Takeaways from the Book What it Takes, Lessons in the Pursuit of Excellence by Stephen Schwarzman
The book, What It Takes, Lessons in the Pursuit of Excellence by Stephen Schwarzman, was recommended by an ex-colleague and friend of mine. Naturally, being in the private equity industry, this book piqued my interest. I still remembered my ex-colleague telling me about this book twice, which prompted me to read an excerpt online. Immediately, I was hooked and ordered a copy of the book from Book Depository.
For those who don’t know, Stephen Schwarzman is the Co-founder, Chairman, and CEO of Blackstone, an American private equity alternative investment management firm with $584bn in assets under management. He started his illustrious career in investment banking at a firm called Donaldson, Lufkin & Jenrette (DLJ for short form), and subsequently went to Lehman Brothers, becoming one of the youngest Managing Directors at the age of 31.
Source: Book Depository
I urge everyone who likes finance, investing or even entrepreneurship to read this book as it gives you more insights into the world of private equity and real estate investing. A lot of lessons learned from this book can be applied to your own personal investing as well.
Below are some of my takeaways or things learned from this book.
A. On Morals
Integrity prevails. All the time. Most firms have core values such as excellence and integrity. However, how many of their employees actually practice that? If having integrity was so easy, why do incidents like the Enron Scandal, and numerous other scandals in the financial sector happen? In this book, it was highlighted that in real estate deal-making, often times the buyer, will threaten to pull out of the process at the last minute unless the seller agreed to a lower price. This may work in the favour of the buyer, as he would have gotten the deal at a lower price given how advanced negotiations had been. However, the trust is broken and that buyer will likely not be shown attractive deals again in the future. In such a case, always stick by your word and the price that you have agreed to paid (barring any unforeseen circumstances eg market crash) so that in the long term, it will work out in your favour.
B. On Investing
I believe most retail investors will find it difficult to detect market bottoms as the markets start declining and economies go into recession. Most would have entered in too early and underestimated the severity of the decline. After all, we can’t predict where the markets will be headed too. In this book, Stephen Schwarzman advised it is important not to enter the markets too early, thinking that it is a “good price to enter” just because it has declined say 50%. Most retail investors would not have the confidence, discipline, or holding power to wait until the cycle fully plays out. His advice on tackling or minimizing the risk of entering too early is to invest when values have recovered at least 10% from their lows. His view is that asset values typically increase as economies gain momentum. Hence, it is better to forego the first 10-15% of a market recovery to ensure that you are buying at the “right” time. Of course it is easier said that done because how can we fully know whether a slight recovery could be a false signal, right? But at least I felt that this framework is pretty useful to keep us disciplined from rushing in to buy when the market is tanking.
C. On Entrepreneurship
Entrepreneurship is never easy, but the journey to it will be fulfilling. I had many friends and university batch mates telling me that after they left their corporate jobs and even though they were working longer hours and earning lesser, they felt more fulfilled. Stephen Schwarzman said in his book that if you’re going to commit yourself to doing something, it is as easy to do something big as it is to do something small. Reason being, both will take up your time and energy, so it’s better to make your fantasy worthy of your pursuit with rewards commensurate to your efforts.
Source: PE Insights.
D. On Networking and Connections
Connections will ultimately get you somewhere. Stephen Schwarzman mentioned in his book, if you studied in a good school or worked in a big firm, there are chances that you will keep crossing paths with the same people of your generation. Hence, it is better to be nice to people.
Stephen Schwarzman has an extensive network all around the world. He knows the top guys from places like General Electric, JP Morgan, Goldman Sachs, Citibank, Pepsi, and even high flyers in China.
Ultimately, his connections led him to become the largest Alternatives asset manager in the world.
E. On Being Flexible yet Firm
Did you know that Blackstone and Blackrock had some affiliation? Larry Fink used to head up Blackstone Financial Management and he and his team owned half the stakes, while Stephen Schwarzman’s Blackstone owned the remaining half. Blackstone Financial Management was doing extremely well and Larry and his team wanted more equity given that they did all the work. Stephen Schwarzman refused to give up more equity as he believed it is important to stick to the original agreement. Ultimately, Larry Fink and his team, together with Blackstone, sold their stake to a bank and renamed it to Blackrock, which go on to be the world largest asset manager with USD 7.81 trillion in assets under management as of end 2020. The decision to sell Stephen’s stake in Blackstone Financial Management remains one of the biggest regrets of his career. Hence, he mentioned in his book that he should have made accommodations and give up more equity when the business was doing well at that time. This also taught me that in life, it is important to be firm on certain things that you strongly believe in, and be flexible enough when the situation calls for it.
F. On Finding the Right People
Finding the right people is probably the most important aspect of running an organization or a team. Hire a wrong fit, and you will spend a lot of time clearing up the mess or dealing with things that distract you from achieving your goals. Stephen Schwarzman mentioned that during his time as a Co-founder and CEO, he found out that there were a handful of toxic senior employees giving the junior ones a tough time and using abrasive language at them. They were giving the juniors work on Friday, just before the weekends at 6pm and expect them to turn it around over the weekend or before Monday. This act itself frustrated a lot of young professionals, that one even kicked the hell out of a photocopy machine until it spoilt. Hence, he believed on calling out such toxic managers out and giving them one more chance. Should they repeat such nasty behaviour, they were let go. He believed that the people he hired, reflected the image of his firm.
Minimally, the people who worked for Blackstone would have traits of self-confidence, intellectual curiosity, ability to navigating unchartered territory, emotional maturity and stability, and a strong sense of integrity.
Overall, I found this book very interesting and fulfilling. Almost everything is interconnected and sometimes, the best investor are not those who are the most mathematically inclined, but rather those who can identify patterns and have good psychological skills. This book also taught me to live a life of purpose and to pursue meaningful work. Money, while extremely important, will come naturally as you get better at what you do.
What other books did you enjoy reading? Share with us in the comments below.
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