Stephen Schwarzman is the CEO and Co-Founder of Blackstone, one of the world's leading investment firms with over 530 billion dollars of assets under management. He is one of the most successful business leaders in history.

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EPISODE LINKS:
What It Takes (book): https://amzn.to/2WX9cZu

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OUTLINE:
0:00 - Introduction
4:17 - Going big in business
7:34 - How to recognize an opportunity
16:00 - Solving problems that people have
25:26 - Philanthropy
32:51 - Hope for the new College of Computing at MIT
37:32 - Unintended consequences of technological innovation
42:24 - Education systems in China and United States
50:22 - American AI Initiative
59:53 - Starting a business is a rough ride
1:04:26 - Love and family

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The following is a conversation with Stephen Schwarzman, CEO and co-founder of Blackstone, 1 of the world's leading investment firms with over $530 billion of assets under management.

He's 1 of the most successful business leaders in history.

I recommend his recent book called What It Takes that tells stories and lessons from his personal journey.

Stephen is a philanthropist and 1 of the wealthiest people in the world, recently signing the giving pledge, thereby committing to give the majority of his wealth to philanthropic causes.

As an example, in 2018, he donated $350 million to MIT to help establish its new College of Computing, the mission of which promotes interdisciplinary, big, bold research in artificial intelligence.

For those of you who know me, know that MIT is near and dear to my heart, and always will be.

It was and is a place where I believe big, bold, revolutionary ideas have a home.

And that is what is needed in artificial intelligence research in the coming decades.

Yes, there's institutional challenges, but also there's power in the passion of individual researchers, from undergrad to PhD, from young scientists to senior faculty.

I believe the dream to build intelligence systems burns brighter than ever in the halls of MIT.

This conversation was recorded recently, but before the outbreak of the pandemic.

For everyone feeling the burden of this crisis, I'm sending love your way.

This is the Artificial Intelligence Podcast.

If you enjoy it, subscribe on YouTube, review it with 5 Stars and Apple Podcast, support on Patreon, or simply connect with me on Twitter at Lex Friedman, spelled F-R-I-D-M-A-N.

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And now here's my conversation with Stephen Schwarzman.

What idea do you believe, whether grounded in data or in intuition, that many people you respect disagree with you on?

Well, there isn't all that much anymore since the world's so transparent.

But 1 of the things I believe in, put it in the book, what it takes is, if you're gonna do something, do something very consequential and do something that's quite large, if you can, that's unique.

Because if you operate in that kind of space, when you're successful, it's a huge impact.

The prospect of success enables you to recruit people who wanna be part of that.

And those type of large opportunities are pretty easily described.

And so not everybody likes to operate at scale.

Some people like to do small things because it is meaningful for them emotionally.

And so occasionally you get a disagreement on that, but those are life choices rather than commercial choices.

See, we often in America think big is good.

What's the benefit, what's the cost in terms of just bigger than business, but life, happiness, the pursuit of happiness?

It's not mandated, and everybody's different.

And some people, if They have talent, like playing pro football.

Other people just like throwing the ball around, not even being on a team.

Depends what your objectives are, depends what your talent is, depends what gives you joy.

So in terms of going big, is it both for impact on the world and because you personally, it

Well, it makes it easier to succeed, actually, because if you catch something, for example, that's cyclical, that's a huge opportunity, then you usually can find some place within that huge opportunity where you can make it work.

If you're prosecuting a really small thing and you're wrong, you don't have many places to go.

So I've always found that the easy place to be and the ability where you can concentrate human resources, get people excited about doing really impactful big things, and you can afford to pay them, actually, because the bigger thing can generate much more in the way of financial resources so that brings people out of talent to help you And so all together it's a virtuous circle, I think.

How do you know an opportunity when you see 1 in terms of the 1 you wanna go big on?

Is it intuition, is it facts, is it back and forth deliberation with people you trust?

And how do you get to pattern recognition?

First, you need to understand the patterns and the changes that are happening.

And that's either, it's observational on some level.

You can call it data or you can just call it listening to unusual things that people are saying that they haven't said before.

And I've always tried to describe this, it's like seeing a piece of white lint on a black dress, but most people disregard that piece of lint.

And I'm fascinated by how did something get someplace it's not supposed to be?

So it doesn't even need to be a big discrepancy, but if something shouldn't be someplace in a constellation of facts that sort of made sense in a traditional way, I've learned that if you focus on why 1 discordant note is there, that's usually a key to something important.

And if you can find 2 of those discordant notes, that's usually a straight line to someplace.

And that someplace is not where you've been.

And usually when you figure out that things are changing or have changed, and you describe them, which you have to be able to do, because it's not some odd intuition, it's just focusing on facts.

It's almost like a scientific discovery, if you will.

When you describe it to other people in the real world, they tend to do absolutely nothing about it.

And that's because humans are comfortable in their own reality, and if there's no particular reason at that moment to shake them out of their reality, they'll stay in it, even if they're ultimately completely wrong, And I've always been stunned that when I explain where we're going, what we're doing, and why, almost everyone just says, that's interesting.

And they continue doing what they're doing.

And so, I think it's pretty easy to do that.

You know, I've sort of been doing this mostly my whole life.

I'm not a scientist, let alone a computer scientist.

And you know, you can just hear what people are saying when somebody says something or you observe something that simply doesn't make sense.

You know, on a quick tangent, pattern recognition is a term often used throughout the history of AI.

That's the goal of artificial intelligence, is pattern recognition, right?

But there's, I would say, various flavors of that.

So usually pattern recognition refers to the process of the, we said dress and the lint on the dress.

Pattern recognition is very good at identifying the dress, as looking at the pattern that's always there, that's very common and so on.

You almost referred to a pattern that's like an, what's called outlier detection in computer science, right?

Just almost philosophically, the kind of decisions you made in your life, based scientifically, almost on data, do you think AI in the future will be able to do?

Is it something that could be put down into code?

It's tough for me to say since I don't have domain knowledge in AI to know everything that could or might occur.

I know sort of in my own case, that most people don't see any of that.

What are you wired or programmed to be finding or looking for?

I do a bunch of that too, because that's what you do in normal life.

But I've always been completely fascinated by the stuff that doesn't fit.

Or the other way of thinking about it, it's determining what people want without them saying it.

There's a missing piece, they don't know it's missing.

You think it's missing, given the other facts you know about them, and you deliver that, and then that becomes sort of very easy to sell to them.

To linger on this point a little bit, you've mentioned that in your family, when you were growing up, nobody raised their voice in anger or otherwise, and you said that this allows you to learn to listen and hear some interesting things.

Can you elaborate as you have been on that idea?

What do you hear about the world if you listen?

Well, you have to listen really intensely to understand what people are saying as well as what people are intending because it's not necessarily the same thing.

And people mostly give themselves away no matter how clever they think they are.

Particularly if you have the full array of inputs.

In other words, if you look at their face, you look at their eyes, which are the window on the soul, it's very difficult to conceal what you're thinking.

You look at facial expressions and posture.

You listen to their voice, which changes.

You know, when you're talking about something you're comfortable with or not, are you speaking faster, is the amplitude of what you're saying higher?

Most people just give away what's really on their mind.

You know, they're not that clever, they're busy spending their time thinking about what they're in the process of saying.

And so if you just observe that, not in a hostile way, but just in an evocative way, and just let them talk for a while, they'll more or less tell you almost completely what they're thinking, even the stuff they don't want you to know.

And once you know that, of course, it's sort of easy to play that kind of game because they've already told you everything you need to know.

And so it's easy to get to a conclusion if there's meant to be 1, an area of common interest, since you know almost exactly what's on their mind.

And so that's an enormous advantage, as opposed to just walking in some place and somebody telling you something and you believing what they're saying.

There's so many different levels of communication.

So a powerful approach to life you discuss in the book on the topic of listening and really hearing people is figuring out what the biggest problem bothering a particular individual or group is and coming up with a solution to that problem and presenting them with a solution, right?

In fact, you brilliantly describe a lot of simple things that most people just don't do.

Find the problem that's bothering somebody deeply.

And as you said, I think you've implied that they will usually tell you what the problem is.

But can you talk about this process of seeing what the biggest problem for a person is, trying to solve it, and maybe a particularly memorable example?

You know, if you know you're gonna meet somebody, there are 2 types of situations.

Chance meetings, and you know, the second is you know you're gonna meet somebody.

So Let's take the easiest 1, which is you know, you're gonna meet somebody.

And you start trying to make pretend you're them.

What are they thinking about in their daily life?

What are the big problems they're facing?

So if they're, to make it a really easy example, make pretend they're like President of the United States.

Doesn't have to be this president, it can be any president.

So you sort of know what's more or less on their mind because the press keeps reporting it.

And you see it on television, you hear it, people discuss it.

So you know if you're gonna be running into somebody in that kind of position, you sort of know what they look like already, you know what they sound like, you know what their voice is like, and you know what they're focused on.

And so if you're gonna meet somebody like that, what you should do is take the biggest unresolved issue that they're facing and come up with a few interesting solutions that basically haven't been out there or that you haven't heard anybody else I was thinking about.

So just to give you an example, I was sort of in the early 1990s and I was invited to something at the White House which was a big deal for me because I was like, you know, a person from no place and I had met the president once before, because it was President Bush, because his son was in my dormitory.

I mean, it's just like the oddity of things.

So I knew I was gonna see him because that's where the invitation came from.

And so there was something going on and I just thought about 2 or 3 ways to approach that issue.

And at that point I was separated and so I had brought a date to the White House and so I saw the president and we sort of went over in a corner for about 10 minutes and discussed whatever this issue was.

And I later went back to my date, it was a little rude, but it was meant to be confidential conversation and I barely knew her.

And she said, what were you talking about all that time?

I said, well, you know, there's something going on in the world and I've thought about different ways of perhaps approaching that and he was interested.

And the answer is, of course he was interested.

And so, you know, conversations of that type, once somebody knows you're really thinking about what's good for them and good for the situation, it has nothing to do with me.

I mean, it's really about being in service, you know, to the situation, then people trust you.

And they'll tell you other things because they know your motives are basically very pure.

You're just trying to resolve a difficult situation and help somebody do it.

So these types of things, that's a planned situation.

It's just sometimes you just come upon somebody and they start talking and that requires like different skills.

You can ask them, what have you been working on lately, what are you thinking about?

You can ask him has anything been particularly difficult?

You can ask him, most people, if they trust you for some reason, they'll tell you.

And then you have to instantly go to work on it.

And that's not as good as having some advanced planning, but almost everything going on is like out there.

And people who are involved with interesting situations, they're playing in the same ecosystem.

They just have different roles in the ecosystem.

And you can do that with somebody who owns a pro football team that loses all the time.

And you already have analyzed why they're losing, right?

Inevitably, it's because they don't have a great quarterback, they don't have a great coach, and they don't have a great general manager who knows how to hire the best talent.

Those are the 3 reasons why a team fails, right?

Because there are salary caps, so every team pays this amount of money for all their players.

So if you're talking with somebody like that, inevitably, even though it's not structured, You'll know how their team's doing and you'll know pretty much why.

And if you start asking questions about that, they're typically very happy to talk about it because they haven't solved that problem.

In some case, they don't even know that's the problem.

So, you know, I do stuff like that, which I find is intuitive as a process, but, you know, leads to really good results.

Well, the funny thing is, when you're smart, for smart people, it's hard to escape their own ego and the space of their own problems, which is what's required to think about other people's problems.

It requires for you to let go of the fact that your own problems are all important, and then to talk about your, I think, while it seems obvious, and I think quite brilliant, it's a difficult leap for many people, especially smart people, to empathize with, truly empathize with the problems of others.

Well, the truly smartest people I know say that exact same thing.

Yeah, being humble is really useful, competitive advantage, as you said.

Since I was in my mid-teens, you know, I was raised partly in the city and partly in the suburbs.

And, you know, whatever the values I had at that time, those are still my values.

I call them like middle class values, that's how I was raised.

And so the accoutrement of the rest of your life has gotta be put on the same solid foundation of who you are.

Because if you start losing who you really are, who are you?

So I've never had the desire to be somebody else.

I just do other things now that I wouldn't do as a middle-class kid from Philadelphia.

I mean, my life has morphed on a certain level, but part of the strength of having integrity of personality is that you can remain in touch with everybody who comes from that kind of background.

And even though I do some things that aren't like that, in terms of people I'd meet or situations I'm in,

I always look at it through the same lens.

And that's very psychologically comfortable and doesn't require me to make any real adjustments in my life and I just keep plowing ahead.

There's a lot of activity and progress in recent years around effective altruism.

I wanted to bring this topic with you because it's an interesting 1 from your perspective.

You can put it in any kind of terms, but it's philanthropy that focuses on maximizing impact.

How do you see the goal of philanthropy, both from a personal motivation perspective and a societal big picture impact perspective?

Yeah, I don't think about philanthropy the way you would expect me to, okay?

I look at, you know, sort of solving big issues, addressing big issues, starting new organizations to do it, much like we do in our business.

You know, we keep growing our business, not by taking the original thing and making it larger, but continually seeing new things and building those.

And sort of marshaling financial resources, human resources, and in our case, because we're in the investment business, we find something new that looks like it's gonna be terrific, and we do that, and it works out really well.

All I do in what you would call philanthropy is look at other opportunities to help society, And I end up starting something new, marshaling people, marshaling a lot of money, and then at the end of that kind of creative process, so somebody typically will ask me to write a check.

I don't wake up and say, how can I give large amounts of money away?

I look at issues that are important for people.

In some cases, I do smaller things because it's important to a person.

There's some unfairness that's happened to them.

And so in situations like that, I'd give money anonymously and help them out.

And you know, that's, it's like a miniature version of addressing something really big.

So you know, at MIT, I've done a big thing, you know, helping to start this new school of computing.

And I did that because I saw that there's sort of like a global race on in AI, quantum, and other major technologies, and I thought that the US could use more enhancement from a competitive perspective.

And I also, because I get to China a lot and I travel around a lot compared to a regular person, you know, I can see the need to have control of these types of technologies so when they're introduced, we don't create a mess like we did with the internet and with social media, unintended consequence that's creating all kinds of issues and freedom of speech and the functioning of liberal democracies.

So with AI it was pretty clear that there was enormous difference of views around the world by the relatively few practitioners in the world who really knew what was going on.

And by accident I knew a bunch of these people, who were like big famous people.

And I could talk to them and say, why do you think this is a force for bad?

And someone else, why do you feel this is a force for good?

And how do we move forward with the technology but at the same time make sure that whatever is potentially sort of on the bad side of this technology with, for example, disruption of workforces and things like that, that could happen much faster than the Industrial Revolution.

And how do we keep that under control so that the really good things about these technologies, which will be great things, not good things, are allowed to happen?

So to me, this was 1 of the great issues facing society.

The number of people who were aware of it were very small.

And as soon as I saw it, I went, oh my God, this is mega.

Both on a competitive basis globally, but also in terms of protecting society and benefiting society.

So that's how I got involved, and at the end, sort of the right thing that we figured out was sort of double MIT's computer science faculty and basically create the first AI-enabled university in the world and in effect be an example, a beacon to the rest of the research community around the world academically, and create a much more robust US situation, competitive situation among the universities because if MIT was gonna raise a lot of money and double its faculty, you could bet that a number of other universities were gonna do the same thing, at the end of it, it would be great for knowledge creation, you know, great for the United States, great for the world.

And so I like to do things that I think are really positive things that other people aren't acting on, that I see for whatever the reason.

First, it's just people I meet and what they say, and I can recognize when something really profound is about to happen or needs to, and I do it, and at the end of the situation, somebody says, can you write a check to help us?

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Stephen Schwarzman: Going Big in Business, Investing, and AI | Lex Fridman Podcast #96