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.