Schwarzman up close

James Stewart comes up with lots of nuggets in his New Yorker profile of the Blackstone Group's Stephen Schwarzman. He's become the poster child for Wall Street greed, highlighted by Blackstone's 2007 public offering that gave him stock worth close to $8 billion (now worth about half that). And yet, the giant public equity firm has largely avoided much of the subprime mess (it specializes in commercial, not residential, real estate). Stewart asked him how it felt to be the focus of such negative attention.

“How does it feel? Unattractive. No thinking person wants to be reduced to a caricature.” He continued, “Why did this happen? We went public in June, 2007, at the top of a giant bull market, with a society undergoing rapid change. Globalization. Job dislocation. Middle-class anxiety. Private equity is seen as a symbol of the people who are prospering from a world in flux. That’s a lightning-rod situation.”

The piece is very long and you might find yourself skimming. But the behind-the scenes stuff is fascinating. Among my favorite stories is Schwarzman's puzzlement at not getting seated in the Four Seasons' coveted Grill Room, despite the firm holding so many functions at the restaurant that they called it the Blackstone cafeteria. When Schwarzman asked why he wasn't getting in, his longtime partner Pete Peterson is said to have replied, “It takes more than just money.” Here's more:

Schwarzman has always drawn a strict line between personal expenses and Blackstone’s business operations; colleagues say that he keeps a close watch on office spending. The company’s offices, on Park Avenue, are furnished with slightly threadbare traditional rugs and furniture and a mixture of modest prints and photographs. (The offices are scheduled to be renovated later this year.) Blackstone does not own a corporate jet. Instead, it uses Schwarzman’s private jet. (In 2006, the company paid him $1.54 million for the privilege.) Schwarzman must approve any other chartered flights. Partners pay for their own lunches; there is a twenty-five-dollar limit on dinner expenses for employees working at night. Even subscriptions to the Wall Street Journal are deemed personal expenses, and all the partners pay for their own.

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Schwarzman’s father and grandfather ran a drygoods store, Schwarzmans, which sold bed and bath linens, draperies, and housewares. When Stephen was fifteen, he approached his father with a plan to open more stores and expand into a national chain, “like Sears.” “That’s a bad idea,” his father told him. So he suggested expanding in Pennsylvania. Finally, he pleaded with him to open just one more store. All his ideas were rejected. “I’m very happy with my life as it is,” his father explained as Schwarzman kept badgering him. “I’ve got enough money to send you and your brothers to college. We’ve got a nice house and two cars. I don’t want any more in life.” Schwarzman found this incomprehensible.

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During his senior year, he had sent a letter to W. Averell Harriman, the wartime Ambassador to Russia and former governor of New York, who was serving as the President’s representative at the Paris peace talks. “There weren’t that many people in that era to admire, and I wrote him a letter saying I admired him and wanted to meet him,” Schwarzman recalled. Harriman, a fellow Skull and Bones man, invited him to lunch at his town house, on the Upper East Side, occasionally interrupting their talk to take calls from Cyrus Vance, in Paris. According to Schwarzman, Harriman asked him, “Young man, are you independently wealthy?” “No, sir, I’m not.” “Well, I am the son of a very rich man, which has made an enormous difference—that’s the reason you’re seeing me. If you have any interest in the political world, I advise you to become independently wealthy yourself.”