David Rubenstein, Co-Founder & Co-Chairman, The Carlyle Group, 2/26/26

Well, I would rather interview you, and I'd ask you, "How did a nice Protestant boy have seven kids? How did that happen?"

And when we find out what's causing it, we're going to put a stop to it.

I absolutely do. Do not quiz me.

Well, I will talk about that. I just want to thank everybody for coming. I lower your expectations. I'm not as good as the introduction. So I hope I can live up to your expectations for coming here. If your last name is Rubenstein, you might think the father was an investment banker, lawyer, or doctor, somebody. But there are plenty of blue-collar Jews, and my father was one of them. My father was one of seven children. And he was the last one, and at the time that he was born, my grandmother... they ran out of names. They didn't even give him a middle name. They couldn't even think of a middle name. He volunteered to go into World War II at the age of 17, and went and served in the Marines in World War II. Came back, met my mother. He had dropped out of high school to go into World War II. Met my mother, who... they fell in love. They said on the first date, he asked to marry her on the first date. That seems a little presumptuous, but... took me many, many years to get around to that. But I would say... my mother dropped out of high school to get married to him, and I was born more than nine months later, and I was their only child. My father did not take advantage of the GI Bill. I never actually asked him why, but he never... he got a job because he wanted to pay for the wedding, I guess, and marriage. And he just worked in the post office his entire life, and retired at... when you're allowed to retire at 55 years old, and you were allowed to retire as a blue-collar worker. And my father... he didn't like work, so he retired at 55, and they moved to a suburb of Baltimore called West Palm Beach, Florida. And that's where they were, and that's what they did. So I was, you know, an only child. And when you're the only child, you obviously have your parents putting a lot more energy into you. But my parents weren't pushing me. They weren't aggressive parents. They weren't educated, really. And so if I had worked in the post office, they would have been happy as well. They just, you know, they just wanted me to be happy, I guess. But I just wanted to do a little bit more than maybe they had wanted me to do. And so it worked out.

I've paid about $130 million in interest so far to Duke. So, no, what happened was I... I had never really been in the South very much, other than unless you count Miami Beach in the South, where my... well, my parents would take our summer vacation was always going to Miami Beach. And my father... we had a car, not air-conditioned. My father would drive down, take a day and a half. I'd be in the back seat as a little boy. And every time we'd get there, you know, it was the only two weeks my father would get off. And there was nobody there. I said, "Where are all the people?" I didn't realize it. Nobody goes to Florida in August. But that's where my father got his vacation was in August, the last two weeks of August. So I'm always saying, "Mom, how come there's nobody here in the hotels?" Look, I... I really think that when you grow up with no real push to do something, there may be an advantage. And when you grow up with any wealth, there may be an advantage. My children have grown up obviously in a wealthier setting. And while I've tried not to spoil them, and I keep making speeches saying I'm giving away all my money, you know, so that they really work hard. When you grow up with nothing, you obviously have a drive that you're not going to quite get if you grow up in a very wealthy setting. Clearly, the people that run the world, as a general rule of thumb, are people that grew up in, you know, I'd say lower-middle-class or maybe blue-collar families. Obviously, some people who run the world are very much from wealthy families, but that's an exception. As a general rule, you have more drive when you're younger, so it's a big advantage. And I went to Duke. It was a happenstance, like many things in life. Anybody here should think about it. Where did you meet your spouse? Was it happenstance? I mean, you happen to sit somewhere or go somewhere someday and you met somebody and you later married the person. Life is very much a matter of circumstances you can't predict. In my case, my next-door neighbor had gone... his brother had gone to Duke University. I never really heard of Duke. And my next-door neighbor was going to apply to Duke, but at the last minute he said he wasn't going to apply because his brother was there. So he gave me the application the night before it was due. I looked at the application. I said, "I'm not sure this is for me." The seal of the university had a gigantic crucifix in it. I said, "Geez, I'm not sure this is really for me." But I applied and I got in. I got a scholarship. That wasn't a basketball scholarship, I assure you. I was the only person in Duke's history to get cut from an intramural basketball team, which is very hard to do. And I got there and I just... I didn't really do any social life. I didn't have any money for that. I just basically worked and tried to get the best grades so I could get into the best law school. And then I came to my second city in life, which was Chicago.

No, I applied and I got in. I had never been west of Hagerstown, Maryland. So I didn't... I applied because I got the application. Somebody gave it to me. I applied, but I didn't really know the University of Chicago. Never been to Chicago or anything like that. I was going to go to an East Coast law school, one of several that I got into. And then after I got in, they sent me a letter two weeks later saying, "You got a full tuition scholarship." I thought, "Wow, I didn't even apply for it." So I said, "Okay, so of course I'm going to get it." But then they sent me another letter saying send in $25 to reserve your place in the law school class. And then they sent a letter a couple days later, send in $25 to reserve your law school dorm room if you want one in Burton Judson, it was called then. So I, being so smart, I said, "Look, I don't have extra $25 floating around. I'll send in $25 for the housing people. They'll tell the law school people I'm coming." So I showed up the first day and I said, "Here I am, David Rubenstein, full tuition recipient." And they said, "Well, you didn't send in your $25. We gave your class position away and we gave your scholarship away to somebody else." So, wait a second, why would I need a law school dorm room if I'm not going to be going to law school? And they said, "Well, that's a different department of the university. I have nothing to do with it." So I didn't know whether to cry, jump out the window, commit suicide. I didn't know what I was going to do because I thought my whole legal career was over and what am I going to tell my parents that their one son is now unemployable and he can't get a job and he can't do anything. And so finally, the woman that was then in charge of it came back and said, "Don't cry. We'll give you the scholarship. We'll figure it out." So they did, and I was there for three years. And now I started a scholarship program to give people at the University of Chicago Law School money now, full scholarships. And I think I've given, I don't know, about 60 or maybe 60 or 70 million dollars. And what we've tried to do is... University of Chicago Law School is a great law school, but they were always losing people... not always, sometimes have a hard time getting people who wanted to go to Harvard Law School or Yale Law School or Stanford Law School. So in effect, if you get a full ride for three years, which is what I'm doing, 20 students each year, 60 every year total in the school are getting a free ride every year. So we get some really talented people. This year, for example, University of Chicago has seven Supreme Court clerks. Harvard has seven, Yale has maybe six. So, you know, all of us are smaller than Harvard, we're getting the same number of Supreme Court clerks. We're getting really talented people and it's been really good for the law school and I'm really happy with it.

I really was not interested in being a lawyer, a serious lawyer. To be honest, I was only interested in those days in politics and government. I was inspired to go into public service by John Kennedy. I was in the sixth grade when John Kennedy gave his famous speech, "Ask not what your country can do for you, but what you can do for your country." And that speech is poetry in prose form. It's the best inaugural address of the 20th century and I just read it over and over again. My teacher in the sixth grade went over it with me and I just read so much about John Kennedy and so much about the man who wrote that speech was Ted Sorensen. And Ted Sorensen was a partner in a law firm called Paul Weiss Rifkind Wharton & Garrison. And so when I was in law school, my only ambition was to go to Paul Weiss, learn how to be what Ted Sorensen was, an advisor to a president, and then I would ultimately work in the White House and be an advisor to a president. I had no interest in practicing law, I had no interest in making money, never had any money, there were no private equity firms, no hedge funds. I didn't care about it. And I did work for Ted Sorensen. He realized I wasn't as good a lawyer as he maybe thought. And so when I said, "Can you get me a job to go to Washington and kind of be an advisor to a president?" He helped me because I think he wanted to get me out of the law firm. So I got a job as the chief counsel to the Senate Subcommittee on Constitutional Amendments, which was chaired by Birch Bayh, senator from Indiana, who was running for president in 1976. And I thought, "This guy's going to be president of the United States, I'm his chief counsel on the Senate Judiciary Subcommittee, I'll probably go to the White House." So 30 days after I went to work for him, he dropped out of his campaign. I said, "Oh my God." So, you know, and some of you may have this experience sometimes yourself. You know, you think your life is kind of going nowhere, your career is going nowhere. I join a guy and 20, 30 days later he's out of his presidential campaign, so I'm going to be stuck working in the Senate, which I wasn't as interested in. And so somebody called me out of the blue, and I didn't have a secretary then. I happened to answer the phone. If I hadn't been there that minute, I wouldn't have gotten the call. And they said, "Would you like to interview somebody else who's running for president?" I said, "Well, geez, I don't know. Who is it?" They said, "It's Jimmy Carter." I said, "That's the peanut farmer from Georgia, right? Let me tell you something, he's not going to be president. We're not going to elect the peanut farmer from Georgia." But I had nothing else to do, so I got the interview, I got the job, and I went to work for Jimmy Carter in the 1976 presidential general election. And when I joined Carter's campaign, he was 34 points ahead of Gerald Ford. And when I finished, Carter won by one point. And Carter said to me, like, "What would you... What did you really do for me? Because I was way ahead before you showed up." But you know, presidential campaigns, you know, are where people do what they want to work in White Houses. The White House staffs are not filled on merit, as we have observed from time to time. So they're often filled by people working the campaign. I worked in the campaign. I had actually never met Carter because he was campaigning the entire time in the general election, and I never met him. And in the transition, I never met him either. He was busy meeting with more senior people than me. And so I was announced as the deputy domestic policy advisor because I was the deputy to the domestic policy advisor, but it was a month into the White House before I actually met Carter. And you finally, you know, he didn't know who I was, and I got to know him over the years. And I loved the job so much, I didn't take a day off for four years. I worked around the clock. People made fun of me because I was never leaving the office, or then I mean the White House. I was just there all the time. And I got to know Carter reasonably well. I knew his positions. And what happened to me then was what maybe some of you had this experience. People told me, "You're a bright young man. If you want a job, call me up." And people are calling me all the time. Join this law firm, that law firm. I said, "Look, I'm going to be the senior advisor in the second term of Carter. So I don't need to be... I'm not going to be the junior advisor. I'm going to be senior advisor." And so what happened was I remember telling Carter, "Look, I know we have gas lines. I know we have hostages in Iran. And I know, you know, we have high inflation, but you're running against a man who's so old he can't get out of bed in the morning. He's 69 years old. Ronald Reagan can't possibly get to be president at 69. We'd love to have a president who's 69, right? But I'm older than 69 now. Now 69 seems like a teenager to me." But I was wrong and we lost. And so all of a sudden I couldn't get anybody to hire me because who wants a Carter White House aide? So I didn't want to tell my mother her only son couldn't get a job. So I said I had so many offers I didn't know which one to take. But eventually she figured it out that I didn't have any jobs. And finally I got a job practicing law. And once again, people told me, "You're not that good a lawyer." So I then started a private equity firm and took off.

Well, the word malaise was never actually used in that speech, of course.

Well, there were private equity... it really began early... well, I should say that they're... All money management, for those who care about money management, was basically traditionally, for several hundred years, fixed income or public equities, more or less. And you got... you charged the money manager maybe one charge 1% or something like that. And you were getting rates of return of, let's say, S&P 500 might go up 6 or 7 or 8% a year over 100 years, so you're going to get 6 or 7 or 8%, and then fixed income 3%, 4%, something like that. That's what money managers did for you with money. When the venture capital people came along in the late '60s and they were starting new companies, they said to their backers, "We're going to actually add value. We want a piece of the profits. We want a carried interest, 20%, like it was." When the buyout boys came along, they said, "We'd like that same model, 20%." And they were getting very high rates of return initially because they were buying companies with 95% to 99% leverage. So the Gibson Greetings Cards deal, which Bill Simon led, he bought it from RCA, they paid, I think, $234 million. He ultimately made about actually $80 million on a $1 million investment. And the reason they were able to do that is if you sell these companies quickly and you're buying it with 99% leverage, you know, it's not that difficult if the economy's good to do well. And so people were doing these deals and we were doing some of them early on. Obviously, later when the economy went down, if you're buying something with 99% leverage, it doesn't work out so well. But what we did is I guess I came up with the idea of starting up the only firm like that in Washington. And I did it in Washington because there was a famous senator from Illinois named Everett Dirksen. Some of you may have heard of him. And very famous. And you know, he did a great job in the '64 Civil Rights Act. He brought the Republicans along for that. And Lyndon Johnson said to him, "You know, in 100 years from now, they're only going to be talking about two people in this country, Abraham Lincoln and Everett Dirksen, because you're the man responsible for the Civil Rights Act." And Dirksen believed it and he got the Republican votes for it and the bill passed. But he famously said once, "When you're getting kicked out of town, get out in front and pretend you're leading a parade." What does that mean? It means take advantage of the situation you find yourself in. I'm in Washington, D.C. Nobody in New York is going to take me seriously. I'm not a great lawyer. I got thrown out of the White House in effect by the voters. So I'm just going to take advantage of Washington. So I said we understood companies more heavily affected by the federal government than the guys in New York did. And that was our stick as we got started. And we actually hired some people that knew more about defense companies or communication companies than maybe people in New York. And we did pretty well. And then one thing led to the other. But what we did is we tried to transform the business by doing two things. One is in the early days of private equity, private equity firms only did private equity. We decided we'd have private equity, we'd have real estate, growth capital, so forth. We'd have many different disciplines, be a multi-discipline firm. And then we decided to globalize it. And then I would, you know, have a European fund, an Asian fund, a Japanese fund, African fund, so forth. We would be global and in many disciplines. That was novel at the time. And because I wasn't an investor, I didn't go into business school like you, I didn't really know much about investing. So I said I'll make myself the fundraiser. So I went around the world begging for money for a long time. I brought in very famous people to help open doors. I brought in former Secretary of State Jim Baker. He was extremely well regarded. If your last name is Rubenstein, you want to raise money in the Middle East, take Jim Baker along. It's much better. And then I brought in his friend. He said, "My friend would like to come join as well." "Who's your friend?" "George Herbert Walker Bush." So he was former president. He wanted to join. He came in too. And we had a lot of famous people. So in those days nobody would want to meet with me. And I couldn't attract a crowd like this. I'd probably get three people in those days to show up here. But with Baker and Bush, I could get people to come and listen to us in our presentation. And the track record was pretty good as it was. Ultimately, it worked out.

I would say, look, we haven't had a recession in more than seven years. Historically in this country every seven years more or less have a recession. I hired one guy that I did hire was a guy named Jay Powell. He had been in the George Herbert Walker Bush administration. He was looking for a job. He wanted to not go back to New York to be an investment banker. He joined us and he was a very nice guy, as honest as the day is long in my view. And I actually think he did a pretty good job because even though when COVID hit, everybody rushed to put, including Trump and then Biden, put enormous amount of money. We injected about $7 trillion in the economy with no corresponding tax increases. And so that was going to produce inflation. The mistake that Janet Yellen and Jay Powell probably made was they called it transitory for a while and it wasn't transitory. When they finally figured out it wasn't transitory, they began increasing interest rates. Amazingly, they increased interest rates to a very high level, but we didn't get a recession out of it. And normally you increase interest rates, you're going to get a recession. And then when you start lowering interest rates, sometimes you get a recession as well. And we haven't had a recession. So I think the economy today... I'm saying there's a recession due, but the economy is confused a little bit. Confused because we don't know whether tariffs are going to be in effect or not, they're going to be refunds or not, we don't really know. We don't know what the new Fed chairman's really going to do. He said he's going to lower interest rates, but how much room is there to lower interest rates? Our European allies are beginning to build their economies that are not as dependent on the United States as they once were. We don't know what the relationship with China's going to be, so there's a lot of uncertainty out there. And uncertainty often makes people nervous about investing. And so I wouldn't say we're in a terrible situation, I'd say it's just a lot of unknowns. And right now because the Congress, everybody in Washington's focused on the midterm elections, we always focus on the next election in Washington, and people think in there that the president's going to have a tough time holding on to the Congress because if you look at history, usually our first term, our first midterm election, a president will lose on average about 25 seats. Trump lost 41, I think, the first time. Barack Obama actually lost about 63 seats. Bill Clinton lost about 52 seats. So if the history repeats itself, you're going to have a different Congress at least on the House side, and then maybe the economy will react to that. So it's just too hard to know, but I'd say it's just a lot of uncertainty right now.

So on private credit, for those who don't obsess over what private credit is, essentially if you go to a bank and you borrow money, you're going to have some security that's pretty good, and the bank, if you default on the loan, the bank is probably going to have 100% credit. So your house, if it's a mortgage or something. Well, an industry arose, really it was the same as when Mike Milken really kind of built the junk bond industry or the high yield industry. An industry arose in the last 10 years or so, where people who were private equity firms, but also now private credit firms, they would say, "We will lend you money. We're not as inexpensive for you to borrow because we have a higher risk, but we'll take a higher risk on your younger company or in your credit that's not quite as good as what a bank would want, and we'll lend you money." Now, the theory was that this was a pretty good business because the credit standards were pretty high, and the interest rates being paid to the private equity firms or private credit firms is pretty good. But because there has been some fraud in one major deal that was owned by HBS, which was bought by BlackRock, and then because Lou has had some credit issues as well, big private credit firm, the market is skittish about private credit. You know, we actually have more private credit dollars now than private equity dollars. So, you know, it's something we're very attuned to. I don't see that the economy is going to crater because of private credit. This is not a big mortgage kind of problem as we had in the Great Recession where you had these mortgages that really shouldn't have been given. I think that there may be some deals, but there's always going to be some credit risk. I don't really think it's a big problem and I haven't seen it in our own numbers. So I'm not that worried about it. Obviously, if you go into a recession or a deep recession, lots of things are not going to be good. But assuming we're in a reasonably good economy as we reasonably are now, I'd say we're probably okay. The private credit thing is not going to be a big problem in my view.

Let me explain what this is about. If public equities yields 6 to 8% a year on annual average, something like that, maybe not quite as much all the time, but can be higher, can be lower, but let's say over that 100 years, public equity is 6 to 8% and fixed income is 3 to 4%, and let's say private equity and private credit are 13, 14, 15% net, something like that. Those are available to big pension funds, the high net worth individuals, to accredited investors. The way our country has worked is that you have to be an accredited investor to go into something that's private like a private equity fund. And so the kind of ass-backwards nature of it is this. If you, let's say, go to the University of Chicago and you're first in your class and you major in economics and then you went to the Booth School and you got an MBA and you're first in your class there, but you say, "Before I go into business, I want to go teach for America." You're not going to likely be an accredited investor. You're not making any money at Teach for America of any consequence. You're not an accredited investor, but you're pretty smart. If you have a retirement plan, you're not going to be able in that retirement plan to have the benefits of the higher rate of return you get from private investments. If you are an absolute idiot, but your father is extremely wealthy and gives you lots of money and you drop out of several colleges and you can't read a balance sheet, you're an accredited investor because you have a net worth of a certain amount. So you can theoretically lose all the money you want in private investments. It's really unfair that people that need higher rates of return can't get it in some cases because they might not be an accredited investor. So people in 401(k)s and IRAs are not often accredited investors, sometimes they are. But what we're trying to do, what the industry wants to do, is say to people in 401(k)s and IRAs, they should be able to take some percentage, some small percentage, not going to be all of it, and put it into a private investment vehicle that might get a higher rate of return than they would otherwise get. And that's what it's about, but it's not going to ruin the IRA or 401(k) for somebody because it's going to be a small percentage, and I think it's not a terrible thing to do.

Well, we all lived through the internet age and some people at the beginning of the internet age said, "Hey, this is not going to really amount to that much." And you know, remember when the dot-com bubble burst occurred in the late 1990s, people thought that internet was going to go away and only one company more or less survived that was a public company, a company called Amazon. But its stock price went down to $6 a share, so people weren't sure it was going to make it. And obviously the internet has changed our lives. Nobody today can live without the internet pretty much, though obviously some people don't have access to it. But most people have access to it, it's changed their lives in some ways. And you think about how you can... how many... how you get through the day without using the internet. AI will have the same impact. It's going to change our lives, but we don't know, just as we didn't know with the internet, how it's really going to do it. So many people made bets on internet companies that turned out to be terrible, some turned out to be much better than people thought, but they weren't the ones that were thought to be the winners in the beginning. Nobody really knows which is the best way to invest in AI today or whether it's going to replace all of us. I don't really think that humans are going to be replaced by AI as some people would speculate, but there will be transition. Just as there was in the industrial revolution, some people lost their jobs, other people got different jobs. The economy is always going to move in fairly significant ways and people will find new ways to make themselves useful and be employed. So I don't...

I don't think AI is going to destroy our economy or destroy everybody's livelihood, but there will be a transition. And transitions are difficult. And in China, there's a curse that people say to somebody else: may you be condemned to live in a time of transition, because transitions are very difficult. And so I would say AI is something that people will have to deal with, just as there's another thing that the University of Chicago is focused on, and it's also going to change our lives, and it's called quantum computing. Quantum computing in Illinois is being — because the governor and other people are really making this a quantum center for the United States. If we can do that, it'd be great for Illinois and Chicago. Quantum will change our lives as well, because it's going to make computers a thousand times quicker than current computers. So there's always going to be some technology thing coming along, and I wouldn't be as worried about it as maybe some people are.

Well, the brilliance of the people in the industry probably. But I would say there's no doubt if you use leverage and not excessively so, and the economy doesn't move against you, obviously leverage is used because people think it will enhance returns. It has some advantages to it. In the early days of private equity, it was a dog-eat-dog world, and what you wanted to do is leverage off the company and sell off assets as quickly as possible, maybe get rid of jobs, ship things offshore, and that ultimately produced a barbarians at the gate mindset that people didn't like. And now the private equity people have recognized that if you do that, you're going to be out of business because the way it doesn't yield great returns, and secondly you produce a lot of social disorder, and a lot of investors don't want to back you. So today the large private equity firms basically have scores of people working there, hundreds of people who really add value, who actually know how to do what's called EBITDA growth, make sure the firm actually grows because it's making internal products better and selling them better, and not because of just leverage. In fact, the leverage is not as great as it used to be. It used to be, as I say, 95, 99 percent; now maybe 50, 50 percent or so. So it's not really leverage, but clearly what you have is an economic incentive. When you tell people that are really intelligent, hardworking, aggressive, you can get 20 percent of the profits on somebody else's money, and if you do a good job you're going to make a lot of money, you're going to attract a lot of talented people, rightly or wrongly. Now, some of these people are in it only for the money; some people think that they're actually doing something useful for society, and I do think that people that manage money do good things for society, but they have to do a better job of explaining.

Let me give you one example. There was an immigrant from Armenia who came to this country many years ago, and he was a biotech guy. He went to MIT, got a PhD there, and he started doing biotech investments. And he had a company that he was really supporting; it was doing some kind of biotech investments, and it wasn't going anywhere. My son-in-law, who had an MD and MBA from Harvard, and he was in Mark Zuckerberg's class at Harvard, he told me I should invest in Mark Zuckerberg's company when Mark Zuckerberg was at Harvard, and I told him it wasn't going anywhere. That was a mistake. And the guy that did put the money in, he put his Bar Mitzvah money in, $30,000, and now it's worth $51 billion. That was a mistake; I should have backed him. Anyway, this guy from Armenia, he backed a biotech company, and my son-in-law went to work there, and I said this company has no products, it's never going anywhere. And sure enough, my son-in-law worked there for four years and had no products and didn't go anywhere. And then they wanted to go public, and when they went public they wanted me to buy the stock. I said they had no products. But this man who was the investor, this Armenian immigrant, said, I think we actually know what we're doing in this biotech area. And then when COVID came along, the company proved itself. It was Moderna. And they came up with a vaccine that many of you probably used, and maybe saved some of your lives, and certainly improved your health. It certainly helped me. And so my point is, venture capitalists, private equity people, they're not all barbarians at the gate. They're trying to make a profit. They're trying to make society better by making companies better. And I tell our employees all the time, what you're doing is you're allocating capital in ways that hopefully make more jobs, and therefore make more wealth, and help our investors who are often public pension funds and so forth. So I don't really apologize for the business we're in. I just think we have to do a better job of explaining what we're doing. There's no doubt though, it's a very profitable business, and when you make a lot of money though, I think you have an obligation to kind of recycle and give it away.