Hi everybody and welcome to In Good Company. And today I'm here with David Rubenstein. David is the founder and chairman of the Carlyle Group, one of the biggest private equity firms, and he also hosts the David Rubenstein Show, where he interviews prominent leaders in business and so on. And earlier this year I had the pleasure of being on your show. So this is like revenge time, actually.
Well, thank you for inviting me, and you were great on my show. And anytime you want to come back, please let me know.
I will. You sometimes talk about people being like brands. So, what's the David Rubenstein brand like?
I'm not quite sure what it is. Maybe it's as too busy to do anything very well, because I'm doing so many different things that I don't really have as good a brand as I maybe would like to have. But the truth is, I spent 30 years — I'm now still in private equity — I spent 30 years building a firm. It became one of the larger private equity firms. But I find that I'm better known now for the TV shows I do, or the interviewing I do, or for my philanthropy. I have a lot of philanthropic things I've done, and people talk to me more about that than anything I've done in the investment world. So I guess my brand is that somebody that can't do anything well, and I do many different things, but none of them that well as I would like to be.
Well, we're going to go through it, and you for sure do a lot of things well. But you were an adviser in the White House at age 27, and now you are here. Just what are the highlights in your life since then? I mean, briefly.
Well, briefly, I came from very modest stock. My parents were not graduates of college or high school. They both dropped out of high school. They were married young. I was their only child. So I grew up in a blue-collar setting. And you know, so you grow up in that setting, you have to make it on your own. So there's a plus about that. My own children have had some advantages that I didn't have. But I was only interested in politics and government at the time when I was young. I had no interest in making money in the days of the 1960s or so. There were no hedge funds, private equity funds, tech startups. There were no billionaires, and you didn't aspire to be a billionaire. And my family was Jewish. If you were Jewish and you wanted to go into business, you went in your family's business. The family might have a business. If you didn't have a family business, you became a lawyer or a doctor or dentist. And that's what my mother aspired me to be — was the doctor. I became a lawyer because I wasn't that good in sciences, and I thought I was interested in politics, and being a lawyer you could go into politics. And my role model was John Kennedy's adviser. John Kennedy was a charismatic person, became president of the United States at 43. But his adviser, and my role model, was a guy named Ted Sorensen, who had been his speechwriter and great intellectual blood bank at 31. So at 31, Ted Sorensen was writing the inaugural address and every other great speech that Kennedy gave. And I thought, I'm not a charismatic figure. I don't want money, but I could be like Ted Sorensen. So I attached myself.
You became a Ted Sorensen at 27.
Well, I did. In fact, I wasn't as prominent as he had become because he was more senior. But at 27, I did become a deputy domestic policy adviser to the president of the United States. I wasn't qualified for the job, but you know, White House staffs are often filled where people aren't qualified. So I did get the job, but unfortunately I got inflation to 18 or 19%. So you know, I didn't last. Carter didn't get reelected.
You started Carlyle in Washington. Everybody else were in New York, and you know, that wasn't so fashionable for a time. But now everybody's going to Washington to do business, right? I mean, all the big business leaders. So you were like nearly 40 years ahead of time.
Well, what happened was I was in Washington. I had worked in the White House. I didn't have the credibility to go to New York and start a private equity firm. I didn't have an investment banking background. All private equity firms were really started by former investment bankers at that time, with very few exceptions. I didn't have an investment banking background. And I lived here. And there's a famous senator in the United States who once said, 'If you're getting kicked out of town, get out in front and pretend you're leading a parade.' What does that mean? Take advantage of the situation you find yourself in. I'm in Washington, so what do I do? I say, I understand companies heavily affected by the federal government better than the guys in New York. So what was heavily affected by the federal government? Aerospace defense. So we did a lot of aerospace defense deals early on. And people in New York said, 'Well, these guys in Washington, they know it better.' So it helped us a bit. And you know, in hindsight, if I had to do it all over again, I wouldn't change it. Because when Washington, there was nobody there then doing this. Now everybody wants to have an office in Washington. Everybody wants to know what the president is thinking or so forth. And when I go around the world now, people don't say, 'Tell me about your deals. Tell me about the deals you've done.' They say, 'What's going on in Washington? What's Trump doing? What's Congress doing?' People are really fascinated by what's happening in Washington. So, but I do keep up with government. I spend a lot of time on keeping up with government officials. So I do have some sense of what's going on in government, but I can't tell you that I'm the leading expert on what's going on in the government. But I know enough so that when I go to Abu Dhabi or Dubai or Korea, I know a lot more than they do about what's going on in Washington.
How many days a year do you travel seeing these investors?
In my peak when I was running the firm, I was the principal fundraiser, and I was probably flying about 800 hours a year, which is a lot. I'm probably now down to about 400 hours a year. But when my peak, I was going to the Middle East five times a year, Europe about six times a year, Asia about four times a year, and then Africa one or two times a year, and South America maybe twice a year. There was a lot of travel. Got a lot of frequent flyer miles. Well, eventually I got out of the frequent flyer world, but in the end, I learned to fly. And you know, I mean, I fly on my plane, and I mean, I'm not the pilot, but I eventually — when I first started, I said, 'Wow, I'm great. I'm going to be in a flight business class.' Then I said, 'I can fly first class.' And then I said, 'Hey, I'm going to come back from Europe on the Concorde.' And then I started chartering planes for a little bit. And then I started chartering planes for a little bit longer. And then eventually I bought a small plane, then a bigger plane, a bigger one, a bigger one, and I got used to it. So I do fly on a private plane. And it's my most favorite possession. I own the Magna Carta, but that's nothing compared to my plane. I tell my family, bury me in my plane. I'm never so happy as when I'm in my plane.
Well, we're going to come back to happiness. Now, you have interviewed many of the best investors in the world. And just coming back to that, what you say here is that many of them come from middle-class backgrounds just like you did. Why is that?
Well, I think people that grow up in very wealthy families may not have quite the hunger and the drive to put yourself through the torture you have to do to learn how to be a really great investor. And investing is a very torturous business because you're going to be wrong a lot of times. And so I think a lot of people who are really great investors came from middle-class backgrounds. They tend to have these things in common. They're pretty good in math generally, not maybe a math superstar, but pretty good in math and arithmetic. They have a certain degree of humility because when you're trading or you're investing, you're going to lose money a fair bit. You have to get used to that. They also have the ability to make a decision to get out of something relatively shortly after they find out it's not going right. In other words, some people have egos that are so big, they say, 'This position is right, the market's wrong.' If you have that position all the time, you're probably going to be wrong a lot because the market's going to go against you. So really good investors say, 'Look, I made a mistake. I'm getting out of this position.' Also, you have to know how to get along with people. And I think a lot of investors who are really good get along with other people. You have to motivate people to want to work for you. You have to motivate people to want to tell you information. And so I think getting along with people is a pretty good thing.
Do you think rich people are less good at getting along with people?
Well, the richer you get, I think the bigger your ego usually gets. Obviously, not always the case. There are some humble people. Warren Buffett is pretty humble, but also very wealthy. But it's a general rule of thumb. If you want to find people that are low ego, don't look for the richest people in the United States or the richest people in the world. Because when you get a lot of money, and I mean money, but being worth a hundred billion dollars or more, you're generally — you can say, 'Look, I'm pretty smart and I'm smarter than the average person,' and your ego tends to get bigger.
So how do you cope with that? Because you got kids who are investors and they are not from the middle class anymore.
Well, I have three children, all of whom are in private equity. They all have their own funds, and they're all — you know, they've seen what I've done, and you know, it's going to be difficult for somebody to replicate exactly what I did, but they will maybe do something better or do something different. There's no doubt that the children of very wealthy people have a disadvantage in a sense that if they accomplish something great, people say it's because of your father or your mother, and if you fail, people will say, 'Well, what do you expect?' Because in the end, they're probably not going to be as highly motivated as somebody who grew up in a poor family. The wealthiest people in the United States don't usually build great businesses. They tend to come from middle-class backgrounds or maybe lower-class backgrounds. So you can't say this publicly, but if you grow up in a wealthy setting, it's a big disadvantage to try to really accomplish something on your own, because even if you do something on your own that's impressive, people won't give you credit for it.
Which is — we come back to that, which is probably why you decided to give away a lot of your money.
I decided to give away essentially all my money. Bill Gates called me when he was studying up the Giving Pledge, and you're a signer as well. And there were 41 of us in the beginning. And I said, 'Look, I started with nothing and I'm going to end with nothing.' But I wanted my children to read all my speeches about giving away all my money so they wouldn't think that when I die, they're going to get a lot of money. I wanted them all to have their own careers and get their business off the ground, and then not feel that if they got a lot of money from me, that that was going to be something that people would say to them, 'You don't really earn the money. You didn't really earn it yourself.' So I'm trying to get my children to be on their own, and I am giving away basically the bulk of my money. I've given away a large part of it already.
Continuing on what makes a good investor, how important are good academic results?
Good academic results can indicate you're pretty smart. And being smart is probably better than not being smart. But the best investors are not the superstar students of all time. Warren Buffett got rejected at Harvard Business School. He tried to get in Harvard Business School. He got rejected. So he must have been an okay student, but not a superstar. A lot of people have dropped out of college. They were smart, but they didn't have great academic records. Bill Gates was smart, but he dropped out of Harvard. Mark Zuckerberg, smart, dropped out of Harvard. A lot of people are very smart, but sometimes they're either too smart to want to go through the college rigmarole and get all the grades and all that. There's no doubt that being smart is better than not being smart, but being lucky is better than not being lucky. And a lot of people have luck for sure.
A yenta is a Yiddish word that means want to know everything, a busybody. And so that's what your mother called you when you were — My mother called me a yenta because when people would come over for dinner, I would always ask them lots of questions and I always say, 'Tell me this.' I'm asking questions all the time. I want to know everything. My mother said, 'Don't be such a yenta.' Which means you shouldn't know everybody's business. But you know, as an interviewer, I am always asking questions. And maybe I got it from when I was a little boy. I was always asking people questions. I wanted to learn stuff.
Are you still a — I'm always interested in interviewing people and learning more, and I try to read as many books as I can and try to interview as many people as I can, and so I guess so. Why does a good investor have to go against conventional wisdom?
Well, conventional wisdom would — if you did what conventional wisdom would be, you're doing what everybody else is doing. So you do everything everybody else is doing. How are you going to be ahead of the pack? So you have to do something that conventional wisdom says is not the right thing to do. And so the best investments generally are against conventional wisdom. And of course, the conventional wisdom is when the markets go up, what do people do? They jump in. When the market's going down, what do they do? They jump out.
Why is it so difficult to go against conventional wisdom?
Because generally people want to be liked by other people, respected by other people. And if you tell people you're doing something nobody else thinks is a good idea, they're going to tell you you're stupid. And nobody likes to be told you're stupid.
So when you look at yourself, what are your strengths as an investor?
Well, I wasn't the investor qua investor that other people in our firm were. I sat on all the investment committees, but I wasn't driving the investment process. So I wouldn't say I'm a great investor. I was probably better at building a business than being an investor. But I would say my strengths were that getting along with people, and probably picking talent was probably a reasonably good thing, and figuring out how to persuade people to do what I wanted to do. Now, all of life is about persuasion. You know, persuading your parents to do what you want them to do, your children what you want to do, your business partners — everybody has to learn how to persuade other people. And you persuade people by talking well, by writing well, or by leading by example. And so I tried to lead by example by working hard, and therefore other people would follow me. And I learned how to try to talk reasonably well so that people would want to follow what I said. If I talked in a very poor way or I couldn't really articulate myself, people probably wouldn't listen and they might tune out.
So let's continue on that. Let's talk about Rubenstein, the leader, right? So you on your show talk to leaders across the world, but mainly in the US. Why don't you like leaders in other countries?
I love leaders in other countries, but here is the challenge. I have a day job and I'm still co-chairman of Carlyle, and I chair a lot of nonprofit organizations like the University of Chicago, the Council on Foreign Relations. So I don't have the luxury of traveling around the world to do as many international interviews as I would like. And I found that it's tough to get people overseas to want to do as many interviews as I might want to do. So I'm always happy to do interviews for people overseas, but I haven't really had the time to really focus on doing it. So if I had no other job, I would say I'm going to take my shows. I'm going to go to Europe for a week, go to Asia for a week, Africa a week, but I don't have the time right now to do that.
Now you categorize leaders into various categories, and you have one which you call visionaries, right? So what have you learned from the visionaries?
Well, visionary leaders are people that have an idea of something that nobody else has really thought of. And like, take Bill Gates. When Bill Gates was thinking of the computer revolution occurring, you know, that was pretty visionary. Many people didn't think there would be personal computers everywhere or there'd be a need for software. And so many people — or take Elon Musk. Elon Musk, you know, thought about the importance of space travel before many other people did. Built this incredible space company, SpaceX, and then he also thought about how you could actually make electric cars actually viable. And so he was pretty much of a visionary, I would say.
Talking of two visionaries, because I think you did one interview together with both Bill Gates and Jeff Bezos in the same interview.
Yes. One time, it was Bill Gates had his annual Microsoft conference, and right before the conference actually started, Bill Gates and Jeff Bezos allowed me to interview both of them, but they wouldn't let me keep a transcript of it, so there's no transcript of it. And they had never been on an interview jointly together at the time.
It was pretty impressive, I would say. And look, think about it. Jeff Bezos drove out to Seattle because he admired Bill Gates and what he'd done out there. He drove out there in his car with us, his then wife, and they started his company from scratch. From scratch, and we were involved in the beginning in helping him a little bit at Carlyle, and then we didn't really take the stock that we could have had. We would have owned a lot of stock at the time, but we didn't.
No, I mean, you win some, you lose some, right?
Yes. But I always think about, like, for example, when Mark Zuckerberg was at Harvard, my now son-in-law was his classmate, and he told me about this company, and he said, 'Look, Mark is looking for $30,000 to get this thing off the ground and so forth.' And I said, 'Look, it's a dating company. It's not going to go anywhere.' I'd seen dating companies before. Well, the guy that actually put in the 30,000 was one of his college classmates who now has that stock and never sold it. It's worth $50 billion.
50 billion. Eduardo Saverin.
$50 billion. So I wish I had made that investment. I wish we had stock in Amazon at the beginning pretty much, and we sold it right away. We didn't think it was going to get anywhere. So I've made a lot of mistakes. I wish I had held on to some of these things.
Well, you also backed a lot of winners. Now, another category you talk about, builders — Ken Griffin and Jamie Dimon and so on. Just what are these people?
Well, builders are people that take an organization that might already be there. Let's say J.P. Morgan. J.P. Morgan has been around for a long time. It's a very famous bank. But when Jamie Dimon went there after his bank that he was then running, Bank One, was bought by J.P. Morgan, he built it into the most powerful bank in the world. Now, therefore, he didn't start J.P. Morgan and he didn't start Bank One, but he built an organization that was quite impressive.
Transformers, what are they?
Transformers are people that take an organization and change it dramatically from the organization that they might have found. A good person in that category might be Steve Jobs. Steve Jobs started Apple, but he was thrown out of Apple. He was out of Apple for 12 years running NeXT, and then NeXT was sold to Apple. He went back to Apple and he transformed it from a company that was almost going bankrupt into a company that became, you know, worth about $4 trillion.
Well, commanders are people who take great leadership skills and really learn how to get people to follow them in some ways. And I'll give you an example. A military leader can be a great commander. Norman Schwarzkopf or Colin Powell as an example. Colin Powell was the chairman of the Joint Chiefs, and he really was a great leader, a commander of people, and knew how to get the most out of people in a military context.
And then we got two more categories there. Decision makers, people who have to make really tough decisions all the time, and then they do reasonably well.
Very often you got a CEO who's making tough decisions about how to build or grow a company, or a president of the United States or other leaders of a country who have to make decisions all the time. When you're, let's say, the CEO of a company, you get decisions coming to you all the time. A president of the United States is going to make decisions. Really good ones are making good decisions.
And then the last one is masters.
Well, masters are people who, you know, people you greatly respect. They have a command of the subject matter that is so significant that people really want to listen to them and really want to follow them in many ways. You could say, take the founders of Google, for example. The two founders of Google, they had a concept and they grew the company in a way that was quite impressive, helped by Eric Schmidt as well, who was the CEO for a long time. So masters are people that master a subject very well. They know it inside out. In the case of Google, it was the system for search engines. But you know, there are many people who master a subject and know it inside out, upside down, but don't actually build great companies. Some do.
Which category would you put yourself in?
Well, I wouldn't say I'm all that skilled in any one thing. I probably maybe more of a builder because I started Carlyle. I really built it in many ways because it was my vision. My vision was to have two things that had never been done before in private equity. Private equity was always a mom-and-pop business. They're very small firms. When KKR did the RJR deal in 1989, they had about seven or eight, nine people. That's very small. That's because they had one fund, a private equity funded buyouts. I decided I would have a business that did buyouts, but then I'd have a growth capital business, a real estate business, and a debt business and so forth. So I have multiple products, and then I would globalize it. So at that time when I was starting Carlyle, nobody had a buyout business in Europe that was an American company, or nobody in America had a business that was an Asian buyout business. But I decided I would have different funds all over the world. So I would both have many different disciplines and then globalize it, and that was the vision I had, and I did it. But I could have done it better than others. I could have done it better than I did. Some have done it better than I did.
In your book you talk about, you know, why would anybody want to be a leader, and it's a very common driver.
You think, yeah, most people in the world are leaders in one way. You're a leader of a family, let's say, you're a parent, you're a leader of the family. But most people don't say, 'I want to be a leader of a country, I want to be a leader of a large company,' and so forth. So some people have a drive to do that, maybe to prove that they're worth something, that they've really achieved something in their life. So everybody doesn't say they want to do that. Many people are very content to be just going along, not being a leader. In fact, the happiest people in the world are not leaders. Now, happiness is the most elusive thing in life. Probably very few people are truly, truly happy. But very often the happiest people are people who don't have a lot of money and aren't leaders. They're just people that are living their life. They might have a nice family, but they're not trying to change the world. People that try to change the world have such drive sometimes, and they're never going to get to where they really want to be, that they're going to feel that they're inadequate in some ways, and therefore not as happy as they might want to be.
Have you never met a happy leader?
When they retire, sometimes they get to be happy, but happiness is very elusive. Thomas Jefferson talked about it in the Declaration of Independence. He wrote the sentence that became the most famous sentence in the history of the English language: 'We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable rights, and among these are life, liberty, and the pursuit of happiness.' But he never actually defined happiness, and nobody really knows exactly what creates happiness. But clearly some people have a happiness, and when you talk to them, you can see they're happy with their life. And some people are just bitter, and they're not happy with their life, and maybe for personal reasons or professional reasons. Very few people actually achieve their goals in life, and if you're very ambitious, it's very difficult to get to your goals.
