Your Survival Guy feels like Jason Bourne writing to you about a secret, underground black-ops finance story—like I’m uncovering some hidden truth. A secret. But in reality, the truth isn’t hidden at all—it’s right in front of our eyes. More like in front of our “I.” That’s the beauty with stories full of EGO and hubris—they just can’t keep their success to themselves. So here we go.
You know about my concerns with “You Invest, They Win” and how EGO plays an unfortunate role in “high” finance. We get a front-row seat to all of this in Blackstone founder Stephen A Schwarzman’s book, What It Takes.
For a little background, Blackstone is the original gangster in real estate, hedge, private equity, go anywhere, etc. funds. If you name an area in finance—or that single family for sale down the street—chances are these guys are looking under that rock or already have. And like any memoir, this story is in the eye of the storyteller, Mr. Schwarzman, filled with his favorite pronouns “I” and “me.”
If you want to learn “What It Takes” to succeed as an investor, look elsewhere. But if you want to read about someone that comes from a good family, is a high school track star and class president that goes to Yale, Harvard Business School, and becomes richer than Croesus, then this book is for you.
Skip to the end of the book, and the Acknowledgments read like a who’s who in politics and finance—the movers and shakers around the globe. He tells us, for example, he’s met the last five presidents of the United States as we learn money and power are non-partisan. Yippee. Hey, woke is not for the broke.
Turning to EGO, did you know that the largest financial services firm in the world, BlackRock—not to be confused with Mr. Schwarzman’s Blackstone—was founded by Blackstone partner Laurence Fink?
Here’s the back story. When Fink was at First Boston, he was the “man” that created mortgage-backed securities. Fink along with Lewis Ranieri over at Salomon, were the godfathers of MBS trading, controlling 90% of the market. Read Liar’s Poker by Michael Lewis for a front-row seat, then watch the movie The Big Short to see what could possibly go wrong.
Well, Mr. Fink bet on the direction of interest rates, hedged it incorrectly, which was apparently not his fault because some kid in operations messed up what he wanted the hedge to do. Anyway, First Boston lost $100 million, and Fink was looking for greener pastures. He joined Schwarzman at Blackstone to create a financial services division, and kicking around names “BlackPebble” didn’t sound “big” enough.
In what Schwarzman refers to as a transaction he’d like to have back, he and Fink got into a disagreement about ownership/dilution, and Schwarzman sold Blackstone’s shares in BlackRock worth a couple to three hundred million at the time to PNC, which it sold a few years ago for around ten billion. The agony of defeat.
Action Line: Depending on where you stand on this true story—just think these guys are up and at it every single day because, as Schwarzman notes, he only needs about five hours of sleep—What It Takes is less about Schwarzman’s Blackstone than it is about how much “I-Rock.”
E.J. Smith - Your Survival Guy
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