Stephen Schwarzman on The David Rubenstein Show:
18:15it worked out and alchemy you did the18:18IPO and Chinese invested and then after18:21you did the IPO let me mention two deals18:24that you did one was the biggest real18:26estate deal in history GOP real estate18:29company built by Sam Zell and you did a18:3240 billion dollar buyout in effect is18:34that right yeah it’s 39 actually okay18:36all right thirty nine billion dollars it18:39was a bidding war you won the bidding18:41war but the real estate market crumbled18:43right after the deal was done so how did18:44you survive with that deal well we18:47worried18:47because the same reason we were going18:49public I sense we were a market top forreal estate so so just buying 39 billiondollars of real estate III thought wasdangerous because you had to pay apretty good price to get it because itwas competitive so as as soon as wedecided we were going to actually raiseour price enough to be the winner therewere two or three of us sitting aroundsaying this deal is potentiallydangerous we’ve got to reduce theleverage and we’ve got to take advantageof the crazy pricesthat people are paying so we’ve decidedto sell half of what we bought the sameday we bought it so when I told peoplethat they just sort of looked at me andand said the same day I said I don’twant to take any risk that the world’sgonna change and we’re gonna be stuckwith all of this so we basically hadevery conference room at the firm activeone buying but then we broke it up intoall these pieces but if you hadn’t doneyou would have lost all your money Ithink that’s probably a market crateredvirtually the next day right becausemost of the people who bought from usbasically got into enormous financialtrouble or went insolvent and and soafter we did that and closed everybodywent homethey’d been sleepless three days laterthey came back and we said let’s sellhalf of what we got left now and be evenmore conservative so everybody went backto workand we ended up with one quarter of whatwe bought very conservatively priced sowe could survive any kind of nuclearwinter we ended up making three timesour money buying right this this giantthing at the top and andthere’s never been more than ten billiondollars bought or sold by a group we did70 billion so you wants to blot anothercompany before the recession really hitthat was caught Hilton and that was aleveraged buyout and some people might21:17say at the top of the market and that21:19deal went down in terms of the debt and21:22maybe the equity but then you openly did21:24things that made it the most profitable21:26buyout in the history of buyouts what21:28did what did you do well that was pretty21:29easy actually looked hard but you know21:34Hilton had not been integrated they were21:36running for different headquarters and21:38there was a huge modernization and and21:42and and cost takeout Oklahoma you sold21:45it up about a fourteen billion dollar21:47profit yes well if we had held it it21:49would have been held it longer it would21:51have been over 20 so so it was a good21:54day21:54cuz nice forty nine billion in recent21:57years you’ve become one of the nation’s21:58biggest philanthropists you gave three22:00hundred and fifty million dollars to MIT22:03for a computing Center and related to22:05artificial intelligence you never went22:07to MIT you had no connection there how22:08did that come about well that was that22:10was really fascinating i I’m not a22:12technologist I had met the president of22:16MIT Rafael Reif and we started talking22:19and you know I we were concerned that22:23the u.s. was just not investing enough22:25in these technologies and I said do you22:28have any interesting ideas so he came22:33back with a let’s double the computer22:36science faculty let’s take our it’s22:39established a new department in effect a22:42new school called it a college which is22:46now gonna be the MIT schwartzman College22:48of Computing and let’s connect AI to all22:52the other departments at MIT so MIT will22:57become the first AI enabled university23:00in the world and I said now that’s a23:03vision I could buy in on final question23:06I’d like to ask you it just deals with23:08this if somebody is watching or reading23:10your book23:11and they want to be a leader a leader in23:13business or philanthropy or or in23:16government what do you think is the key23:17quality to be a leader and what have you23:19seen as their key quality enable you to23:21be a leader I I think to be a leader you23:23have to be a really good listener you23:27have to understand what’s going on23:29around you you you have to be measured23:33and and you have to realize that23:36everything you do is amplified in the23:41minds of the people who are listening to23:42you so so care nuance kindness but23:49defining a culture it’s what a leader23:53does Steve thanks very much for this23:56time I appreciate it thanks David