Carlyle CEO Harvey Schwartz at Semafor World Economy

Well, thank you. Thank you for joining us.

It's going great. I mean, again, great to see everybody. I was super fortunate to get the call from the founders a bit over three years ago to join the firm. And everybody knows Carlyle, iconic name in finance, really well, 40 years ago almost a startup in private capital which has now become a mainstream industry. But there are many unique things about Carlyle which are really, really super special, but one of the very special things is it's just born in DC.

Yeah. When the founders met, they got together, they strategically figured out how to launch the firm and why DC would be different. Actually, not true. So, David was working in the White House and decided, David's not here, but he's told this story. Many of you have heard it. And apparently he said to Carter, 'Hey, there's no way you're going to lose to an actor in the election.' And David said, 'Well, apparently if you get inflation to 15%, you can lose.' So David left the White House and heard about this thing, leverage buyouts. Private equity didn't exist, but David's from Baltimore, as you all know, now owns the Baltimore Orioles. Bill Conway's from the area, Dan D'Aniello. It was really an accident of birth, but it turned out to be uniquely defining for the firm because as you would expect some of the core things we do like aerospace defense, national security, industrials, healthcare, these are all very mainstream Washington-centric, geopolitically-centric industries and it was just an accident of birth that we ended up being here. A fantastic competitive advantage for Carlyle and our teams.

Well, I think that there are major themes around the world. So I just turned 62 so I'm a fair bit older than you. You know, in my lifetime, the themes that have really dominated capital markets, investment, business development have been declining interest rates, declining deflation, globalization. You know, the Berlin Wall came down in '89. So, we went through this period. Certainly, some very challenging things happened along the way. We had financial crisis, but generally speaking, I'd say those were the dominant trends, including technology accelerating. Pretty much all those trends are slowing or reversing other than technology which is still accelerating. And so, hey look, we don't root for global instability but everywhere you go in the world the major thematics have shifted. So national security is a discussion everywhere in the world. But it's not just about security in a traditional sense. It's about security around energy. Amplified today by the events in the Middle East, but it's security around energy, security around data, and it's traditional security around defense. But Canada's increased their budget, Europe, Japan, obviously the United States. And so this repositioning happens to fit areas of our expertise quite well. We're the only large-scale firm that's committed to this type of capital, but it's going to require a lot of capital globally.

National renewal. So I don't think it's cronyism. I think that what you're seeing is prioritization around the world. Again, if we were sitting in Europe, the whole discussion would be about a reordering of priorities. And it doesn't mean, for example, that things like renewable energy, sustainability aren't important topics. They've just been reordered and they've been subordinated to other more important issues. And look, I think that there are times in economic history where government plays what feels like a more meaningful role in the economic design of what's happening. And so 2008, 2009 obviously very involved, savings and loan crisis back in the day very involved. You had the Greek minister up here earlier obviously post-2008, the Greek economy redefining itself. We happen to be in a period where governments are very involved economically because they need to be and they need to be because priorities are shifting and I think a lot of this is a trend that started in 2008 if we're all really looking back and it's always easier to predict the future when you look back at it but sitting back in 2008 that was really the beginning of deglobalization or global splintering.

Well, we're not in that business. I mean look, I think they're very smart people. They've had massive success in a number of industries. I think that to the extent to which technology is changing there's certainly a role for early-stage capital. If you, again, we only have five minutes but if you went back to for example 2000, we've lost half the public companies in the United States since 2000 but the economy has grown dramatically. What capital has supported that growth? Well, the capital chain from very, very early-stage venture capital all the way through to companies going public and being supported in the public markets, that dynamic has shifted but companies have grown and the economy has grown dramatically. So we play a role at our part of the stage of the capital formation which is really cash flowing. So that's the business we're in. We're not in venture capital but there are super smart people in venture capital and I think they'll figure out ways to create value for their clients. And I think it's a different, more speculative form of capital but there's certainly a role for it to play.

Was it before or after lunch? I think that depends on how scary you want to be. I would say that three things that are out there. I do think geopolitical risk is mispriced. So, we have gotten accustomed to very unsettling geopolitical events sorting themselves out. When Silicon Valley Bank went out of business, the market responded seven times more violently to that than when Russia went into the Ukraine. I would say Russia going into Ukraine wildly more significant than Silicon Valley Bank going out of business. And I think we would have said that that day.