Book Review: Stephen Schwarzman's "What It Takes"

In high finance circles, Steve Schwarzman needs no introduction. He's the chairman, CEO, and co-founder of The Blackstone Group (BX), the world's largest private equity firm. If you aren't familiar with private equity, they deal in alternative assets, anything that's not stocks, bonds and cash. Blackstone buys, fixes and sells companies and real estate to large institutional clients such as pension funds and institutional investors. With the encouragement from former Treasury Secretary Hank Paulson, Mr. Schwarzman recently published What It Takes: Lessons in the Pursuit of Excellence. This is not an autobiography per se, but more of a business memoir. If you are business student, or have an interest in finance, this book is for you. However, because he goes into great depth about specific business deals, the general public may not enjoy it as much.

This is no rags to riches Horatio Alger story. Schwarzman comes from a middle-middle class family from Philadelphia back in the 1950's. A common and comfortable demographic 60 plus years ago. An outstanding athlete, he did his undergraduate studies at Yale and was a member of the Skull and Bones club, the secret society known for powerful alumni. Schwarzman also received an MBA from Harvard. A natural-born salesman, he was a go-getter from day one, and parlayed the enthusiasm and ambition into becoming king of the hill, A-number one.

That's not to say he didn't have his obstacles. In the late 1960's, Wall Street was controlled by white shoe WASP firms. At that time, there was only one Jewish partner in the investment banking universe. Being Jewish, he knew the odds were against him. Despite that, he took a job at Lehman Brothers. There was a glass ceiling, but it was beginning to crack. Schwarzman hit the ground running and broke that glass ceiling. He made partner in 10 years because of his excellent performance in Mergers and Acquisitions. It's a big feat when you consider how rampant Antisemitism was half a century ago. Although the movie Gentleman's Agreement won Best Picture in 1948, a film which is about Antisemitism in America, twenty years later, there still weren't many inclusive promotions. Schwarzman is a pioneer in leveling the field in investment banking where religious prejudices were rampant.

The rich are different than you and me. After 10 years at Lehman, Schwarzman had a house in the Hamptons and an apartment in Manhattan. Tells you a lot about investment banking, but you pay the price. As he reflects on his thoughts after his first assignment a Lehman, "This isn't Harvard Business School. These people don't fuck around. I'm living according to their rules. I had better learn to play by them.". And so he did. A quick learner, he acclimated himself to the rough and tumble world of finance: "Every point in every negotiation was a fight, with a winner and a loser. People in the business weren't interested in carving up the pie so everyone got a slice. They wanted the whole pie for themselves.". They eat what they kill.

With plenty of experience, and being frustrated with the corporate culture at Lehman, Schwarzman and Pete Peterson left the company and formed Blackstone in 1985. According to the author, "I had wanted out of Lehman because the ethics there had become so awful - the greed, the fear, the gutlessness, the hunger for power, the dishonesty.". This is about a third of the way through the book, and this is where he lost me. Much of this had to do with the fact it rehashes details about deal after deal after deal. If you're in finance, or an aspiring entrepreneur, the minutia would be a great value to you. But as a casual reader, I couldn't identify with the narrative. For instance, in Walter Isaacson's Steve Jobs, every page was engaging because most people have lived through the iterations of Apple (AAPL) consumer products. You could relate to it. Likewise, books about old school tycoons such as Howard Hughes have all the gossip about affairs with starlets above and beyond the business success. Despite Schwarzman's accomplishments, very little kept my interest until the last 50 pages.

I thought the book would have been much better if written as strictly a business text, or, as a more in depth look at his personal life. Instead, it's an amalgamation of the two which left many questions unanswered. As an example, his first marriage ended in divorce and he immediately goes into therapy. Schwarzman glosses over it with little explanation. Divorce is a big emotional event in one's life. Throughout the narrative, his two largest losses after founding Blackstone are Larry Fink exiting the company to form Blackrock (BLK), and Blackstone not financing Michael Bloomberg's fledgling firm. Those are missed opportunities, and Schwarzman took the blame for money left on the table, but they aren't life or career altering. I was interested in what made him tick, what motivated him.

Blackstone had the second largest IPO in the 1990's, second only to Google (GOOG). The section about the IPO was instructive, although Schwarzman didn't go into great detail about the corporate "road show". I believe his perspective would be educational to aspiring entrepreneurs. Also, the chapter about the 'Great Recession' of 2008-2009 is enlightening. Although Blackstone foresaw and prepared for the economic free fall as early as 2006, they got hurt, too. However, he doesn't mention the Crash of 1987, and, what implications it had on his two year old company. The Savings and Loan Crisis of the early 1990's (which cost taxpayers a bundle) was just a way to make a buck. But that's the nature of the beast. Investment banking is a grownup's game, and Blackstone is successful at it. As Schwarzman stated: "Deals that used to go to Goldman Sachs were now coming to us.".

Peppered throughout the book are subchapters with common sense advice and business tips. Subjects such as the trials and tribulations of being a startup, interview techniques and life lessons. Many times in the narrative the author emphasizes the network effect in human relations: it's not what you know, it's who you know. Social connect the dots. Schwarzman has a great sense of humor which makes the story more enjoyable than most finance publications. This comes to light when discussing all the pitfalls he faced. He's from the school of grin and bear it, and always seems to land on his feet.

The last section of What It Takes is about Mr. Schwarzman's philanthropic endeavors. I found it uplifting. In 2004, he became chairman of the John F. Kennedy Center for the Performing Arts in Washington, DC. This is in addition to his duties at Blackstone. His Rolodex filled with business contacts now includes the upper echelon in arts and entertainment. Plus, he made many political contacts to expand his investment banking firm. In the field of education, he established the Schwarzman Scholars at a prestigious university in China. An Asian version of the Rhodes Scholarship at Oxford. He's done a lot for investment banking, the arts and education, especially building relationships with China. The world needs more leaders like Stephen Schwartzman, especially with the country divided and burning. Nevertheless, it still doesn't take away from my view that in 200 pages of a 350 page book, the narrative wears you down if you aren't an industry insider.