Early “Catastrophic” Blackstone Deal Led to Schwarzman’s Passion for Preserving Capital

We tend to remember and apply best those life-changing lessons that were painfully learned. For Stephen A. Schwarzman, chairman, CEO and co-founder of The Blackstone Group, one of those early painful lessons was the importance of establishing and following a rigorous process for assessing all the risks before making an investment.

By Robert Stowe England

“We go from the premise that our first job, sort of like a doctor, is do no harm – and in the financial business that means don’t lose money,” Schwarzman said November 6 at a Reuters Newsmaker event for his new book What It Takes: Lessons in the Pursuit of Excellence. He was interviewed at the Thomson Reuters building in New York before invited guests by Reuters editor-at-large Sir Harold Evans. Schwarzman in his book cited “don’t lose money” as the number one rule at Blackstone, acknowledging that saying that out loud sometimes prompts smirks. 

Since before the September 17 release of the book, Schwarzman has granted a number of high-profile interviews with prominent media outlets and venues besides Reuters. The Wall Street Journal was first out of the gate with a feature titled “Stephen Schwarzman’s Lifelong Audacity.” Next the Economic Club of Washington, D.C. sponsored a live interview of Schwarzman by David Rubinstein, whose eponymous show on Bloomberg features peer-to-peer interviews and who is also co-founder and co-executive chairman of The Carlyle Group, a private equity firm. 

On the day the book was released Schwarzman was the featured guest on CNBC’s early morning talk show Squawk Box. Schwarzman has also been interviewed live at high-profile events sponsored by the New York Times and the Washington Post. 

Blackstone’s chairman, in his conversation with Sir Harold Evans, tied his passionate aversion to losing money, especially capital, in part, to losses from the firm’s third investment: a $330 million leveraged buyout in 1989 of Edgcomb Metals Company, a Tulsa steel distributor. The price per share was $8, four times the $2 share price of a 1986 LBO of Edgcomb by Drexel Burnham Lambert. “Based on our analysis, [it] seemed like a good price,” Schwarzman wrote in his book.

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