David i dont consider myself a journalist. Nobody else would consider myself a journalist. I began to take on the life of being an interviewer even though i have a day job of running a private equity firm. How do you define leadership . What is it that makes somebody tick . Before we get into blackstone, i would like to talk about a couple of other things. You grew up in a middleclass environment in philadelphia, and now you are one of the wealthiest men in the world and one of the biggest philanthropists in the world. You are an advisor to president s. The last three president s have asked your advice on things. And you are very close to President Trump. When you were growing up in philadelphia, did you ever in your wildest dreams imagine this could happen . Steve no. Dave do you pinch yourself every day when you think about where you have achieved your status in life . Steve every day is an adventure, and every day is a privilege. David you have come to know President Trump quite well in recent years. Did you know him before he was president or know him very well . Steve i knew him before he was president. David so when he told you i am thinking of running for president , did you tell him he had a chance or that is a tough thing to do . Steve i thought it was a veritable bull veritable impossibility. David when he got elected, did he say steve, you are wrong, why dont you serve in the administration . Steve i cant tell you exactly what he said. It was very funny. I did not to be a part of the government. I have a wonderful life as it is. I did not want to disrupt that. David you have been an advisor off and on from the beginning of the administration of the president. He has asked you to do a number of assignments. I have never seen him tweet anything unfavorable about you. You have managed to stay on his good side. What is the secret to staying on his good side . Steve you tell people the truth. I dont work for the administration. I am an independent person. I give my views. I find that he likes to listen. That is, i think, a good thing. David let us suppose he is reelected and said, i would like you to be secretary of state, secretary of treasury, would you ever consider that . Steve when i was younger, i would do that. But i am at a point in my life where that is not where i want to spend my time. David you have spent some time recently writing a new book. Schwarzman, what it takes, pursuits and excellence. I read the book, and it is quite fascinating. I know you quite well, but i did not know a lot about your background, which i found quite interesting. Lets go through the creation of blackstone. You grew up in the suburbs of philadelphia. Is that right . Steve thats right. David you are from a middleclass family. Your father had a curtain store. Steve a curtain store. It would have been a Bed Bath Beyond type of store. David it was started by his father. Steve thats right. David so he came into the business. Did he say, your oldest of the three sons, now, it is time for you to come into the business . Steve that was sort of expected. I found that standing up and waiting on people buying linen handkerchiefs was perhaps not my highest and best use. David you told your father that maybe he should expand and do more than one store. Maybe become bed, bath beyond. What did he say to that advice . Steve he said, steve, that is interesting. I dont feel like doing that. I said, dad, why dont you want to do it . We have lots of people in the store, and i havent seen another store like this and i think we could be national. David he just said not for him . Steve he just said im not interested. I said, why dont we open stores all over pennsylvania . Because i was from philadelphia. He said i dont want to do that. , so then i had a third option, which is why dont we open , stores all over philadelphia . He said, i dont want to do that either. I said, dad, why dont you want to do this . He said, i am happy the way i am. I have a house. I have two cars. I have enough money to send you and your brothers to college and that is really all i want. I shook my head, and i went, i dont understand that. I just saw the opportunity to open stores all over the country. He just did not want to do it. What was surprising to me is he was very intelligent. David you say in your book that he was far more intelligent than you that might be an , exaggeration, but he obviously was a smart person. Steve that was not an exaggeration. Because i would talk to him when i was starting my career on things. No matter what i was working on, he could always find the weakness in the argument or the deal. David what about your mother . What did she do . Steve she was just aggressive. She was a housewife. It was the 1950s and 1960s. I have twin brothers. The three of us were a handful. That was the paradigm at that time. David as i said, i have known you for quite a while but until i read the book i did not realize you were a track star. Were there a lot of white jewish boys on the track team . Or were you a minority in that regard . Steve i was a minority of one. David you say in the book that you did something that was audacious. You applied to harvard, yale, and princeton. Harvard did not accept you. So you then got out some coins and called the director of admissions at harvard and said you made a mistake. , what was that like . Steve that was frightening. We did not have cell phones then. So i got some quarters, and i found the phone number for the admissions office. The payphone was outside the gym. I stood there and put those quarters in and you could hear the ringing when they dropped down. I asked for the dean of admissions and i was put right through. He picks up the phone and i said i am Steve Schwarzman from , avington high school in pennsylvania. I am on the waiting list. I would really like to go to harvard. Why dont you take me off the waiting list . He said, how in the world did you get through to me . He said you are not allowed to , talk to me. I dont talk to applicants. I said, but we are talking. He said yes. , you sound like a very nice young man, but unfortunately, we are not going to be taking anyone from the waiting list this year. Our yield was higher than we thought. Where else were you accepted . I said, i was accepted at yale. He said you will have a very , good time at yale, and you will enjoy it. I said i am sure that i would but that was not my objective for the phone call. He said, i understand that. I am just so sorry. David did you ever see him . Steve ironically, it is really a great story. The ceo of mackenzie was in my office 25 years later. He was on the harvard corporation. I told him the story. He asked what year. That dean of admissions was a close friend of his. He said, do you mind if i told him that i ran into you . I said, no, that is fine. I got a letter two weeks later from that former dean of admissions. He said, i remember getting that phone call in 1964. He said, every time i see you in the newspaper, i realize that i blew it. I wish i made all the right decisions but as i told you of at the time there were no , beds at the inn. David you interviewed with a number of firms and the one you decided to go with was Lehman Brothers. Steve yes. The people were fascinating. You had ex cia agents and people who had worked on oil rigs. David you then went to Harvard Business school. Steve yes. David did you enjoy Harvard Business school . Steve no. David did you want to drop out . Steve yes. David what kept you from dropping out . Steve i wrote a letter there was no internet i wrote a letter to the president of the firm which is where i worked a bit right after i graduated and before i went into the army. I said, dick, it is cold up here. The classes are highly repetitive. I would like to come back to work. If you dont want me there i , will do something else. What do you think . He wrote me a sixpage letter that said that is just the way i felt in december of my first year. I was going to transfer to the Economic School and get an economics phd. I did not drop out and neither should you. You should complete what you are doing. I was so dumbfounded that he was so kind and thoughtful and had similar feelings and basically said, dont you do that. Its the wrong decision. That i just listened to him and stayed. David you mustve done well because you had lots of offers afterwards. Steve yes. David you interviewed with a number of firms. The one you decided to go with was Lehman Brothers. Steve yes. David why did you pick Lehman Brothers . Steve the most interesting cast of characters. That was before mbas went to wall street. So they just hired at random. This was the first class of mbas that lehman was going to hire. The people were fascinating. You had excia agents. You had people who had worked on oil rigs. You had all kinds of unusual people working at the firm. I thought for whatever reason that it was the right personality fit for me. David you became a partner at an early age, i think 31. Steve 31. David at 31 years old you are a , partner at Lehman Brothers, and life is going well. Then there was a problem, Lehman Brothers was sold. Steve that is right. I sold it to american express. The problem was that in the trading side of the firm, there was a position taken that really went wrong. David you decided to join someone who had previously been the president of Lehman Brothers. He was eased out. That was pete peterson. He was also previously the secretary of commerce in the nixon administration. You decided to start a new firm in 1985. Steve that is right. David the firms name was . Blackstone. So blackstone starts. 1985,two people, you and pete peterson. Where did you get the money . Steve it did not require much. It was an advisory business. You talk and people give you money. David you each put in 200,000. Steve the Strategic Plan for announcedss which we in a letter to everyone we knew, first, the m a advisory business. It required no capital. The second was going into the private equity business. David you had never been a private Equity Investor before. Pete said, since we havent, we will go out and raise a fund. You said, lets raise 1 billion. That is fairly audacious. Where were you going to get 1 billion . Steve we went to our top 18 prospects. Everyone said no except for metropolitan life and new york life. One said i will give you 50 million and the other one said i will give you 25 million. But, i do not be a big part of things. You have to raise 500 million or else our commitments are worthless. We had already gone to everybody we knew who were the best targets. I looked at that, and i went, omg, we are going to fail. We just met one more company. It was called Prudential Life which was theany number one financier in those days. We were over at newark on a friday having lunch with the chief investment officer. He was having tuna on white bread cut across. I am busy pitching this private equity fund, and you can share part of our advisory profits. Advisory profits as a merchant bank. He keeps chewing, and his adams apple is going up and down. I keep doing my thing. He finishes the first half of the sandwich. He gets through the other half halfway and he looks over at me and he says, i think that is a good idea. Put me down for 100. Can rememberll that moment. Did he actually say he is going to give us 100 million . The number one investor in the world. If he gives us money, other people will follow him. I realized somehow, in newark, on some dreary friday, he gave us the money. I just did not want him to choke on the rest of the sandwich. David make sure he lived to give you the money. Steve exactly. David you did very well and your business was booming. You decided to get into other businesses . Steve the first one ended up as blackrock. With larry fink, and larry brought people over and they were called blackstone financial. David blackstone financial. You actually own the firm . Or own part of the firm . Steve 5050. David so you own 5050. Now blackstone financial is now blackrock which is managing 6 trillion or Something Like that. Steve 6. 5 trillion. David how did they escape from blackstone . Steve they did not really escape. You know, we set up an economic arrangement which ended up being inappropriate for a business that was growing as rapidly and needed to add as many people. I made a mistake. I took the original agreement and i did not want to change it. It was advantageous for my side. The blackrock people, blackstone financial people were frustrated with that. That was the judgment of an amateur. Me. David the Real Estate Market crumbled right after the deal was done. How did you survive with that deal . Steve just buying 39 billion of real estate i thought was dangerous. David in 2007, you decide maybe you should take a firm public. It was a private company. Why did you take the firm public . Steve i took it public for a lot of different reasons. I had a sixth sense that something terrible was going to happen in the environment. Money was so available. Money was cheap. Everybody was doing things. Prices were crazy. I just had a sense this was going to come to a bad ending. And that we should have a lot of capital to make sure that we were bombproof. That was one reason. A second reason is i thought it would be a great branding event for the firm on a global basis. Everybody would know who we were and that would make it easier to raise money as well as to have people sell us companies and other assets. David ultimately, what happened was, the Chinese Sovereign Wealth Fund was in the process of being created and they heard about you going public. Through an intermediary, they said, can we buy a big stake in the ipo and you ultimately decided to let them do that. Steve the ipo was going to be 4 billion. They offered to invest 3 billion. We did not even ask them. And i had not been to china since 1990. This was shocking because china had not invested in another Public Company since it was founded in 1949. So this was a complete paradigm shift for china. And we were chosen by them. It was pretty heavy stuff. David it worked out. You ultimately did the ipo and the chinese invested. Then after you did the ipo, let me mention two deals that you did. One was the biggest real estate deal in history. Eop, Real Estate Company built by sam zell. You did a 40 billion buyout of buyout, in effect . Steve 39 billion. David 39 billion. It was a bidding war, but the Real Estate Market crumbled right after the deal was done. How did you survive with that deal . Steve we worried. Because the same reason we were going public, i sensed that we were market top for real estate. So, just buying 39 billion of real estate i thought was dangerous. Because you had to pay a pretty good price to get it because it was competitive. As soon as we decided we were going to actually raise our price enough to be the winner, there were two or three of us sitting around saying this deal is potentially dangerous. We have got to reduce the got to take we have advantage of the crazy prices people are paying. We decided to sell half of what we bought the same day, we bought it. When i told people that, they looked at me and said, same day . I said, i dont want to take any risks. That the world is going to change, and we are going to be stuck with this. We basically had every Conference Room at the firm active buying and then we broke it up into all of these pieces. Dave if you had not done that, you would have lost all of your money . Steve i think that is probably the case. David the Real Estate Market cratered the next day. Steve most of the people that bought from us got into enormous financial trouble or went insolvent. After we did that and closed, everybody went home. They had been sleepless. Three days later, they came back and we said, lets sell half of what we got left now and be even more conservative. Everybody went back to work, and we ended up with one quarter of what we bought, very conservatively priced so that we could survive any kind of nuclear winter. We ended up making three times our money buying this giant thing at the top. There has never been more than 10 billion bought or sold by a group. We did 70 billion. David you also bought another company before the recession really hit. That was called hilton. That was a leveraged buyout. Some people might say at the top of the market. That deal went down in terms of the debt and maybe the equity. You ultimately did things that made it the most profitable buyout in the history of buyouts. What did you do . Steve it was pretty easily actually. It looked hard. Hilton had not been integrated. They were running four different headquarters. Modernizationge and cost takeout. David you sold it at a 14 billion profit. Steve if we had held it longer, it would have been over 20 billion. It was a good day. That is 14 billion. David in recent years, you have become one of the nations biggest philanthropists. You gave 350 million to m. I. T. For a computing center. Relating to artificial intelligence. You never went to m. I. T. You had no connection there. How did that come about . Steve that was really fascinating. I am not a technologist, i admit. The president of m. I. T. Started we started talking. We were concerned that the u. S. Was just not investing enough in these technologies. I said, do you have any interesting ideas . He came back with, lets double the Computer Science faculty. Lets establish a new department, in effect, a new school, called it a college, which is now going to be the m. I. T. Schwarzman college of computing. Lets connect the ai of all the other departments. M. I. T. Will become the first ai enabled university in the world. I said, that is a vision i could buy in on. David final question i would like to ask you. If somebody is watching or reading your book and they want to be a leader, a leader in business or philanthropy or government, what do you think is the key quality to be a leader . What key quality has enabled you to be a leader . Steve i think to be a leader, you have to be a really good listener. You have to understand what is going on around you. You have to be measured and you have to realize that everything you do is amplified in the minds of the people who are listening to you. So care, nuance, kindness. Defining a culture is what a leader does. David thank you for this time. I appreciate it. Steve thanks, david. David why is it wall street doesnt Value Airlines as much as you think they should . Ed our largest investor is warren buffett. He said you guys are the chicago cubs of the business world. You not only had a bad decade, you had a bad century. David initially you went to fritolay, right . Ed i always considered my seven years there as my postgraduate degree. David what percentage of people actually lose their luggage . Ed we never lose it. We call it mishandled. David mishandled. [laughter] would you fix your tie, please . David people would not recognize me if my tie was fixed, but ok. Just leave it this way. Alright