What It Takes
Subtitled Lessons in the Pursuit of Excellence.
Summary
Schwarzman's memoir covers his upbringing, Yale, Harvard Business School, Lehman Brothers, and the founding and building of Blackstone from 1985 into the firm's current form as the largest alternative asset manager.
The business content covers the early fundraising, when he and Peterson were rejected repeatedly before Prudential anchored the first fund; the structural decisions including the choice to do friendly transactions only, which differentiated the firm from the hostile acquirers of the period; the diversification into real estate, credit and other strategies, which Schwarzman identifies as the decision that made Blackstone an asset manager rather than a buyout firm; the near-failure of an early investment in Edgcomb Steel and the change in investment process that followed, requiring a full partner review of every deal; and the 2007 public offering and the crisis that followed immediately.
His stated principles include hiring people better than yourself, pursuing large opportunities because they take the same effort as small ones, entering businesses only where you can be first or second, and treating difficulty in raising capital as information about the product rather than the market.
The book is a memoir by a very successful man about his own success, and it reads that way. It is thin on failures beyond those that produced a lesson, on the political and fee controversies the industry has faced, and on the criticisms of private equity's effects. The material on the firm's investment process and on the diversification decision is the most useful.
Key takeaways 7
- Blackstone pursued only friendly transactions, which differentiated it from the hostile acquirers of the 1980s and gave it access to sellers who would not deal with them.
- Diversifying into real estate, credit and other strategies turned the firm from a buyout house into an asset manager, which is what produced its scale.
- A single early investment failure led to a process requiring every deal to be reviewed by all partners with the case argued against, which was the durable institutional change.
- Large opportunities require the same effort as small ones, so the effort should be directed at the large ones.
- A firm should enter a business only where it can be first or second, since subscale positions consume management attention without producing returns.
- Difficulty raising capital is information about the product being offered rather than about the market's receptiveness.
- Permanent access to long-duration institutional capital is what allows a sponsor to buy during periods when other investors are forced to sell.
Who should read it
Investors and founders interested in how an alternative asset manager was built and the process discipline that followed an early failure.
About Stephen A. Schwarzman
Co-founder, chairman and CEO, Blackstone, 1985-present; previously managing director, Lehman Brothers
What It Takes is the definitive first-person account of how the modern alternative-asset firm was built, backed by one of the longest CEO tenures in finance.
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