Billionaire private equity CEO Steve Schwarzman co-founded Blackstone when he was 37 years old. Today, Blackstone is the largest private equity firm in the world, with around $434 billion in assets.
During a recent conversation with Yahoo Finance, Schwarzman, now 71, reflected on his career, lessons in dealmaking, and even offered some sage advice for young twenty-somethings looking to launch a Wall Street business.
“If you’re going to start a business, it’s different in finance than it is in the tech world. In the tech world starting something and failing isn’t great, but it’s not horrible. In finance, when you fail, you end up losing a lot of people’s money, and they’re not happy about it, and they remember it. So the key is don’t fail.”
To minimize the risk of failure, you have to develop skills from years of experience. That’s why Schwarzman cautions young people on launching their own business too soon.
“It’s not for 22 year-olds or 26 year-olds. I’ve watched over my career really gifted people who are 26 saying, ‘I want to go out and start my own business.’ And I said, ‘You haven’t seen enough bad things yet. You don’t have a really sophisticated understanding of risk and things that can go wrong that could really hurt you.’ And some of them say, ‘OK, I’ll stay and learn more.’ Other people say, ‘I don’t care what you have to say.’”
As a result, he’s witnessed many go out too young and fail.
To be successful, you’ll need a certain amount of experience that comes with age. You’ll also need to differentiate yourself instead of piling in a business that everybody else is already doing.
“So if you’re starting a business, you want to have something unique, a different take on what’s going on in the world and you have to be right. And you have to be psychologically prepared to take lots of problems because there’s nobody else to rescue you like there is in another place.”
Launching a new venture in finance “really, really serious business,” he added.
“It’s not like saying, ‘I have a great idea for another app. And if this one goes, it only cost me a few million dollars, and we could be worth a billion or two billion dollars.’ That’s a whole different type of approach with a different structure for the people who give you money.”
In the venture capital world, investors expect that some of their investments won’t work out. Many entrepreneurs in the tech world can simply start over. That’s not always the case when it comes to managing money.
“In finance, when you give people money, or you are hired to do something, they expect it to work. And if it doesn’t, the consequences to you — because once you get off track from being at a great place doing things that are successful — and you say, ‘No, no. I really know how to do this.’ If you make a complete mess of it, what you find is that most people don’t want you back and you’re out there. And so I’m not trying to be discouraging because I did this. But but I’m trying to be responsible and sober about it.”
Julia La Roche is a finance reporter at Yahoo Finance. Follow her on Twitter.