Podcast Summary
Starting a successful business: focus, vision, and unique plan: To achieve large success, focus intensely, maintain emotional stability, have a unique plan, and envision a big vision. Hire experts and maintain ethical behavior, distinguishing between managing and entrepreneurship.
Key takeaway from this conversation between Nicolas Tangen and Steven Schwarzman is that achieving large success requires enormous focus, emotional stability, a unique plan, and a big vision. Schwarzman, the founder and CEO of Blackstone, shares his experience of starting the world's largest alternative asset manager in 1985. His initial vision was to create a new type of financial institution focusing on mergers and acquisitions, private equity, and financing new businesses during cyclical depressions. Schwarzman emphasizes the importance of having a clear strategic plan, hiring experts, and maintaining ethical behavior. He also highlights the difference between being a manager and an entrepreneur, with the latter requiring visualization, creation, and the ability to handle the heavy lift of starting something new. Schwarzman's story demonstrates the importance of a unique plan, focus, and vision in achieving significant success.
Entrepreneurial struggles shape investor philosophy: Personal experiences of entrepreneurial hardships can influence investors to prioritize avoiding losses over gains, leading to a more cautious investment approach.
Entrepreneurship involves facing significant challenges, including the possibility of failure, rejection, and being alone. These difficulties can be daunting, but those who persevere and make it through the initial struggles often find success. This experience has shaped the investment philosophy of some investors, leading them to prioritize avoiding losses over making obvious gains. Personal experiences, such as losing significant capital, can leave a lasting impression and motivate investors to be more cautious in their decision-making. However, this doesn't necessarily mean becoming too risk-averse. Instead, it may result in a more thoughtful and deliberate approach to investing.
Investing in thriving economic neighborhoods and minimizing risk: Successful investments require minimal risk perception and being in economically vibrant areas, adapting to current economic shifts and central bank responses.
Successful investments are made when the risk is perceived as minimal and the deal requires the least debate. This risk sensitivity approach, rather than being overtly risk-averse, leads to the most logical and fruitful investment decisions. Another key factor is being in a thriving economic neighborhood where growth or upside potential is evident. Looking at the current economic climate, we are in an interesting phase following the pandemic, which affected the entire world and led to significant savings due to lockdowns and remote work. These savings are now being deployed, leading to an explosion of purchases and a mismatch in production and demand, resulting in high inflation. Central banks are responding by raising interest rates, which can cause market dislocations and instability, as we are currently experiencing with financial institutions facing challenges.
Uncertainty for banks amid rising interest rates: Rising interest rates can lead to losses for banks, potentially causing depositor nervousness, increased regulation, and less money for economic growth. The peak of interest rates is uncertain, and this economic situation presents a period of adjustment and uncertainty.
The increasing interest rates set by central banks like the Federal Reserve, ECB, and others can lead to significant losses for banks, which can make depositors nervous and potentially result in a loss of confidence. This uncertainty could lead to more regulation on banks and less money available for economic growth. The peak of interest rates is uncertain, and there could be more turmoil to come, potentially leading to a recession. Banks with large deposits, like Blackstone, may be seen as safer bets during this time of uncertainty. Overall, the current economic situation presents a period of adjustment and uncertainty, with potential implications for medium-sized banks and economic growth.
Patience pays off in investing: Successful investing requires patience and buying undervalued assets during economic downturns. Identify and hire exceptional individuals for significant organizational value.
Successful investing requires patience and waiting for the right opportunities. Steve Schwarzman, CEO of Blackstone, shares his experience of making significant gains during economic downturns by buying undervalued assets when credit contracts and waiting for a 10% bounce before engaging. He emphasizes the importance of not trying to time the market and calls, as it can lead to missed opportunities. In terms of leadership, Schwarzman advises that leaders should listen and ask for people's views, as every word they use gets amplified. He also emphasizes the importance of identifying and hiring "10s," or exceptional individuals, who can do almost anything and can be identified by their passion and expertise in their field. These individuals can bring significant value to an organization.
Creating a connection through conversation: Engage interviewees in conversation about unique experiences or passions to assess personality and communication skills. CEO pay justification depends on investor success, but excessive compensation may not align with value added. Long-term interest in China led to significant investment in Blackstone.
During job interviews, instead of focusing solely on the CV or qualifications, it's essential to create a connection with the interviewee by engaging them in conversation about unique experiences or passions. This not only makes the interview more enjoyable but also allows the interviewer to assess the interviewee's personality and communication skills. Another key topic discussed was the issue of CEO pay. The interviewee argued that as long as investors are doing well, high CEO pay is justified, as people who do high-level work historically have been well compensated. However, they acknowledged that there are instances where CEO pay seems excessive and not aligned with the value being added. Lastly, the interviewee shared their long-standing interest in China, which was sparked during a family trip in 1990 when they witnessed the country's rapid growth from a largely bicycle-dependent society to an economy with an average per capita GDP of around $13,000 today. This interest led to a significant investment in Blackstone from Chinese investors in 2007.
Unexpected call from former Chinese officials highlights China-US tensions: Find a career that aligns with your passions and aptitudes for a fulfilling work experience
The relationship between China and the US, two global economic powerhouses, is currently strained, and this can have significant implications for the world. This was highlighted in a conversation where the speaker received an unexpected call from two former high-ranking Chinese officials, who were rumored to be starting a new sovereign wealth fund for China. Despite their past positions, they were unemployed at the time, yet they were urging the speaker to take their proposal seriously. This situation underscores the importance and complexity of international relations, particularly between major economic powers, and the potential impact on the global economy when these relationships are strained. Furthermore, the speaker offered advice to young people, emphasizing the importance of finding a career that aligns with one's passions and aptitudes. By doing so, work becomes less of a chore and more of an enjoyable and fulfilling experience, leading to extraordinary achievements. This message is particularly relevant for today's young listeners, as they navigate the complex world of careers and seek to make a meaningful impact.
The importance of human skills in finance: Success in finance doesn't solely depend on math skills. Empathy, problem-solving, and understanding human behavior are crucial.
That success in finance, or any field for that matter, doesn't necessarily rely on having strong math skills. Instead, understanding human behavior and problem-solving abilities are more crucial. This notion may surprise many, as finance is often perceived as a purely mathematical discipline. Steven's unique background, from working on a Norwegian tanker to becoming the COO founder of Blackstone, highlights this idea. While sailing in Trinidad, he found himself in a bar altercation due to a misunderstanding. Although he was saved by his crew, the experience taught him valuable lessons about human behavior and the importance of empathy and quick problem-solving. These skills have served him well in his finance career, demonstrating that experiences and personal qualities can be just as important as technical abilities in achieving success.
