Stephen Schwarzman

Forbes - - CON­TENTS -

PRI­VATE EQ­UITY KING­PIN: CO­FOUNDER, BLACK­STONE

When Pete Peter­son and I launched Black­stone in 1985, we wanted to cre­ate a place where peo­ple would en­joy com­ing to work and be re­warded for in­ter­nal col­lab­o­ra­tion. The firm we came from was known for its in­ter­nal rivalries, with part­ners of­ten at odds, plot­ting against and one-up­ping each other.

Cre­at­ing this en­vi­ron­ment be­came im­por­tant early in Black­stone’s his­tory, as we moved from M&A into pri­vate eq­uity. We had no or­ga­ni­za­tion then. Peo­ple would just come into my of­fice and ask me to make de­ci­sions. One deal, a steel dis­tri­bu­tion com­pany in Philadel­phia called Edg­comb Steel, didn’t turn out the way we hoped be­cause we failed to so­licit mul­ti­ple points of view from all of our part­ners. I had a spe­cial tomb­stone made for that deal, which was black and in the shape of an ac­tual tomb­stone to re­mind my­self every day of what I learned. I re­al­ized that we needed to set up rig­or­ous pro­cesses to re­view deals to­gether and help avoid risks, even if that meant chal­leng­ing an idea I was putting for­ward. No­body’s job was to say, “I think it’s won­der­ful.” In­stead, I in­sisted on ev­ery­one com­ing to­gether to an­a­lyze po­ten­tial prob­lems that could lose in­vestor money.

To­day we’ve in­sti­tu­tion­al­ized this ap­proach across the firm and have our deal teams meet every Mon­day to re­view each po­ten­tial trans­ac­tion. We’ve repli­cated this process across each of our busi­ness groups. With­out this process, I’m not sure we would have evolved into a suc­cess­ful busi­ness.

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