The David Rubenstein Show: Robert F. Smith

[Music] you wanted to go into technology banking like all things you know land of the blind one iron man is king where there a lot of african-americans in the technology area at that time very few a very few what propelled you to say I'm gonna give all this up and go start my own company very few software companies were actually efficiently run we took you know these kernels of best practices you became very involved in philanthropy philanthropic endeavors were part of my family my family dynamic one thing we have to do is ensure that our society is a just society would you fix your time please well people wouldn't recognize me if my tie was fixed but okay just leave it this way all right I don't consider myself a journalist and nobody else would consider myself a journalist I began to take on the life of being an interviewer even though I have a day job running a private equity firm how do you define leadership what is it that makes somebody tick when you were growing up in Denver the son of schoolteachers did you ever think you would become the wealthiest african-american in the United States I was basically raised in a family of I'll call it achievers you my mother my father both had Doctorate degrees in education and they emphasized not only to my brother and I but to the rest of the family the importance of really you know a becoming educated be working really hard and and you know see trying to become the pinnacle of success in one's community and you know when I look back at those days and the formative elements of who we were in our communities I saw parents who who gave generously of time energy effort and intellectual capacity to our to our community and I think what that led me to do was always think about striving for excellence talk about your background in a moment but I'd like to now just explain to people what you actually did that made this great fortune what we did and what I was able to do was was bridge a couple of ideas you know software is truly still the most productive tool introduced in our business economy over the last 50 years and through my work when I was a as an investment banker I got to see a number of software companies and how they operated and I ran across one that turned out to be a client and ultimately the owner of that business that that trust ended up being my first investor and that particular business had a set of practices that they used business practices that helped them run that business more efficiently than any other software company that I that I had seen and so in essence you know what I would say you know took some of the kernels of those best practices and said if you took them and as an engineer and create a process around delivering those best practices across the world of enterprise software you could do quite well when you grew up in Denver was there a lot of discrimination then against african-americans I grew up at a time when when desegregation was just starting and so prior to that you know like all cities in America and large cities you know there's their segregated communities and there still are for the most part and it's unfortunate I grew up in a predominantly african-american community we all lived in a commune for the most part because you still had redlining you still had an accessibility to to capital to buy homes which created in essence the basis of a lot of the wealth in America so it was a time in growing up that I really understood the importance of community and it was pretty much a segregated community that I grew up in until we started bussing in forced busing created the desegregation Leasing the school systems when you were very young your mother brought you to the March in Washington you did when Martin Luther King made his famous speech I think the impact of her bringing me and my brother here not only was you know for the summer but for us to understand that our community stood for something our community was striving for something and it was important that we were a part of it and I think that's part of the the lifelong you know part of my soul which is I have to give back and help my community move forward and in this in this wonderful country called America now as we have this discussion now we're in the african-american history and culture museum to which you're one of the largest donors this is very near where Martin Luther King gave a speech right and your mother was living in Denver at the time that correct were brought here but she grew up in Washington she didn't yeah and your grandparents what did they do my grandfather actually was the Postmaster General for three post offices here in the DC area and before that when he was in high school he actually worked in the Senate building and what he did was he actually worked in the Senate lounge and he served coffee and tea and and you know could took you know hats and coats from various senators as they came in when President Obama was first inaugurated I brought my grandfather who was 93 at the time and while we were sitting there and in our seats and you know really really understanding and feeling the majesty of the moment for him he said see grant said you look up there in that Senate building and he pointed to a window above one of the flags he said I used to work in that in that in that room and he said I remember looking out that window when FDR was being inaugurated and he said I remember there wasn't a black face in the crowd and here we are and I'm sitting with my grandfather seeing the first black president being inaugurated he said America is a great place as long as you're willing to work hard and and drive forward on a set of principles and ideals that are important and frankly authentic so that sticks with me to this day so you went to Cornell you majored in engineering I did Chemical Engineering and now the school of chemical engineering is now named after you as a result of gifts that you've given how about that you graduated from Cornell and then your first job is that Goodyear yeah good your time rubber right and you went to air products and chemicals right when the air products and chemicals and worked in Applied Research and Development and had some wonderful experiences there I develop some sell a line of products believe you not call fresh back that actually extended that the shelf life of foods and then from there went into craft renew foods and there I had product equipment and process development and for me my whole life and at that point I was all about you know how do you create a solution their unique solutions that no one else had come up with create ideas that no one else or you know that had ever come up with and solve problems how do you go from working in the engineering departments of these various companies to a financial engineering sure of Goldman Sachs sure is actually a quite an interesting story I I had done very well this top student for our first year in business school so I had to come back from the summer graduation to get this award and as they went through my background there was a gentleman by name of John Newton doll who ran his own investment bank at the time who was the keynote speaker and he comes over to me after the they give you my reward he has a speech you say you have a really interesting background have you ever thought about a career and Investment Banking and I said well I said there's a bunch of a former investment bankers in my class I don't like any of them and he says well why not I said well they think they know everything in a pretty arrogant I said you got to understand I'm an engineer we do know everything it bothers us and he chuckled and I was happy that he didn't take offense to to my joke but what I did was I said you know honestly I don't understand what investment bankers do you know I was a scientist I was a technologist I you know I thought about the world through that lens and this is another case where someone extended themselves for me which is why it's important that I continued to pay that forward and he says once you come to my office and let's talk about it so he invites me down and we sit down and we have lunch he picks up the phone and David calls people like Stan O'Neal okay at the time was a CFO of Maryland Hilton when I ran Merrill Lynch and Ken Chenault and as they're all prominent african-american being all probably after african-american business leaders and all of them took the meetings and from there they introduced me to other people to take meetings I literally had over a hundred interviews in the fall of my second year in business school and figured out that merger and acquisitions was the only business I wanted to be in in investment banking and I said because with the exception of warfare it's how assets get transferred on this planet it's a CEO level discussion it's a board level discussion there's a strategic discussion and that was quite interesting to me and I thought I could add particular value and insights into into that particular business three jobs you had before you went to business school did you feel any discrimination against you because you're an American oh yeah I mean it's one of those in America I have and still do you know I remember a time when I was actually at Air Products and I was invited to give a talk in California in San Francisco at one of the big conventions and this this you know man comes over and he asked questions about well how does it work an extension of shelf life of rice and cooked rice and I'm telling you how what the you know explain that the dynamics the biology in the organ they're not elliptic issues you have to think about in addition to the microbiological issues the guy said you know you're a very smart guy you just have your heritage to overcome in order to be successful in business and you know that kind of stuck with me at a time that you know after all of this wonderful work that I'm doing they he still viewed me through that lens as opposed to the work that I had done so you went to Goldman and said I'm leaving yeah they try to talk you out of it of course at some point in time in your life you know you've got to look yourself in the mirror and said you know you have to take a risk you he went to Columbia Business School and I assume you did pretty well there because you went to goldman sachs afterwards great the what year did you join goldman in 1994 so you worked there for a while and then how did you decide to you wanted to go into technology banking right so like all things you know land of the blind one iron man is king and at the time technology for us was it was defense contractors we had another company we took public one called Microsoft we had this other company we've called on called IBM and that was the world of technology as far as Goldman was was concerned where there are a lot of african-americans in the technology area at that time very few very few I was our first M&A banker on the ground in San Francisco focused on tech and then we decided to form a tetra and so that created the whole another whole nother Nexus and dynamic of opportunity your job is to convince clients to hire Goldman you got in to give them good advice right did you meet Steve Jobs I I didn't meet Steve Jobs personally but I was on the team that we actually got engaged we had two at the time you may not remember this Apple was under assault Steve was said I'm not coming back unless there's a different board so we fired the board got rid of the CEO and invited Steve to come back all right so you're going very well out there you're now living in San Francisco area you're making a big success you by Investment Banking standards I presume you're you know highly compensated so forth what propelled you to say I'm gonna give all this up and go start my own company right so the interesting thing that occurred as you know again as an engineer that I realized way back in my Goodyear entire in rubber days the impact that software really had on businesses the thing that I noticed that there's very few software companies were actually efficiently run well why the big part was most executives who started software companies well they wrote code or they knew a market opportunity and they sold the code there was never anyone who taught them how to run software companies so I didn't run into this the small company I'll say small in in Houston Texas that is the most efficient software company I've ever seen they had some very basic things that they just did extremely well and I said well if you took those basic things and actually applied them ultimately to other enterprise software companies you could run those businesses very similar to the way they ran theirs and would create tremendous value in those companies that that was the idea that was a conceit and they said that's a good idea why don't you do it well yeah in essence I said well if you actually thought about taking some of these best practices and putting them buying enterprise software companies and driving them forward you could actually do pretty well and I said that's a great idea would you do that and I said well you know they gave me one of those offers that looked quite interesting and I remember my lawyer said this is a bad deal Robert but you should take it yeah right so you went to Goldman and said I'm leaving right they try to talk you out of it of course they made the pitch against it but you know I like all things David at some point in time in your life you know you got to look yourself in the mirror and said you know you have to take a little risk and go see if this is how old were you when you took this I was 39 years old and it's so it's so interesting so of course I started doing research it was the same age that others left what they were doing to go start their businesses I said well let's go give it a run all right so you started buying companies with the money that from this Houston company right how many deals have you now done if you look at it today it's a little over three hundred one of the things you did that was unique many people think that buyout people what they do is they lever up a company borrow a lot of money tell the CEO do the best job you can and then they you know hope their for the best great what you actually did was something different you actually put a system together to make sure every one of your companies was gonna follow the system can you explain that sure and it's important you know early on in the world of software you couldn't borrow money in software companies anyway it wasn't until probably oh six oh seven till you could actually lever up software companies so there was no debt available so the only value you the value that you could create had to be inherent in the business you had to now improve the operation so what we now do we took you know these kernels of best practices and in essence have now developed a whole systemic approach here's how you use a special best practice to improve the efficacy of whatever that functional area is within a within a within that company we then have it come a group now called Vista Consulting Group that delivers I've over a hundred people in that group that actually delivered these best practices with them to the management team and the management team adopts those best practices the way I like to think about it we install the best practices in those businesses that actually cracks the rubik's cube of profitable growth not only are we increasing the profit margins of those businesses but we actually can't accelerate the growth in those businesses at the same time let's describe fish to today how many employees is fish to have we have about 300 so call it a hundred or so in my investment team a hundred and so and VCG and call it a hundred or so in administration so 300 people in the core of what is Vista and what point did you realize you were pretty good at this it was it the first year the second year a third year when did you realize hey I'm really good at it it took a while believe it or not it wasn't until we really finished our first fun we actually closed out the last deal and the first funds and we actually are pretty good at this you've signed the giving pledge one thing we have to do is ensure that our society is a just society our society has the ability to actually cure its own problems and you know while we accumulate wealth on the one hand you know we need to also solve the problems that we that are facing us today while we are alive so I guess I need to show you this way David here we go all right very impressive what we have here is this Center is designed really to capture all of the records of the African American experience and there's the records that were institutional you know we think about Friedman Bureau in other places we can now go and capture those and digitize them and you can have access to them this is that your the best of the institutional records but the real beauty here is how do you now though and give everybody a chance to put their family's history and their narrative the US environment or part of being a part of us here in a place that's accessible so generation upon generation can now find you know who they were how they contributed and not just the five hundred people that we see represented that everyone knows but millions of people will come what about your family well I I hope that they're here but I'm excited we should probably go take a look and see if any of that is accessible [Music] in ancestry and FamilySearch you can search for individual people the first hit we get is a war war to 1951 sa 1914 that Sam yeah there you go what about 1881 that was a good guess in the census this is the 1940 a great grandmother great-grandmother so here you can see they live on Florida Avenue she's a domestic mm-hmm and they're renting their home yeah she's got an eighth-grade education huh and in the 1940 census she's 59 years old yeah these are all my grandfather's siblings I don't put this together right yeah when you became very wealthy which is in the last few years or so you became very involved in philanthropy much of your giving has related to african-american related projects or clauses and I'd like to just talk about a couple of that sure the African American history and culture museum and we're now at what attracted you to that cause sure there are two elements we have been stained by the history of slavery and in still stained by the part of you know of racism but what we need to do is make sure we have a monument to the people who have actually you know put their blood into the soil that could create it what is the best country in the world so that's point number one point number two I think it's important that the people African American people have a place to come to feel a sense of pride of who we are and where we're going and also contribute their story majority of my gift is there actually the digitization of the African American experience so any family can now digitize their photographs their narrative there they're you know they're they're their videography whatever it might be and it's now a part of this museum and people will be able to learn about their family histories in in ways that come alive was just something that your parents instilled in you or why do you decide to become such an active philanthropist in just a few years I saw my mother write a $25 check to the United Negro College Fund every month growing up and even when I wanted a new pair of you know converse all-stars she said go earn the money to get them yourselves as you wrote that $25 check which I could have bought two pairs with you know she instilled in me the importance of giving to the community I saw my father who was on the board and ran you know the local YMCA is at East Denver YMCA and I know how he contributed time and energy and in intellectual capacity on raising funds so the kids in our neighborhood could go and spend you know camps or summer camp and enjoy the outdoors and understand the importance of the outdoors and building one's sense of spirit in one's soul so all through my life growing up you know philanthropic endeavors were part of my family my family dynamic you signed the Giving Pledge was that hard to do but says you're gonna give away half your wealth now it wasn't hard you know it's it's it's it's so interesting you know I and it's wonderful that you know the Bill and Warren and folks like you are actually out there having and being in that evangelist for what this is one thing we have to do is ensure that our society is a just society our society has the ability to actually cure its own problems and you know while we accumulate wealth on the one hand you know we need to also solve the problems that we that are facing us today while we are alive part of what I think about is I know today the problems that are facing the communities I care about and if I have the capacity to do something about them frankly it's on me to do something about them and the giving pledge is a is a good way to to put a signal out there that say listen this this is the right thing for anyone who accumulates wealth of any size irrespective whether you sign the pledge to actually care about the community in in very meaningful ways you have another very interesting philanthropic project you have a ranch that you have converted yeah it's called Lincoln Hills it's actually the oldest African American resort community founded by African Americans and it was founded as a place where African Americans could buy a plot of Lion land for $25 build a cabin and that's what they would come in summer and spend their vacations I went up there the first time and I was just six months old so goes way back in history everyone from Duke Ellington to Zora Neale Hurston to Langston Hughes and Count Basie all come there they stayed there because they could not a in the hotels in Denver during that period of history so overtime is you know after desegregation like a lot of the African American institutions kind of fell in disrepair and got sold off in different parts and now we've developed a wonderful program that serves our community in so many different ways 6,000 inner-city kids every summer come to the ranch we also get to about two to three hundred wounded veterans every year in the winter though when the ranch has pretty much shut down one of the things that we identified my wife identified this was that there are programs once called together we rise we partner with that actually handles aging out foster kids so now we have built at the ranch a 16 bedroom ranch house and we can host up to 30 kids during the during the holiday so we host them and do all sorts of fun activities with them here are a big fly fisherman I love it yes now tell me what the appeal is because you have a big brain and you're trying to outsmart a little small brain so why is that so now is it because those little brains are actually focused on outsmarting you because you're in their territory but the beauty of it honestly David is nature you're standing I think about it you know all things in in this world that we live in today depend upon water in order to live I think about water as being in essence the literal lifeblood of this planet and you're standing in this water with your feet on the soil and the water is rushing around you and at some point in time if you open yourself to it all things become white and you stand there and you start to realize that you were part of this greater this greater consciousness of existence and this is the fly-fishing is just a way to stand in the water without looking ridiculous now your parents are alive my mother still is he's and she must be extremely proud of what you've achieved does she call you all the time to tell you how great you alright she usually calls me to tell me what I need to do a little better or thoughtfulness about what our community needs is still very relevant and valid and so she identifies areas that she says you know Robert you need to think about this and how can you help this one kid or these hundreds of kids in certain ways so what is the greatest pleasure of your life pleasing your mother or making a great deal of money giving away money catching a 30-inch rainbow okay all right know the greatest pleasure in all honesty David it's Frankie just to liberate a human spirit and when you're able to liberate a human spirit and see that spirit really become its best self and that person become its betsa that is the greatest thrill on the planet so what would you like to be have people say as your legacy eventually you might slow down you might do something else would you ever go into government you know I don't know you know I like all things you you look for areas that you can bring a unique solution to and in solve a problem I think the problems I want to solve now are an equalization of opportunity for African Americans to help them on board into what is the the commercial enterprise that is America you know how do we create sustainable career opportunities for people not just a job or not just a place to go work and I think it's through the education it's through internships so I hope that I'm able to establish and build a sustainable fabric to identify these folks get them educated in in you know a series of schools get them the right internships and put them on a path to not only be creative business leaders but also creative engineers and technologists that contribute to what is the fabric of America Robert Smith it's a great story a great American story congratulations on what you've achieved and thank you very much thank you David

Channel: David Rubenstein

Views: 199,684

Rating: 4.9255104 out of 5

Keywords: Bloomberg

Id: dYNfTQnM7vc

Length: 24min 4sec (1444 seconds)

Published: Wed Jun 20 2018