'Million dollar question is, what will happen with offices?': Stephen A Schwarzman
Stephen A Schwarzman, chairman and CEO of Blackstone Group, talks about investment trends and lessons from the Covid-19 pandemic in the first instalment of Capital Ideas, a new series that serves up the most riveting success stories in the world of business
I started in middle-class America; my father had a small store and I used to work in it. I hated that; I liked playing sports, and being with my friends at school, but I had to learn what it was like to work in a retail store. And I was lucky enough to go to Yale University. And then I went to Harvard Business School. My math skills were terrible, but somebody thought I should go into finance. I just didn’t like doing statistical work; I like dealing with people. And it took a few years to learn the basics, because finance is really about solving people’s problems. It’s very important to listen to what they’re saying, and what they’re not saying, but they’re probably thinking.
I started my own company when I was 37, an age when you know a bunch of stuff but you don’t know everything. And as we grew our business, we became the first investment banking boutique. We did merger and acquisition advice, and started in private equity and expanded into other areas. We started with two people and $400,000, which, in the world of large corporations, is not much. We now have about $560 billion, and about 3,000 people working at our parent company. With all the businesses and real estate we own, it’s around 500,000 people.
We became the largest owner of real estate in the world. I buy things and operate everywhere. And that’s gotten me involved with politics and philanthropic work to solve problems. So my life is a lot of fun.
But it’ll change back to our old world; not 100 percent, but a lot once we get vaccines and other medical breakthroughs. So I think in a year from now the world will be back to the one we all used to have.
In real estate, it’s a question of which area you’re concentrating in. Our biggest concentration in India has been in real estate for technology companies. Technology is one of India’s great strengths and people from all over the world have operations in India. We’ve done some joint ventures that have been very successful; we’ve done the first two real estate investment trusts so that the public can benefit from owning those things as well.
India’s had among our highest returns in the world in private equity, which means we keep putting more money in those companies that grow faster, and hire more people.
For more conventional office work, there’s uncertainty around the world about how that’s going to change. I think more people will stay at home initially, but the landlords have buildings, and the people who go to work are going to need more distance between themselves. This means the density of those offices will be much less, which means you’re going to need more space per person. So that should probably balance out a bit.
You’ll probably have less expansion in office, but we have to recognise that there is a short-term impact and long-term trends. In the short term, there’ll be many more people working from home. But as soon as we get these vaccines and antivirals that are going to make people more comfortable, there will be more people going back to offices. The economy will pick up, and we won’t have what looks to be a major dislocation, like we’re having now.
You also have some giant size companies that dominate the stock market indices, which are technology companies that are doing great. While a lot of other companies in the physical goods world are hurting, like hotels and amusement parks. Apple has a market valuation of more than $2 trillion, and Microsoft is getting close. These have massive impacts on indices. So there is a very uneven balance between winners and losers: The winners are so big that they’re biasing the way we look at markets. But from the perspective of companies that are doing great, they don’t think their prices unfairly high.
🔊Listen to the full podcast below:
Capital Ideas is a weekly podcast series that serves up some of the most riveting success stories in the world of business. Meet the men and women behind the companies, and get a peek into how they got to where they are, and what makes them extraordinary. Subscribe to the series here