because I wasn't Magne or suma and we talked at our management committee about this issue and and I asked how many of you were only like eight people nine people how many of you were magneri suma one hand went up how many of you were laude no other hands went up so the rest of us would like Generic people and we're pretty flexible and you know as organizations grow you end up you know sometimes hiring really very bright people but I think that people who have a balance you know it's good to be smart obviously but but having leadership skills is really important and playing sports is good too and the reason for that is you learn to take pain and it's it's not easy to be successful um you know it requires a lot of effort a lot of setbacks it's a little bit like sports you get thrown on the ground you you got to get up so we hire less than 1% of the people who apply it's it's surreal and we have amazing people but we always make sure that we have a few of them like myself with more generalized skills and it's something we're always refining well you've been in this business for decades I do want to go back and revisit some of your early years in your book you wrote that at DLJ I was never trained properly I would cower in my office hoping no one noticed me scared that I would be found out as ignorant or incompetent I must have been the biggest buyer of antiperspirant on the east side of Manhattan and then when you were at Lehman Brothers you told this story about working months on this fairness opinion you submit it you're so proud of it and then you get this phone call from your boss that there's a typo on page 56 so I have to ask you how formative were those experiences and how does it shape the way you built the culture at Blackstone yeah well everybody knows that sometimes when you start out it's rough ride and it was it was definitely rough for me I had no training and I was I was like the person in in a class at school who whenever they asked somebody to open the class you try and position yourself behind somebody else's head so you wouldn't get called on and that was because I wasn't trained and and so what happens is when you have these bad experiences you don't forget and when you you sort of make a you know sort of a vow to yourself that were that if you ever got into a position of authority you wouldn't do that to anybody else you one thing you want people to be as prepared as they can be you want as low as low as stress environment for them you want them to understand that they can ask questions I mean I'm in the financial business and almost everything's been invented before you did it you know certainly for your first few years so let's let's not have you struggle it's it's absolutely okay to ask questions too as a shortcut you're not allowed to ask the same question over and over again which means you've learned thing but the idea that you have to struggle let's let's eliminate that and so each of these unhappy experiences we have a great training program now because I want everybody to be trained I want everybody to be comfortable well I do want to also talk about the fact that you excelled from an early age on Wall Street I think you were one of the youngest mansion directors at Lehman Brothers by age 31 but fast forward to today and then even looking out in the future how do you think the financial services industry has changed and is it still a viable place for young people to go yeah it's a financial businesses is still really good it's just changed and as long as you're printing in the United States and extra trillion dollars a year of money over and above what you would normally do with these deficits there's always plenty of money and plenty of new things that you can do places that are larger our place has 2,500 people so it's not that big you design people's careers so so if you're really terrific you move faster the idea that the world has to be rigid to make life easy discourages having you know people of great talent and I love people who have talent I was I was always sort of a bit frustrated by being held back and why why should we do that so you don't have to be a big thinker you just look at things that don't make sense and say I'm not going to do that no I also think it's also interesting you have these rules for life you talk about finding problems and solving them you say that there's 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 I mean it makes me think of when you were in high school you brought on a cool rock band you changed the rules at Yale so women could spend the night on dorms you also made sure that the folks you're in the army with got fed they weren't feeding them breakfast when they were doing their morning tours we also saw problems whether it's Business School Wall Street so what was inflection point for you that you were looking to solve problems in your life and realize hey this is actually good for being successful well whenever you're in any kind of situation the reason you're there is something's going on and and what you really want to know is what is the problem that you're solving and the only way you learn that is is you think you have an idea but it's really the other person you have to understand and what's what's on their mind and how do you address their issues if you're like a long young person make pretend you're in an advisory capacity all you want to know from your client is what are you worried about what are you thinking about and once you understand that it's it's pretty easy to create solutions if you're just guessing about what what's on their mind you'll waste a lot of time and maybe not get the right thing I do want to talk about problems that this generation will be facing right now we're in the middle of trade negotiations and I know you wrote about this you are involved in that process it's been ongoing you write that it's some of the most difficult negotiations you've ever experienced so Steve are we going to see a deal anytime soon and what has to happen for us to see a deal well that's that's almost an unfair question because the Chinese are sitting in a room either right now or they just broke with the Americans so it'll be announced and what I think might happen today doesn't really matter because today is almost over and we'll all know where things are but fundamentally we're asking the Chinese to change their system in their system was brilliantly designed as an emerging market developing market economy so that much like the Americans in the 19th century people forget we have very high tariffs we were a small country we had you know the ability to protect you know our nascent industries and China just started doing this 40 years ago and and they've had an astonishing result you know they forty years ago they had GDP per capita of a few hundred dollars and and now it's ten thousand dollars and it's going up at a thousand dollars a year so so China has done some remarkable things but they've done it in ways that are inconsistent with the developed world they've got very high tariffs and taxes three times as high to bring a product into China as it is for China to sell one in the United States you would assume if that were the case the person who gets in at a very cheap price would do better and and they do it's the same way with markets opening its selectively open but not like the US has been and and so I think it's it's a time for adjustment the question is how fast will an adjustment come over what time frame and how dramatically at each point because no one would give up their entire system because someone else asks them to do it so we're doing the asking and they have their own internal politics they've got their hardliners which is basically things have been really good for us plus we don't like being pushed around which they were you know but by the developed world for the last hundred to two hundred years and they don't like it on the other hand you have their reformers who say look we realize that we we should be more open what we'll learn best practices from the West it'll be good for us so in a way these negotiations are somewhat hostage to to what China wants to do and there are two elements in China just like we have internal politics in the United States our view that they're a monolith and they don't have internal points of view is wrong so so we'll see what's happening it's an exciting time now are you optimistic it depends on what criteria if you're looking for a full solution to the differences between the US and China that's not going to happen if you're looking for something less than that we'll have to see what China is prepared to put on the table well Steve you're no stranger to the White House I know you've engaged with several administrations and you wrote about this in the book that quote from the moment Donald Trump was elected president I had been getting calls from people who did not know what to make of him they had listened to him during the campaign and were nervous about what he might do so what I tell folks what do people get wrong about president Trump well that would take a long time to answer that question but if you can of course see you know narrow it down to one thing that people get wrong well I had a lot of people from foreign countries as well as well as domestic people sort of approached me you know Donald Trump lived in New York you know for his whole life and we're in New York now and New York isn't as big a town as it seems on the outside and and so a lot of people knew Donald Trump and nobody knew what he would be like in a presidential position and and so they were basically without any knowledge and and had a lot of concerns about it and so you know I would meet with them and see what was on their mind and see if I could solve some of the issues but you know what one of the things is is all of these sweets are are not worth listening to and for some reason everybody is focused on them all and I never have been you know some of them are just indicative of sort of a general area of concerned and aren't meant to be taken literally and you know with today's news media it doesn't matter whether it's left or right people just hang on every word I've always thought that would drive them sort of nuts and that's that's where they've ended up as a society and you know I think you have to wait to see something of real importance that's more considered but that that's not what the media is doing and so you get all this confusion and focus where there probably shouldn't be focused but it's just my point of view all right well we are coming up on the 2020 election and you are the son of a dry-goods seller you are the American Dream you are now the 100th richest person in the world according to the Forbes list but as we approach the election you're seeing more and more candidates come out proposing a wealth tax you have one who says billionaires shouldn't exist you're also seeing polls that are more favorable towards socialism so what is your response to that well there are a bunch of different responses as to this thing about billionaires it shouldn't exist that if you look at who these people are they didn't become prosperous sitting and just watching television these are people who started businesses and every place where everybody worked was started by somebody and and that's the way the world works and the people who take that risk and start those businesses and end up you know either you're hiring ten people a hundred people thousand people 10,000 people a hundred thousand people yeah that's where people work and those people make more money and what happens is they become affluent most of them fail by the way nine out of ten businesses that are started result in failure so if you're one of the people who make it through that you're providing employment and prosperity and in effect tax revenue and and you have a bunch compared to other people and then you get older and you pass away and and the laws you know it sort of tacks away most of what you have owned it's already it's already been taxed once already typically and then that's dispersed and then that wealth disappears and and and so that's that's what that's how these people get created and you know in in terms of a wealth tax I I don't remember whether they're 210 or 220 countries in the world and only four of them have a wealth tax if it was such a good idea and it was so easy to raise money you'd have loads of them you've had more than four and they give it up so why did they give it up so so yahoo addresses a lot of younger people people who want to start businesses and here's how this would work if you were trying to start a business and you got venture capital money make pretend that you were successful and your company make it really a good success was worth a billion dollars on a valuation basis and you started it so you had three hundred million dollars of the billion but you probably had a salary of somewhere around three hundred thousand dollars so so what would happen is you'd end up with a hundred and fifty thousand dollars after-tax and if you had a 1% tax you know another three hundred three million dollars so how are you gonna pay three million dollars of taxes when you only have a hundred and fifty thousand dollars so this would be a terrible situation to have created something be successful and be hemorrhaging financially so that's how a wealth tax works and what would happen with that person is they would not want to stay in the United States I believe they would leave but what's more important is people who would come here to start businesses wouldn't come because the success would be taxed away and a wealth tax ends and so what is logical is those people would find another place to go and there would be another ecosystem developed it you would have I think countries offering them tax free zones to do their business and you would basically create a huge dislocation for the United States so so I think there are reasons why wealth taxes don't exist and I just gave you one of several well before we let you go you're problem solver you look for big problems and you want to find solutions we're starting to see some of your peers and thinking Ray Dalio Bridgewater associates sales forces Marc Benioff come out and say the current capitalist system is broken so using that problem solver mentality Steve how would you advise that we fix it well I think it's it's pretty clear that as a result of a fed study done two years ago that 40% of Americans the Fed said couldn't write a four hundred dollar check in an emergency so what that means is this forty percent of the population basically doesn't have savings and they are having a really really tough time which is why our politics has become poisonous because because we've got a large percentage of our population that's not doing well and I think you have to address that first you have to provide more money for these people and I think there are a lot of different policy approaches I think a good place to start is to increase the minimum wage up to $15 that this is actually a tax on the business community right you know because you're taking profits away from them to give them to workers that takes care of significantly increasing money for fifteen percent of the population but what happens is the people who used to be getting more than the minimum wage they have to be boosted up when you're close to doubling so so this ends up affecting somewhere around 35 percent of the population and and it's got lots of knock-on effects that's the first thing but capitalism isn't broken per se what's been broken is our educational system so so when I was younger which apparently was a long time ago but I didn't get the word on it that that the US was one of the top two or three education systems in the world we've now fallen somewhere between number 25 and 30 and in math we're solidly in the 30s if you're producing a workforce that is dramatically inferior to come editor's on the global scale we're gonna have a lot of trouble I was just in China a few weeks ago and I was meeting with one of the top few people in their government and he was telling me he said you know what we're gonna do and in education we spent an hour on education and he said we're gonna require that every student in China take computer science and I'm sitting there going oh em gee in the United States we probably have 5% of our primary and secondary students taking computer science it is not capitalism that's broke imagine we're competing with a country where everybody is computer literate and we've got hardly anybody this is not a recipe for long-term success and and it's it's not about capitalism we have to put the best possible individuals and and and and training on the playing field that's how you win the game and we're just not doing what we need to do in that area and if you deliver those people to a workforce you're really disadvantaged so I have a slightly different take you know these these are government issues by the way they're not business issues but there are a lot of things that business can do to help train people we have to do that you know we have to make sure that students who aren't necessarily on a college track do stuff like they do in Germany where the business community you know trains those people for real jobs takes them on board and gives them good careers so we have a lot of levers that we can play with to have better outcomes for the people in the country and and we have to do that this is not optional well you know what I think these sound like generational opportunities Stephen Schwarzman CEO of the Blackstone Group thank you so much for joining us at the Yahoo Finance all market summit will now be joined first of all thank you guys Julia and Steve for that really insightful conversation that was that was a great way to end the day and I just hope that everyone had as wonderful a time as I did I thought it was really really awesome so thank you all so much everyone here in New York thank you to everyone who is watching the livestream thank you to our sponsors Accenture Edelman McKinsey in vault 12 and then also thank you to everyone from Yahoo Finance's the wonderful crew who produced this thanks to Jen Rogers and Brian Cheung thank you all so much we'll see again next year thank you [Applause] [Music]

Channel: Yahoo Finance

Views: 43,526

Rating: 4.8878503 out of 5

Keywords: Yahoo Finance, Personal Finance, Money, Investing, Business, Savings, Investment, Stocks, Bonds, FX, Currencies, NYSE, Equities, News, Politics, Market, Markets, Market Movers, Midday Movers, The Final Round, Blackstone CEO, Stephen Schwarzman, wealth tax, US-China trade war, inequaltiy, Donald Trump, billionaire, Billionaire talks being successful

Id: bmQjbGC7as4

Length: 25min 4sec (1504 seconds)

Published: Thu Oct 10 2019