The world doesn’t actually like pioneers: Stephen A. Schwarzman

While growing up in the middle-class suburbs of 1950s Philadelphia, Stephen A. Schwarzman did several part-time jobs: folding handkerchiefs at his father’s linen shop, selling candy bars and lightbulbs, delivering telephone books. He wanted to expand the family business, but his father was not interested. The young Schwarzman dreamt of a larger life. Today, he is the force behind Blackstone, the world’s largest alternative-asset manager that manages over $500 billion and a portfolio of companies across the world that employ hundreds of thousands of people.

In an interview, the 72-year-old tycoon, who has released a new book, What It Takes: Lessons In The Pursuit Of Excellence, shares events and episodes that shaped his career, and offered him valuable lessons in entrepreneurship. Edited excerpts:

You raised a billion dollars for your first fund, an unprecedented move at that time. Why did you do so?

I have always believed that if you’re going to commit yourself to something, make sure it is a “worthy fantasy”—something that, if achieved, has significant upside. I believe you must always give 100 percent to any task you undertake, which means you can only really tackle one personally defining effort at a time. This means choosing the right goal is critical. It’s this conviction that drove us to raise what was at the time the biggest first fund ever, even though my partner and I had no previous experience in investing. We knew that the effort to raise $5 or $10 million for a $50 million fund would be about the same as trying to raise $50 or $100 million for a larger fund. Of course, it’s also critical to match the size of your fund with the opportunities to invest. You should never raise more than you can prudently invest for your clients.

What makes for a good pitch?

When we launched Blackstone in 1985, my partner Pete and I were confident we could leverage our track records and connections to quickly get off the ground. We sent out nearly 500 letters, made countless phone calls to our network and even took out a full page ad in The New York Times, only to come up completely dry. In this initial push and the months that followed, we made a critical error—we approached our best prospects first, before we had refined our pitch and really determined what we were “selling” to the market.

Every pitch will be different, but you need to test and understand what actually differentiates your offering before going after your best prospects. But even with the best preparation and the most strategic approach, be ready for rejection. No matter how good your pitch or your product is, it’s always possible to receive a “no” for reasons beyond your control. Take each failure as a learning opportunity.

You often say entrepreneurship is not easy. What factors should potential entrepreneurs keep in mind before starting a business?

Entrepreneurship is tough. Most people spend very little time telling you about the pain and low points that come with starting any business. With that in mind, I have always used three key “tests” to determine whether a new business is worth it.

No.1: Is the upside big enough? As I mentioned before, make sure that the ultimate opportunity is worth your full dedication. No.2: Is it unique? When people see what you are offering, they should say, “My gosh, I need this. I’ve been waiting for this. This really appeals to me.” If not, you’re wasting your time. Third, timing is everything. The world doesn’t actually like pioneers, so if you are too early, your risk of failure is high. The market you are targeting should be lifting off with enough momentum to make you successful.

Throughout the book, you insist on the importance of “cultural fit” when it comes to the hiring process.

Being a strong and accurate assessor of talent is perhaps one of the most critical skills of anyone who is starting or running a business. I’ve spent significant time thinking about how to do this. Cultural fit is a key consideration. From Blackstone’s earliest days to today, I have placed a high value on making sure new hires share our values and fit well into the culture we have built at the firm. I saw first-hand on Wall Street what can happen to firms that make culture an afterthought.

One thing I always ask myself after each interviews is, “Would I want to be stuck at the airport with this person if our flight was delayed?” Being nice, thoughtful and considerate of others matters—I will never hire someone based on talent alone.