King of Capital

The Remarkable Rise, Fall, and Rise Again of Steve Schwarzman and Blackstone

By David Carey and John E. Morris

Crown Business. 391 pp $27.50

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Reviewed by Steve Weinberg


Growing up in the Philadelphia suburb of Huntingdon Valley during the 1950s and early 1960s, Steve Schwarzman understood business enterprises instinctively. His parents owned a store selling linens and housewares. Schwarzman encouraged his elders to expand nationally, using the enterprise of Bed Bath & Beyond as a model. His parents said no, they were content to stick to a local operation.

Steve Schwarzman as an adult would feel no such limitations, becoming one of the most daring, wealthiest entrepreneurs in the corporate world by the time he reached age 40.

While still attending school, including Abington High School, he channeled his aggressiveness into athletics and academics, excelling in both. He starred on the track team, could jump high enough to grab a basketball rim despite never attaining a height of 6 feet, and entered Yale University in 1965. Upon graduation, Schwarzman landed a job at a Wall Street investment bank, left to earn a Harvard University MBA, then settled in at Lehman Bros., where he would pull off all manner of business deals for more than a decade.

Although successful by any measure at Lehman, Schwarzman wanted more. At Lehman, he bonded with a big-foot partner, Peter G. Peterson, who had served as U.S. secretary of commerce during the administration of President Richard M. Nixon. During the early 1980s, Peterson and Schwarzman began plotting their departure from secure, high-paying positions at Lehman to form their own boutique investment-banking enterprise, which would rely on private equity to buy and sell existing corporate enterprises for profit.

Schwarzman and Peterson knew success was not guaranteed, but they took the plunge. They named the company the Blackstone Group. (Schwarz is the German word for black, and Peter translated to Greek is petros, which means stone.)

The rise of the Blackstone Group has been documented in thousands of newspaper and magazine stories, not to mention Peterson's 2009 memoir, The Education of an American Dreamer. As a result, much of the saga as presented by journalists David Carey and John E. Morris breaks no new ground. But when they do break new ground, they know their material. The pair worked together at the Deal, a news service and magazine covering private equity, mergers, and acquisitions. Morris now edits for Dow Jones Investment Banker.

Schwarzman looms large in the book, but it is not primarily a biography of the Philadelphia-area entrepreneur. Rather, it is a book that sometimes feels like a corporate biography of the Blackstone Group, and in other sections feels like a primer on the private-equity industry.

The overarching organizing principle is a year-by-year account of the business deals entered into by the Blackstone Group. The array of enterprises Blackstone executives purchased, reorganized, and either sold or retained is vast, and keeping track of them might feel dizzying for readers unfamiliar with the realm of corporate high finance. That said, Carey and Morris are not only knowledgeable guides, but also superb at explaining unfamiliar concepts. (At one juncture, for instance, they use a homely example of how to market toothpaste to help explain a complex business deal that involves no toothpaste at all.)

The book carries the ring of authority in part because the journalists obtained a remarkable degree of cooperation from Schwarzman and others at the Blackstone Group. The authors resist the label "authorized" for the book, yet by any journalistic standard they received extraordinary cooperation in obtaining interviews and documents.

For example, information about many of the business deals came "from the confidential prospectuses known as private placement memorandums for Blackstone's fifth and sixth buyout funds, which were obtained by the authors. These documents were given to prospective investors in Blackstone's funds and are not publicly available."

In return for their special access, Carey and Morris say they reached an agreement with Blackstone personnel "to check all quotes and facts explicitly attributed to the firm or people there, a condition imposed by many sources and companies when dealing with journalists.. . . Blackstone did not at any stage review the manuscript, nor were the characterizations, observations, conclusions or opinions here shared with or vetted by Blackstone."

Schwarzman is portrayed largely as a hero of the corporate realm, Blackstone is portrayed largely as an upright enterprise, and the private-equity industry is portrayed largely as a responsible form of commerce, enhancing the businesses bought and sold more often than denuding those businesses.

Carey and Morris, fortunately, do not see everybody and everything through rose-colored lenses. The book covers Schwarzman's wealth-related excesses, for instance, without sugar coating. And when some Blackstone deals go bad, Carey and Morris explain why, naming names along the way.

Steve Weinberg is a biographer in Columbia, Mo. His most recent book is "Taking on the Trust," a dual biography of Ida Tarbell and John D. Rockefeller.