Authors: David Carey and John E. Morris
Blackstone is one of the biggest private equity firms in the world with US$450 billion in assets under management. King of Capital is a colourful story of Blackstone’s rise to the top and how Steve Schwarzman’s hot headed personality has shaped the company’s DNA and culture.
Although the book regurgitates some of the common tales of entrepreneurial journeys such as persistence, tenacity, self-belief and continuously reinventing one’s self, there are a number of other interesting insights for me:
- Luck plays a bigger role in success than what most people would want to admit. To those who recognize this, it’s quite a humbling realization. In case of Blackstone, the company fortuitously closed its first fund two days before the Black Monday in 1987 (the day the U.S. stock market plunged 23% in one day). Had they got the timing wrong, all their investors would have backed out and the company would have wound down. The same applies to their IPO in 2007 which happened a few days before the world plunged into the infamous 2007 – 2009 financial crisis;
- Successful leaders have the emotional temperament not to get sucked into fades. Most private equity investors lost over US$30 billion of their client’s capital between 1999 and 2000 investing into anything that ended with a dot.com;
- At some point during, every start-up has to undergo the painful and delicate but necessary transition from being a freewheeling and personality-driven company with no defined standard operating procedures into a corporate entity with systems and process. The trick is to find the balance between that and maintaining your innovative/competitive edge;
- To build a generational company, founder(s) have to deliberate develop a well-defined succession plan with an obvious heir-apparent. This means letting go of some of control/grip they have on the company and institutionalizes processes and decision making
- Finally, market commentators are obsessed about how lack of innovation can potentially kill a company. That is mostly true but the number one cause of corporate bankruptcy is actually excessive debt. Debt amplifies a company’s fixed costs and narrows down its options or ability to respond to changing competitive environment. It’s weird why so many executives and entrepreneurial seem not to pay enough attention to their balance sheets. Within South Africa, Edcon Group, the parent company of Edgars is a case in point
King of Capital is an interesting read for those fascinated by the world of finance, entrepreneurship and the role of private equity within the broader economy. It also touches on what happens of hubris reach astronomical levels and excesses become the order of the day – someone will always get burnt.