The CEO Series: Steve Schwarzman


MR. RYAN: Well, good morning. Welcome to The Washington Post. I'm Fred Ryan, publisher. And thank you for joining us for this special edition of our CEO Series.

We're pleased to have as our guest today Stephen Schwarzman, the Chairman, CEO and co-founder of the Blackstone Group.

Steve founded Blackstone in 1985 with former Secretary of Commerce and Lehman Brothers CEO, Pete Peterson. And, over the past 34 years, the company has grown into a multinational private equity firm with assets totaling more than half a trillion dollars.

In addition to his accomplishments in business, Steve is also an active philanthropist with a history of supporting education, cultural causes, and the arts. He sits on the Board of the Council of Foreign Relations, the Business Council, the Business Roundtable, and the International Council of the World Economic Forum.

In his new book, "What It Takes: Lessons in the Pursuit of Excellence," Steve uses his 50-year career to offer advice on how to become a successful entrepreneur and CEO, and it's already a national bestseller.

Today, we'll hear from Steve about the book and the leadership lessons it contains. And we're delighted to have The Washington Post's Michael Duffy here to lead the conversation. So please join me in welcoming Steve Schwarzman and Michael Duffy.


MR. DUFFY: Good morning, everybody, and welcome, particularly to Steve, businessman, business owner, private equity king, presidential advisor, philanthropist, and now writer, if the hundred thousand or so words in this book are to be believed.

So, Steve, I mean, you're here in the Valhalla of journalism. Is that because you have decided to seek honest work and join us?

MR. SCHWARZMAN: Well, it certainly would result in a pay cut.


MR. DUFFY: Okay. Possibly. Why did you write this book? Tell us a little bit about what it takes and why you decided to undertake it. You had lots of things you could have done, instead.

MR. SCHWARZMAN: Yeah, well, I started writing the book as a result of a meeting I had in the Middle East with the head of a sovereign wealth fund who was a royal family person. And it was supposed to be a five-minute handshake, and instead he started asking me about how he could run his organization better; hire people; how do you hire people; how do you pay people; how do you look at the world; how do you something which is technically called "asset allocation," which is really where do you invest, what type of things do you invest in; and how do I see the world.

Well, this is pretty easy stuff, for me. All I wanted to do was sell him our products. And I tried in the middle of the meeting, and he said, "Please don't sell me anything. I'm going to buy it anyhow. I just want to know what you think." So, that was a pretty surprising meeting. It was about, I don't know, six, seven years ago.

And then, when I started going other places, the same thing happened. And after about 25 of those meetings, because they each take a while, I figured, jeez, if I wrote a book and just gave them the thing, I wouldn't have to talk about this stuff.


MR. SCHWARZMAN: So, that's where the book came from.

MR. DUFFY: That's good. Now, well, let's start a little bit with the bio. You grew up in Pennsylvania, in Philly.


MR. DUFFY: You went to Yale, Harvard Business School. And by the time you're through what most people would think of as their formative years, you learned pretty quickly that it's best to think--one of the things that is clear in the book--that it's great to think big. Don't think small.

But it's in sharp contrast to an experience you had when you were with your father, who ran a linen store.


MR. DUFFY: And tell us about his worldview. It was a little different.

MR. SCHWARZMAN: Yeah, my dad had a store that sort of looked like Bed, Bath and Beyond, but this was a long time ago and there was no Bed, Bath and Beyond. And I had to work there starting around the age of 10, and I was in charge of the ladies handkerchief counter--not a particularly uplifting or intellectually challenging type of activity.

And it was pretty clear there were a lot of people who came into this store on a regular basis, so I said to my dad, I said, "Dad, it looks like you're doing pretty well." As a 10-year-old, you don't know too much, but this was probably when I was about 14. And I said, "Why don't you take the store and open it everywhere in the country?" I said, "I think you could be really successful."

And my dad looked at me and said, "I don't think that's a good idea."

I said, "All right. Well, let's just open it all over Pennsylvania." And he said, "I don't want to do that."

I said, "Okay, how about we could probably put six or seven stores in Philadelphia?" He said, "I don't want to do that."

I said, "Dad, this is a winner. Why don't you want to do it?" And he said, "Because I'm happy the way I am. I have a house. I have two cars. I have enough money to send you and your brothers to college, and I don't want any more." Which I thought was sort of hard to take in, because my dad was very smart, certainly smarter than I am. And I just couldn't understand why he didn't want to go for it. But I learned that not everybody is the same. And his contentment is what made him sort of a remarkable human being. And he's passed away. Wish he was still here. But it was an interesting learning thing for me.

MR. DUFFY: We'll come back to contentment, maybe, before we're done.

There's a great passage early on in this book where you're shopping for investment banks. He's not shopping to buy them. He's shopping to go to work for them. He's looking at six or seven right after business school. And he makes the rounds, and you finally decide on Lehman, which he describes as "full of interesting characters, ex-CIA agents, ex-military, strays from the oil industry, family friends, randoms," which I thought sounded a little like a newsroom.

Anyway, Lehman's your pick, but not before you make a visit to Goldman Sachs, where you conclude that they conclude that you are quote "a little too much my own person." Now, what does that mean? Is that a good thing or a bad thing?

MR. SCHWARZMAN: Well, it was apparently a good thing for me because I didn't go there. But they didn't want me because I had apparently too much of a personality or something. And what you learned is that different organizations have different cultures, and they don't like to stray much from their culture.

Lehman had a different culture, which I thought was pretty interesting. But my first day at work, I got to the elevator. Lehman had its own building at One William Street. And the elevator doors, which were made out of iron, sort of like a feudal castle, opened and somebody walked out, and he looked at me and he said, "Oh, you're on of the new people." I said, "Yes, I am." And he said, "You'll love it here." I said, "Well, I hope so." He said, "The reason you'll love it is that nobody here will stab you in the back. They'll just walk right up to you and stab you in the front."


MR. SCHWARZMAN: So, you can imagine going home for your first day at work and your wife says to you, "How was your first day?" And I told her that story, and she said, "It's going to be an interesting career, there."

MR. DUFFY: But you're a rocket at Lehman. You rise very fast. You're managing director at 31. But there is a fair amount in this book about what I think would be fairly described as early screwups, or at least missteps where you're called out for things, in addition to maybe you're a bad typist, I don't know, typographical errors, but also for not sitting up straight in meetings. Were these formative, or were they just random events?

MR. SCHWARZMAN: No, no, they're definitely formative.

My first assignment was a valuation of a company that made airplane seats. Apparently, I'm so old, this was the introduction of jets. And so, they were selling a lot of seats, and that company was sold to someone, and things sort of collapsed and the recession at that time, and people were suing each other, and we were hired to give a valuation.

And so, I thought my whole career hung on the outcome of this first assignment. And I wrote some 75-page analysis for an older man named Herman Kahn, who was hard of hearing. And so, when he spoke on the phone, it was like you could keep it far away from you.

So, I got that assignment. And I went to give it to him. He wasn't at his desk. I left it on his desk. A few hours later, he calls and he says, "Is this Steve Schwarzman?" And he's like, booming. And I said, "Yes, it is." He said, "This is Herman Kahn. You have a typo on page 56." Smack.

I worked on this thing for like two months. That was the only feedback I got on this assignment. So, when you say, "Was that formative?" Yeah. I never give anybody anything that isn't perfect.

And at our firm, Blackstone, it's the same rule. And so, this really twists you from in college, an A is--you know, it's an A, but could be a 94, could be a 92, could even be a 91. In our world, it has got to be 100.

I had another one which was, like, even worse. This was just light. But, you know, this kind of stuff happens to almost everybody at some point. But, you know, I did a statistical analysis for one of the partners who was probably seven years older than I was. And it's a whole series of spinning off a company or taking it public, and it was reams of numbers on different alternatives.

So, at that point, you only had one partner, one associate, none of this army of people. And so, I did all the work. And we were on the plane and the partner who was sitting next to me starts going over the analysis. And I'm looking at him, and his face starts scrunching up a bit and he keeps turning pages. And he said, "You know, there's a statistical error here."

MR. DUFFY: In your analysis.

MR. SCHWARZMAN: In my analysis, and it was running through--of course, it touches a lot of the pages. And he said, "Look, half of these pages are wrong, half of them are right. I can do the presentation to this board of directors with the ones that are correct, just take out the other ones." And so, you know, I was just so just upset about the whole thing, so I ripped the stuff out. And we got to the meeting, and he handed out the brochures and started going through it. And I was so flustered by failing that I had taken out the good pages.


MR. SCHWARZMAN: And I don't know if you've ever seen a human being in a suit look like he was swimming across a board room table to get all these things back. And I can only say that the ride in the taxi going back to the airport was somewhat chilly. And we were sitting next to each other in the lounge right until the plane was called. Not a word was spoken. And he said, "If you ever do that to me again, you're fired." So, it never happened again, but these are the learning types of things when you're a young person.

MR. DUFFY: You and Pete Peterson break away from Lehman and start Blackstone. And you spend months planning and organizing it, and you start to raise capital, but it doesn't come easily. In fact, you say that you made--this is an interesting lesson: You made a mistake by asking your friends for help first.

MR. SCHWARZMAN: Yeah. One of the mistakes you almost always make as an entrepreneur is you come up with a concept and you want to make easy sales, so you go to the people you know best. This is a horrific idea. It's psychologically comfortable. It's totally logical.

The only problem is, you don't realize how bad you are, because let's assume they're pretty informed--always a good thing to assume, that somebody else is informed--and they start asking you questions. And if this is like your first shot, you don't know all the answers. Or you thought you did, but then they ask you things you don't know.

So, as soon as that starts happening, the person who does the asking completely loses confidence in you and they don't give you anything. You should actually see that person as like your 25th presentation, because by that time somebody else has put you through your paces. So, there is some counterintuitive things when you start.

MR. DUFFY: Sometime in the mid-80s, you almost go to work for Jim Baker here in Washington.


MR. DUFFY: And Baker's staff was, as many people know, was one of the best anyone had seen in years since Kennedy, maybe since the New Deal, yet you turned him down. How come?

MR. SCHWARZMAN: Well, what happened is I had a non-compete after I sold Lehman to American Express. And Jim Robinson, who's a very nice guy, was the head of American Express, and he called Jim. So, I moved to Washington and worked at the White House. I thought this would be really exciting.

And so, I met him, and then he passed me on to Dick Darman, who passed me on to Dave Stockman, who ultimately joined me at Blackstone as a partner. And so, everybody was ready to go. I was going to be the number-four person on that team, and then I got a call to say that he was switching jobs with Don Regan and everybody was, in effect, going with him. And they recommended I not stay, and try and work for Don Regan, because they said that there were going to be problems, which, of course, there ended up being.

So they said, "Would you like to work at the Treasury?" I said, "Well, what would be the job?" They said, "Well, you could be Assistant Secretary for Debt Management."

I'm thinking to myself, I don't know anything about debt management. I said, "So, what do they do?" He said, "They refinance the U.S. debt and issue bonds."

So I said, "Well, how long has that position been vacant?" And the answer was two years. I said, "You obviously don't need a human doing this work since they kept issuing bonds the whole time." So I said, "I don't think this is for me." And that was--

MR. DUFFY: Your close call.

MR. SCHWARZMAN: Yeah, that was my--

MR. DUFFY: Let's talk about China, because there is a great deal in the book about China and your work on behalf of the administration in China.


MR. DUFFY: And it starts with an interesting story. You told President Xi in early 2017, the book says, that you thought, according to some estimates by the Fed, as many as one-half of all Americans could not write a $400 check in an emergency. And you conveyed that to President Xi as a way to convince him to reset--that is, change--the U.S.-Chinese relationship, particularly with respect to trade.

The book says that he heard that and agreed, in fact, proposed the reset. Yet, here we are three years later and we haven't had a reset yet. How come?

MR. SCHWARZMAN: Well, that's a good question. Basically, he was asking me about how President Trump got elected. And, you know, I described--it was 40 percent, not 50--Americans were really having a very difficult time, and, in effect, there was a surprise outcome. And it was a surprise to everyone, except maybe the person who was running.

And I said, as a result, "You're going to be faced with a variety of requests to basically change or modify your system just because you're the second-biggest economy in the world. You're growing at three times the rate. And that's great for a developing market economy, much like the United States in the 19th century, where we had high tariffs and other things."

"But things change. You're now second in the world, and there doesn't appear to be a third or fourth, I mean, you're so big."

And the U.S. and China actually, together, depending upon who's doing the measurement, which measurement, are between 35 and 40 percent of the entire world's economy. People have no idea how big this is and how consequential it is.

And I said "You know, you're probably going to think that the request for change is coming from a person, but it's not really. It's coming from a country." And whether that person's there or not, that the country, if we don't solve these kinds of problems, will continue to feel the same way or more passionate. So, there's no alternative other than making adjustments to be more like a developed world economy.

And he said, "I didn't know those facts." I said, "That's all right. We didn't either." I said, "Everyone who predicted the 2016 election was wrong. So don't think you have bad staff work. We didn't know. So there we are. But now you're facing a structural need for change." And I said, "This is happening all over the West. It's just not an American issue."

And so he said, 'Assuming you're right, which I assume you are, we're going to have to make a significant adjustment."

MR. DUFFY: And do you think they want to make it or--

MR. SCHWARZMAN: I think they do. It's an interesting situation. Here is a country that, in 40 years, has gone from a few hundred dollars per capita GDP to $10,000, and it's going up a $1,000 a year. It's pretty amazing. It's probably the most remarkable economic growth for a giant-size country in world history in that kind of period.

And so, their system is not open the way ours is. It has higher tariffs and taxes. It has sort of a 3:1 basis compared to them coming and bringing goods in here; And sort of limited market access, all kinds of restrictions, intellectual property issues; and a whole variety of things that need to be adjusted.

And they have, as we found out, internal politics. We view China as a monolith run by just one person. China's a big place, 1.3 billion people. And they have their own Standing Committee, which is their senior leadership. And they have what I guess we would call in English "reformers" who want to make these adjustments, and they have hardliners who say, look, we've been growing at these enormous rates, why should we change? It's good for us, and we're not so rich.

And so what you're seeing in these discussions is you're seeing China showing up with sort of slightly different hats at different points over a two-and-a-half-year period. And sometimes they change what they were thinking. And it's not the people that you meet with. It's their system. So I think nobody just drops a system, and so you're going to have, over time, changes, but having them instant is not going to happen.

MR. DUFFY: You said in the book you've made eight trips on behalf of the administration to China. That was at the time of the writing of the book. Have you made more since?

MR. SCHWARZMAN: Yeah, sure. I go over for other reasons, too. I started a school in China. It's a lot like the Rhodes Scholarship. It's called the Schwarzman Scholars at Tsinghua University, which is their number-one university. So I go over for that.

MR. DUFFY: Do you think the Chinese need more whispering about--well, let me phrase it carefully. Who needs the Schwarzman whispering more: the Chinese to understand the Americans, or the Americans to understand the Chinese?

MR. SCHWARZMAN: Yeah, well, I mean, I'm not going to answer that question. But I think it's really impossible for an outsider to deal with the internal politics of China. That's their situation. And you can describe to them the consequences of decoupling, that its not, in my view, in any case, in their interest. And they can take that on board. But you're powerless to do anything to influence things more than giving your views.

MR. DUFFY: Given what you know about both parties, would you say that we're getting closer to a deal or getting further away from at the moment?

MR. SCHWARZMAN: Well, actually, it's been really unusual that in May, is in the close to the deal pile.

MR. DUFFY: Yeah.

MR. SCHWARZMAN: And I think everybody knows that story, that you had roughly 150 pages and like a third of them disappeared a few days before their group was scheduled to come over, and they obviously changed their mind.

And then, as there usually is between these two countries, there's a period where they withdraw and trying to figure out where they're going next. And that's why they're coming over. So, in a way, it's a great reveal when they come over--and coming over Thursday, Friday, I guess. And we'll know what happened backstage because we'll see it on the front stage. And I'm not sure anybody knows exactly what that will be.

MR. DUFFY: Who or what is coming.

MR. SCHWARZMAN: Excuse me?

MR. DUFFY: You aren't sure who or what is coming.

MR. SCHWARZMAN: Well, I know who's coming.

MR. DUFFY: Yeah, but exactly what'll be put on the table. Do you believe that a small deal might be advisable before a big comprehensive deal? There has been talk about sort of a down payment.

MR. SCHWARZMAN: I think that's up to the President.

MR. DUFFY: Would you favor it?

MR. SCHWARZMAN: He's got to figure out whether that's of interest.

MR. DUFFY: Has Hong Kong made this deal more likely or less likely?

MR. SCHWARZMAN: I think it's made it more likely because China is facing a lot of significant issues. And Hong Kong, because it has some link with Taiwan in terms of the Taiwanese watching what's going on in Hong Kong, it's like that's in the super important category. Trade, everybody knows what they can do or not. So I don't think trade is hard. They control the outcomes of trade. I'm not sure who controls the outcomes of Hong Kong.

MR. DUFFY: There is an article this morning in Foreign Affairs by one of your private equity counterparts in Hong Kong who suggests the numbers would tell you that the U.S. is losing this battle, that the tariffs have been more damaging for our economy than they have been on the Chinese.

MR. SCHWARZMAN: Well, I think this situation where the entire world is slowing in terms of economic growth. So in terms of who is winning or losing, that's sort of not the point. The point is, almost everyone economy in the world is slowing. But when you get 35 to 40 percent of the world's economy sort of at loggerheads, supply chains starting to change and technology types of intersections going apart, the whole world, it's sort of like when the parents are fighting, the children get affected. And this at the moment has been sort of economically disadvantageous, particularly in manufacturing. Manufacturing is going backwards literally every place in the world. I have difficulty describing who a winner or loser is in that. There are a lot of losers.

MR. DUFFY: Anywhere in this. Do you at all worry that the relationship could actually come completely apart and there would be a breakdown between the two countries worse than we've already had?

MR. SCHWARZMAN: I don't think that's in the long-term interests of the world.

MR. DUFFY: China was an early investor when you had the Blackstone IPO.


MR. DUFFY: Are they still?

MR. SCHWARZMAN: No. I was completely unsolicited. I mean, I was stunned. I mean, how would you like somebody to show up and say here's $3 billion?

MR. DUFFY: That's B, with a B.

MR. SCHWARZMAN: I mean, I started out trying to get $5 million. I thought that was great. So this was an unsolicited approach by them.

And at that time, when we went public in 2007, we actually had two other countries do the same thing. So it was pretty flattering. And we took the money from China because I thought that in the scale of the sort of global economy there was going to be nobody, no other country like China. And we actually did that with non-voting stock and no board representation because I wanted to make sure we were run independently without an influence.

MR. DUFFY: Are they still investors in Blackstone, the Chinese?

MR. SCHWARZMAN: Oh, no, they sold their stock I think after about six or eight years.

MR. DUFFY: One more trade question since we are also looking down the road here. Do you expect Congress to approve NAFTA? What does your crystal ball tell you? It's getting harder to get anything done, so I'm wondering about that one. MR. SCHWARZMAN: Well, you guys all live here, and it's Washington.

MR. DUFFY: But we're having you here today to tell us--

MR. SCHWARZMAN: And I see people on television all the time, you know, with their crystal balls and Ouija boards.

MR. DUFFY: You don't need one of those. Just tell us what you think.

MR. SCHWARZMAN: And most of that stuff doesn't happen. It's hard to know what a Congress will do. Should NAFTA, the new NAFTA, USMCA be approved? Yes. Why? Because it's in the interest of the United States. And there's a bunch of improvements from the previous NAFTA, and so why would you want to go back to something that isn't as good, other than the fact that people down here seem to have some like strange way of sometimes not doing things that are to the advantage of sort of what someone outside would look at and say why not do something that's good for you.

MR. DUFFY: Okay, a little talk about politics before we finish. Democrats have been having a really robust conversation all year long about capitalism and socialism. Why haven't you guys--that's the capitalist team--won that argument better?

MR. SCHWARZMAN: Well, I think it's for the same reason that we mentioned earlier, that you have about a minimum of 40 percent of the people in the country who are not having a good or expected economic outcome. And when you have something like that, you always get, regardless of what country where things happen of that type, you'll get populism, and that populism generates anger, and that anger gets directed. And usually it doesn't end up solving the problem, but it does get people elected.

MR. DUFFY: Democrats, several whom are running for president, want to levy a tax on wealth--not on income, on wealth.


MR. DUFFY: And the public at the moment favors this by a rate of 2:1. Republicans are almost 50/50 on it, for some versions. Why isn't that a good way to address income inequality?

MR. SCHWARZMAN: Well, it's interesting. There are roughly I think 210 or 220 countries in the world, and only four of them are doing that. Now why is that? Because it doesn't work. If it worked really well, you'd have a lot of countries doing it. You have had countries that have tried to do it, which have given up on it because it's very technically difficult. But on a practical level, it's very discouraging when you do things like that for people who want to start businesses.

So, for example, forget the individual numbers that different people are using for that kind of tax, whether it's 1 percent, 2 percent, 3 percent. But if you take somebody who comes to the United States or is in the United States and wants to start a high-tech company, which is an area where we have enormous advantages ourselves to China, between the two countries. So usually those companies aren't very profitable, but they get valued highly if they're growing. So imagine you're the person who started this. It's your idea. You're the next Steve Jobs, whatever. And you start. You get paid a few hundred thousand dollars. Your company has success. The company is worth a billion dollars. You're worth $300 million.

So under this construct, you probably get hit with a 1 percent tax. So you're making 300,000, you're paying 150,000 of tax, you've got 150,000 to live on, and then you've got to come up with another $3 million to pay your 1 percent wealth tax.

So how exciting would that be? You would have no money, and because your stock is all liquid. And so I think if you went ahead with a plan like this, nobody would want to be subject to that who is trying to build something.

And what I think would happen if you did that is, you'd have people who wanted to create not come to the United States. Because why would you? The more money your company was worth, the bigger your losses would be as a person.

So I think what would end up happening is that other countries would basically have free enterprise zones and they would just invite you to go to their country, and you will divert major parts of the United States over time to go someplace where people aren't penalized for starting businesses.

So I've been thinking about this. And it's very easy to make these announcements without understanding the dynamism of what would happen.

MR. DUFFY: Do you have an idea about how we could address inequality in a more thoughtful way?

MR. SCHWARZMAN: I've been thinking about this a lot because we've got to address this problem. And I think you first of all have to start by increasing the minimum wage to probably $15, adjusted for different parts of the country. It becomes a tax on the business community, if you will. But that's about 15 percent of the workforce, and it would be an increase that was very substantial for them.

You'd also have the people who were being paid between whatever today's minimum wage is and the $15. So all of those people would get a boost. So you would probably have like 35 percent of the population, which is this group that really is having financial difficulties, having increases. And I think that's better than just transfer payments, because that way people would be working.

MR. DUFFY: Isn't it also just unfair to tax regular income differently than capital gains?

MR. SCHWARZMAN: Well, that's an argument for economists. And since I've been in the workforce, which is, I guess, only been 50 years even though I feel like I'm 38, that there's always been an advantageous position for capital, so the capital comes here and capital is deployed. You could make an alternative argument if you want. It just seems--

SPEAKER: Blackstone's wealth is bad for tenants. Blackstone and Schwarzman are fueling the global housing affordability crisis.

SPEAKER: Shut up!

SPEAKER: They spend millions and millions of dollars stopping legislation which is fueling homelessness and displacement. Schwarzman's wealth is built on the backs of low-income and working-class communities. Schwarzman, shame on you! Schwarzman, shame on you! Schwarzman, shame on you! Schwarzman, shame on you!

[Continued chanting]

MR. DUFFY: Please, if you guys—

SPEAKER: There is a global housing affordability crisis. It's getting worse [unclear].

MR. DUFFY: Steve, could we--

SPEAKER: And Blackstone is a key player. Google Blackstone housing affordability. The United Nations has called this out. This is widespread, and it's a problem. And if you want to know what it takes, then you should probably revisit that.

MR. DUFFY: Steve, if we could just continue.

One of the other issues that has come up in the last couple of weeks isn't about economics. It's about foreign intervention in our politics. The President actually said in the last couple of weeks that he had spoken to you about the allegations against Hunter Biden. Is that true? Did he speak to you about talking to them with respect to China?

MR. SCHWARZMAN: I think I'm on the record on that.

MR. DUFFY: You are. And what did you say?

MR. SCHWARZMAN: Well, I'm on the record.

MR. DUFFY: I think someone spoke for you saying you hadn't spoken to him about that. Is that accurate?

MR. SCHWARZMAN: That's what I said.

MR. DUFFY: Okay. Has he ever asked you to intervene in domestic political matters with the Chinese?

MR. SCHWARZMAN: I didn't even know there was a Hunter Biden.

MR. DUFFY: Well, I appreciate you taking that one. Talking about private equity for a minute also, it's gotten a bad rap because of buyouts like Winn-Dixie and Sears--not your company. But particularly in retail, private equity has been very tough on the news business, in particularly our line of work.

Elizabeth Warren wants to regulate private equity differently. She wants to make you guys take less cash out of the companies, treat the debt differently. What does she have wrong when it comes to her proposal to regulate private equity? It's not the only proposal, but it's the one that--

MR. SCHWARZMAN: I think you have to start with the reality of how the U.S. economy works. The U.S. economy has roughly about 151 million jobs; 66 million people leave their job in a year. This is like incredibly dynamic. And they leave to either retire. They leave to change jobs. They leave because they're fired.

The number of people in the United States in a year who are fired are 21 million. The number of total jobs in private equity is 11 million. So if you had 10 percent of the jobs in private equity reduced--which you don't--that would be a million jobs. There's still 20 million jobs that people are fired from.

And so the idea of singling out one small group which over time has no job loss with 21 million people being fired a year--say it's 20--by non-private equity jobs, it's really almost nonsensical to be doing that, analytically.

And so what private equity does is we buy companies, we fix them up, we try and make them grow faster, because the faster they grow, the higher the valuation you can get. And the faster they grow, the more earnings you have. So it's a double benefit. We put some leverage on those companies. The companies don't go bankrupt any more than regular companies. We end up earning double the stock market.

So, there have been huge flows into this because when these companies grow, you also hire more people, because you can't run companies without people. And the faster you grow, the more the people. So basically, this is a very good thing.

And the reason why large institutions who basically represent people's retirements--government workers, policemen, firemen, teachers, and others--continue to put more money into this asset class because this asset class ends up being good for America. It's good for them. It's good for the people. It's the top-performing asset class for all of these individuals and institutions.

So the idea of basically singling this out when the numbers don't even make any rational sense because you have one company that has a problem. I wish nobody had problems. That's not the way the economy works. If 21 million people are being fired a year and you lose 6,000 jobs, and a politician announces that as if it's the only jobs that are being lost in America--I'm not in favor of anybody losing their job, obviously. But if there are 21 million people doing it, and this is a very small segment of that, what's going on in the rest of the country? What's going on is this is how a dynamic economy works.

MR. DUFFY: We only have a few minutes left. You have moved much more dramatically in recent years into philanthropy, particularly in New York City, and of course overseas with the scholars. I'm wondering, it's been controversial in recent years about how effective philanthropy can be. It's been criticized of course sometimes for individuals who are trying to overcome other things that happen in their lives.

Talk to us a little bit about how you plan your own giving over the rest of your life. Some people have said they want to give it all away. Are you a give it all away person, or do you have a plan to take it a different direction?

MR. SCHWARZMAN: No, I'll leave some to my family and basically give most of it away.

MR. DUFFY: Do you have some direction you want to go with it in the main, or have you thought about it?

MR. SCHWARZMAN: Well, I'm very focused on education. I went to public school, and I went to two great universities after that. My schooling made a huge difference to me. If I hadn't gone to the kind of public school I did, I wouldn't be sitting on this platform today.

So I support both universities in special areas. I'm very interested in artificial intelligence and making sure that's introduced in a way that's good for society. And I've given a lot of money to Catholic schools even though I'm not Catholic, because they have amazing outcomes. Sort of 70 percent of the students in New York are below the poverty line, and 90 percent are minorities, and 98 percent of them graduate and 96 percent go to college. So I'm a great believer in giving people the opportunities to have a better life.

MR. DUFFY: That's all the time we have for today. I want to thank you, Steve, for taking time, the good and the bad today, for being our guest. We do outside have copies of Steve's book. It's a great book, especially if you know someone who's 25 or 30 and just starting out. So, I can recommend it.

If you would like to watch today’s interview in playback, please head over to I’m Michael Duffy, and thanks for joining us.


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