The early years of Blackstone's Steve Schwarzman: A "bleak and depressing" banking job and a "dull" MBA
What does it take to become CEO of one of the largest private equity firms in the world? There's no better person to ask than Stephen Schwarzman, founder of Blackstone. His story is well known, but a new series of articles released by Blackstone in partnership with Nikkei Asia have provided new insights on his rise to the top.
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He grew up in "a rough neighbourhood."
Schwarzman grew up in Oxford Circle, "then a Jewish neighborhood in Philadelphia." His family ran a curtain and linen store there for several generations; Schwarzman said his father ran the store with a "perfectionism not unlike the discipline" he had when building Blackstone. His father worked seven days per week.
Schwarzman said "Oxford Circle in those days was a rough place," and that the father of his friend was killed by the mafia. His family later moved to an upper-middle-class suburb which he described as "a different America." The Schwarzman family home was "only slightly better than an ordinary house, with a lawn and two family cars."
He was failing his degree at Yale, then got some help
Schwarzman took an "unusual interdisciplinary program" at Yale University called "Human Culture and Behavior." His first papers were on English literature; he struggled on the first one and then "unquestionably fail[ed]" the second. An English teacher then took him aside and tutored him; "he taught me first how to write and then how to analyze."
"His kindness changed the course of my life," Schwarzman said. Not only did his grades improve to the point where he was in the top 10% of the class, Schwarzman said he gained the "confidence" to try and break into Yale's illustrious Skull and Bones club. He was invited to join after he was able to organize for the New York City Ballet to perform on campus, which he did by pretending to represent the Yale Ballet Society (which did not exist).
He haggled his graduate salary with the founder of an investment bank
Like many people in private equity, Schwarzman started his career as an investment banker, spending seven months at midsize bank DLJ which was his "doorway to Wall Street."
Schwarzman is infamous for turning down DLJ's initial offer of $10k (roughly $90k today) because he wanted to be the highest earning graduate of his class. He had heard that another student was offered $10k too and asked Bill Donaldson, one DLJ's founders, if he could be paid $10.5k instead. Schwarzman said Donaldson was "astonished" but said he would think about it. The next day, Schwarzman got his wish.
"My good fortune ended there," Schwarzman said. "No one bothered to teach me anything. It was one of the most frightening experiences I had ever had." He described the seven months at DLJ as "bleak and depressing," and left to pursue a Harvard MBA, but he did enough to impress Donaldson; Schwarzman said that he received an offer to lead DLJ as the firms president when he was 34, which he turned down.
He found his Harvard MBA "dull."
Schwarzman went back to school to get an MBA at Harvard because he "had struggled badly for lack of any real knowledge of finance" while working in banking.
Harvard was disappointing, though. Schwarzman said the school had "no brilliant students" He grew restless "listening to such tedious lessons in the company of students who did not seem especially clever," but was persuaded to stay after writing to Dick Jenrette, one of DLJ's founders.
After graduating from Harvard Business School, Schwarzman received an offer to work at Lehman Brothers. There, he met Pete Peterson, with whom he founded Blackstone. "Connections with people can change a life," Schwarzman said, "provided you are open enough to ask them anything."
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