What started in 1985 as a tiny advisory business with a mere $US400,000 on its balance sheet has ballooned into the industry’s top player under his watch, with $US368 billion in assets under management.
In the early 2000s, though, the company’s rapid growth was starting to get the best of Schwarzman. A master of controlling risk, Schwarzman’s determination to vet the company’s moves and ensure it didn’t overextend started to become a problem, the Blackstone founder explained in an interview with Jason Kelly of Bloomberg Markets (emphasis ours):
I was working 18-hour days, the business kept growing very rapidly, and the demands on me were astonishing. Beside the fact of living a life of perpetual overstimulation as we were growing, I could see that I couldn’t get to everything. The firm was too dependent on me as a choke point because I was very focused on controlling risk. When you lose control of risk at a financial institution, you do a variety of unfortunate credit extensions or purchases — and all of a sudden you’ve blown up your business. I was committed that that wouldn’t happen.
That’s when Schwarzman, who according to Bloomberg is worth $US11.9 billion, made what he considers his best decision ever: hiring someone even smarter than himself who could help him run the company.
It took a couple years, but in 2002 Schwarzman found his ideal candidate in Tony James, who spent 25 years at investment bank Donaldson, Lufkin & Jenrette until it was acquired by Credit Suisse.
It’s not hard to fathom what Schwarzman liked so much about James, who was running investment banking and private equity for Credit Suisse. In James, the Blackstone head honcho found he was essentially looking in the mirror.
I called three people who’d known me from my few months at DLJ and had also worked with Tony, and it turned out he’d done similar things to what I had done. He’d started their private equity business, oversaw their M&A activity, ran their investment banking, and was the head credit extender. He was the person who pushed the button: “We’ll buy this at this price.” I started out doing that here. These were all things we had in common, so when I started interviewing Tony, it was like interviewing myself — except that we have a different personality type, and he’s somebody who was smarter than I was, which I sort of liked.
Schwarzman hired James as president to co-run the company, which he says was “probably the single best decision I’ve made.”
It’s worked out well for both parties. Blackstone continued its rapid ascent, making James a billionaire in the process.
Schwarzman’s full interview with Kelly is worth a read. Check it out at Bloomberg Markets.