Transcription
I'm going to share with you every single thing that I learned while working at Blackstone. And funny enough, most of the notes are actually in this little notebook here that I took every single day while I worked in private equity there.
Some of these were actually from this exact day where I was sitting in this table. And yeah, that gentleman to the right of me, he's Steve Shoresman, the CEO and the founder of Blackstone. And he imparted incredible life lessons, business lessons that I'm going to unpack for you. And funny enough, this was my very first day on the job. Private equity firm, investment firm, financial giant, Blackstone, Blackstone, Blackstone. Buying assets, assets, assets. We always try to be the best in the world.
And I know it feels like light years ago, but I wanted to take all the lessons that I learned about investing, management teams, businesses, the economy, and kind of how the secret world of private equity works. And I wanted to unpack that in 13 life-changing lessons that I think everyone should know. Like, I don't want to gatekeep, and this is not the channel where we gatekeep. We make smart money moves and we make investing in higher levels of finance accessible for absolutely everyone. And as we progress through these 13 life lessons, each of them become incrementally more impactful in my everyday life and investing and how I run my businesses today. So without further ado, let's dive into the first lesson that I learned while working at Blackstone.
Lesson number one, bigger is better. Now at Blackstone, they are known as the number one firm in the alternative investment space. Essentially, they are the largest in terms of assets under management, portfolio companies, real estate properties, credit, you name it. When I was there, the whole focus and the culture in the ethos of the firm was around how can we grow bigger, faster, be the best. Number one, they are insanely competitive. And I think that's for good reason. Because if you want to compete in a very tough, intense environment like allocating capital, making informed investment decisions, you have to compete. And why compete if you don't want to be number one? And in the game of private equity and asset management, the larger the assets you manage kind of hint at the better you are as a firm because more and more stakeholders are entrusting you with their dollars.
And the reason why I say bigger is better is because once you reach a certain scale, whether it's in your business, in your content or whatever you want to do, you start to unlock efficiencies and you start to unlock leverage. So as a scaled platform like Blackstone, we then had properties all across the world to where we had data points and points of views on local economies, on local markets. We had investments in businesses all across the world to understand what's happening on the cost side and customer behavior and employees and talent. And if you can take all of that knowledge, you can build yourself a central brain of just a competitive advantage. So, especially when you're investing, keep in mind bigger is better because of the synergies that you can unlock through that scaled platform. And that's how Blackstone has been crushing it and continues to crush it is just by having immense scale across different assets. So what I encourage for you and for all these lessons we're going to take everything and how it applies directly to your everyday life is whatever you're building or striving for. You may not have the resources, you may not have the skill today, but strive to be as big as you feasibly can because my thesis is that if you shoot for the stars, a jar your land somewhere close to the moon if you just stay consistent enough. So bigger is better for everyone including you.
And now moving on to lesson number two, diversification equals longevity. So Warren Buffett always tells folks, especially the investors, don't put all of your eggs into one basket. Now, this plays a role in Blackstone's everyday DNA because they are one of the most diversified asset managers. They are not just a private equity firm. They are not just a real estate firm. They have assets all across the entire world. And what that does, it allows for them to where if one asset class declines or goes through a downturn, the others might not be as impacted. So when you think about Blackstone, they have private equity which they started as, they have real estate, they have credit, they have hedge funds, they have special situations, they have secondaries, you name it. Any form of an investing product, Blackstone has some type of fund or team or expertise in that particular asset.
So as you're thinking about your personal portfolio, diversify. Don't put all of your money into one single stock or one single index fund or one single cryp. Diversify as much as you can. When you're thinking about your business and you're running a business, diversify your end markets. Diversify your customers because diversification is what's key to allow for you to have long-term stable compounded growth. Because if you are super super super niche and exposed to just one particular thing, you're overindexed when things go poorly and you don't want to be in that seat.
Lesson number three, only hire A players. So, funny enough, before I actually joined Blackstone, I was kind of discouraged because I watched a video from Stanford that was an interview of Steve Schwarzman and he outlined that Blackstone only hires A+ players and I was like, crap, I kind of get some B's and C's sometimes. But what I did have was an A+ effort, A+ mentality, an A+ like energy to bring to the table. So, I think that's how I got the job. But it really showed me that all of my co-workers were incredibly intelligent from top Ivy League schools, they were all rock stars. They were all hardworking. And it showed that wherever I go, wherever I build, whatever I assemble for my own team, right, for my content side and for the holding company, I only want to hire A players. Because if you put a bunch of A players in a room together, you unlock magic intellectually, commercially, talent-wise, they share skills, they share resources, they have a willingness to win and a willingness to compete. And I think that's why Blackstone is so great. Of course, Steve Shoresman is an absolute legend. John Gray is an absolute tank. But if you think about the employees that all work at Blackstone, they are some of the hardest working raw intelligence and willingness to be scrappy and win professionals.
And I think that is an important lesson to where personally, if you're a C player or a B player, work harder. Try your best to get to that point of just having A+ energy in everything that you do or at least strive for that. And if you're in a privileged seat to be an investor to where you own businesses and you get to hire management teams and you get to hire employees, make sure you do the most important piece of diligencing the talent to ensure that they are A level talent or you see a bridge to get them there. Because the worst thing you can do if you're an investor or a business owner is to hire subpar talent. It's either they have it or they don't. And there are enough people out there that are scrappy, that are hungrier, that are willing to go the extra mile to get the job done and help your organization and business win.
And I'll let you guys in on a little secret. So, when I was actually interviewing for Blackstone, I was a B player, right? But I think this is what convinced them that I was an A player. They asked me, "Hey, you didn't go to Harvard, which we typically recruit from, and your gradeoint average is below usually folks that we entertain. Why should we hire you?" And I said, "While they're very intelligent and super smart, uh, I think I have something that the rest of them don't have." And that's a PhD. And they all laughed at me. They said, "Hey, you're not a doctor. You don't have a doctorate." But I said, "I have something that is even better." And that's I'm poor, hungry, and determined. So, I'll let you leave that up to your imagination. But that just proved that I was hardworking, that I was humble, that I was willing to go the extra mile that all the other Ivy League smirks just weren't willing to do. And I think that's why they hired me and that's why they kept me and I was able to stay. But that's a little cheat code of you. So, if you ever in an interview, like give that a shot if you come from that background. Um, and I guarantee that'll work a little magic.
So, lesson number four, integrity is everything. So, remember that clip that I showed at the beginning of the video where Steve was giving us a bunch of life advice and cool advice? Um, that was the nice part of the meeting. He also was pretty mean during that conversation. He looked every single one of us in the eyes and he said, "While you work hard here, you will live the greatest life you could ever imagine. But I will tell you one thing. If you do anything to tarnish the reputation of the firm, I will personally find you and fire you." Jaws were dropped in the room globally. But it's very important because it takes decades to build a reputation with a personal brand in your business, in your community, with your partners in your family, but it only takes 2 seconds to ruin it. And I say it all the time, repetition is everything, but it's it's really key. So you need to be very cognizant around what you post, what you say, who you surround yourself by. Not being an elitist and not swind up or other people, but make sure that you are just around folks that resemble the positive values that you represent and that you reflect because I like to think about it like warm bubbles, the newspaper test. Um, if whatever you were about to do, whatever action you were thinking about doing, and it might be a little questionable, but whatever action you were thinking about doing, if that action were to be reflected on the front page of the local newspaper that your grandma reads, would you be proud of that action?
So, next time you're at the bar or next time you're going out or next time like you're hanging around a new group of friends, keep that same perspective. Like, if what I'm about to do was going to be on the front page of the newspaper, will grandma finance be proud? Ask yourself that. So integrity is everything because like I said it takes decades to build one but seconds to ruin one. And as we talk about reputation, one of the key and most important pieces is to surround yourself by people that are just like-minded and in a similar community. And that's the whole reason why I made this channel for folks that are looking to make smart long-term financial decisions, aka smart money moves, can find that here on my channel. And if you're new here and if you're enjoying the content, do me a huge favor and smash the subscribe button. It cost you absolutely nothing besides a kind heart, but means the world to me as well as my team. And if you are already been here, welcome back, baby. And if you are new here, welcome to the fam.
Lesson number five, play long-term games with long-term people. Okay, look. So, at Blackstone, everyone's old. The partners that worked there, the CEOs that we hired, the bankers that we worked with, they all had some type of long tenure relationship. You want to know why? Is because relationships compound over time. So for Blackstone, when we went to go acquire a business or a property, we had long-term relationships to help us ask the right questions and make the right assumptions. When it came to hiring folks, we had pipelines of long-term friends that were CEOs that we could tap into and hire for portfolio companies.
So, what's key is you might be new to your journey now. You might be very early in your career, but there is no barrier to starting to build your network. And what is important is that you allow for that network to compound over the long term. The people that you meet at a conference today can be lifelong business friends for your entire career. And don't be very transaction-oriented, right? Meaning you meet someone and you just want to get something out of him or her. But instead, strive to be someone that is just relentless in adding value to people that you meet because that allows for you to be top of mind for folks long term. And that compounding piece of the relationship engine is just absolutely incredible. So I strive every single time that I meet someone, how can I add value? How can I extract value? How can I be someone that is kind, uh, doesn't have an agenda or motive, but just generally intellectually curious to meeting people, understanding what they love about life and figuring out what we can build together. So I always encourage you in your friends, in your dating, in your business relationships, in your network, play long-term games with long-term people.
Lesson number six, take care of your customers. So Steve Shoresman is like kind of almost clocked out of Blackstone, right? Like he's older. He's not running as much of the day-to-day. He's still the CEO. There is a younger scrappy hungry like legend that runs Blackstone today and his name is John Gray. He's the president. And whenever I was in meetings around John Gray, whether they were investment meetings or presentations, he treated Blackstone like a thriving business, like a regular business that had products that had customers. Our products were our investment strategies, private equity, real estate, secondaries, hedge funds. Our customers were our limited partners, LPs, aka the people that entrusted their dollars with us to go invest. And his key focus every time people meet with us is to make sure that we deliver by our customers. Meaning when we have their capital to go invest, we make strong risk-adjusted returns to ensure that we are giving them what they came here for, which is Blackstone quality investment performance.
So when it comes to your business, when it comes to your own investing, when it comes to your life, take care of your customers. And your customers could be giving you time. They could be giving you dollars. They could be giving you attention. Whatever that may be, take care of it. Deliver value and try to add even more than what they expected. Because if you do right by your customers, they will keep coming back. They will grow. They will spend more dollars with you. They will want to unlock more opportunities for you. And it just pays dividends long term. Great investment performance allows for Blackstone to play long-term games with our customers. So, just great performance broadly in your life, in your field, will allow for you to play long-term games with your customers.
So, now we're going to spice up a little bit for lesson number seven, and we're going to talk about some of the nitty-gritty like cool like ninja style investing tactics that I learned while I was at Blackstone. And lesson number seven was buy the worst house in the best neighborhood. And what that means is that you need to become an expert in picking great spaces, great industries, great geographies because rising seas lift all boats. You could find the greatest company in the entire world, incredible gross margins, super profitable, cash flow out the book, right? But if it's in a dying industry, that means nothing for your investments. So what's key is think thematically. And at Blackstone, we always invested around themes. And those themes could be data centers. It could be student housing. It could be AI. Pick themes that you have conviction that will be around for the long haul and find the worst or undervalued property or business in that space. So I before I even think about buying a business spent years thinking about the themes that I wanted to invest behind at my holding company and I picked a handful and then the search became what is the best performing business in that space that is undervalued people are overlooking it because that's where the value comes in because that mega theme is going to allow for that asset to grow but then buying the ugly house or the underpriced house allows me to unlock value on my buy and that's what we like to do at Blackstone. So for you, I encourage you before you even think about investing and buying. And I know I talk a lot about buying businesses on my channel, but before you even start that journey, make sure you spend as much time thinking about the market you're going to invest in, thinking about the neighborhood that you want to spend time in because that will drive a significant amount of your returns and then you can just try to find the ugliest house on that block. All right, plain and simple, but moving on.
And then lesson number eight, buy real estate. So, Blackstone, they're known to the world as like the best private equity firm in the entire world, arguably between them and KKR, right? But what people don't really know them as, but they are, but they're one of the largest real estate owners in the entire world. Commercial properties, industrial properties, data centers, single family homes. At one point, they were the largest owner of single family homes in America. They are the greatest real estate investors that have ever existed. That is part that's half of the DNA of Blackstone. The other half of course is like buying big buyout companies. But piece for this for you is that you're going to be incredibly successful. Why do I know that? Because you're watching my freaking channel, right? But you're going to be incredibly successful. And as you continue to scale and grow your wealth, I highly encourage you to get exposure to just long-term stable real estate. Now, I'm not a real estate broker and I'm not a real estate guru, but over time, I'm focused right now on just building a great private equity portfolio. But as we scale and as we continue to grow over time, I will expand and start purchasing commercial real estate, data center real estate, storage units, all kinds of things to just get exposure to that asset class. Now, I don't know the right mix and the composition of how much in equities, how much index funds, how much in private equity, how much in real estate you should have, but at least consider it because it's working incredibly well for Blackstone. And that's kind of like a secret smart money tactic that they're doing. Some of the best investors in the entire world have some piece of real estate exposure.
Lesson number nine, diligence everything. So when it comes to investing, especially in buying businesses and doing it at a caliber and level of of Blackstone, the number one thing isn't how fancy and connected your model is, but instead it's about understanding what are the right assumptions when thinking about buying a business. Like how much is this industry actually going to grow? What is the true cash flow potential of this business? What are the true costs and how are they going to trend after I own a company? Like those kind of questions and diligence areas are super important and when it comes to buying business like in private equity you are buying majority to 100% of the entire company sir you're now the new owner to where all the employees respond to you all the customers are looking to you right and what's key is you are owning a living organism of business operations and as you're thinking about buying a business diligence absolutely everything like diligence is the website, their social media, the customers, the employees, the benefits packages, everything that is focused on this business, every piece of operation, every equipment, every tool, every corner of the office. Diligence, everything to truly figure out what are the right assumptions, but more importantly, work with other people as well and have conversations with experts in that space to help refine your diligence. Like at Blackstone, this isn't really a secret, but we used to spend $1,000 per hour to speak with experts that work in different fields. Like if I were to go buy a manufacturing business, we would go find a manufacturing CEO and pay him or her $1,000 an hour to ask them a billion questions about the industry, about the space, about the competitors to help refine our assumptions. So for you, when you're going to thinking about buying a business, I highly encourage you go on LinkedIn, find experts in that field, go to local college campuses, find professors in that field, and pressure test your assumptions and diligence and ask a bunch of questions so that when you go back to the asset you're looking to acquire, you can dive so deep into the specifics around what makes that business and industry tick. So use your network to help inform your diligence to make a better decision around the price and the assumptions around the business you're looking to acquire. This is so good.
Moving on to number 10. Diligencing management matters. So what is management? Management is the CEO, CFO, chief marketing officer, chief, aka the big wigs that run the business that you're looking to acquire. And diligencing them is mission critical because you can think about the business as the horse in a horse race because the business has just raw horsepower to perform and grow. You can think of the management team as the jockey. The management team, the CEO is the person, the guy or gal that is striving to drive execution, that is setting strategic vision, that is setting the culture and the pace within the organization. And that is super important because if you have the wrong jockey on the right horse, you're not going to win the race. You want to have the right horse with the right jockey. So diligenting them is mission critical. Like understanding everything about their background, understanding their EQ, their IQ, understanding their leadership track record, understanding if they have like any lawsuits or anything that like skeletons in the closet. You want to truly diligence everything about that management team. But more importantly, and it ties back to an earlier lesson, is you want to make sure that that leader has integrity because they can make one simple mistake that can ruin the reputation of the business, which then ruins your investment returns. And we all know this famous example of that a-hole CEO of that tech company that was caught doing something a little bit unethical at the Coldplay concert. Now, I'm not diving into the mix of that, but I would just let you know right there, that's an example of poor integrity. And if I were the private equity owner, I would have wanted to diligence that beforehand or immediately active fire that guy on the spot, which I think they did. But plain and simple, integrity matters, especially in the jockey that is running the horse in the race that you're trying to win.
Now, I know I said a lot about diligence and I don't want you to feel overwhelmed because Kitty Finance is here to help you. So, if you want to understand the true art of diligence, whether the questions to ask as well as a checklist, check this out in the free ebook that I have down below, which is focused on how to buy a business step to step. I wrote in like 10 to 15 pages everything that I learned at Blackstone and KKR when it comes to private equity and buying businesses. And I wanted to equip every single one of my viewers, aka subscribers, with the right tools and resources to make informed investment decisions when it comes to buying businesses. So, if you're interested, download that free ebook and check it out. And I have a checklist in there and key diligence questions to ask before you buy any business. And that thing took me like a few weeks to actually make. So you guys better read that.
All right, moving on. Lesson number 11, play the game of networking. So when I was there, one of the key things that the leaders would tell me is that Kenny, you have a very fancy email, kenny.lastname@blackstone.com. Use that as your calling card to get in touch with anyone in the entire world. And that's exactly what I did. I emailed CEOs. I emailed politicians. I emailed key leaders in academia just to help inform my investment decisions. When it came to this diligence, oh, I blasted everyone to make sure I had the right assumptions and the right answers when it comes to investing and buying businesses.
So, how can you tactically do that? Well, first and foremost, go on LinkedIn. And this is not sponsored by them, by the way. Go on LinkedIn, make an account, reach out, and connect with people in the industry that you want to meet. Because, like I said, we want to play long-term games with long-term people. But you can't start that if you aren't connecting and networking. So when it comes to networking, you have to use every single thing that you have at your disposal. If you're a student, use that university as your calling card. If you're currently working, use that friend where you're at as your calling card. If you're in a great community or neighborhood or nonprofit or extracurricular or sport, use that as your calling card to get in touch with people that are in the circles in the areas that you want to start investing or adding value or learning about. Everyone has the potential to reach out to someone. And I have this very naive thesis is that no one is unreachable. You should got to be scrappy enough to reach out and get in front of them. Plain and simple.
Lesson number 12. Culture matters. Now, I say culture matters because I personally worked on a team within Blackstone that I think arguably had the greatest culture in all of business. Our leader Vern Perry, he's like family to me now. And the culture that he set within that firm to make everyone feel like they're part of a family helped empower performance, helped encourage ownership, and helped folks go the extra mile for the team. So, if you're an investor and you have an investment fund, set the culture of excellence within your team. If you're buying a business, encourage your management team leaders. Or if you're the CEO, set the culture of excellence and strong integrity, of great personality, of fun and openness and humility, because culture is everything when it comes to businesses. We've seen so many great companies fail because of a poor culture. But if you're investing in buying a business on day one, you have the perfect chance to build a culture where people feel accepted, where people feel encouraged, inspired, and they want to go the extra mile for the team and deliver results. So culture for me at my holding company and the companies that we acquire, that is everything. Folks should feel as if they're all rock stars and superstars on a franchise team. I want everyone to feel like the '90s Chicago Bulls, right? I want everyone to feel like they're Kobe on my team because everyone has the potential to grow and win and execute. And it's also a culture of excellence where there are great expectations of everyone on that team. And if you want a really cool book to read when it comes to culture, I recommend everyone to read this book called Amp It Up by Frank Sluben, who was one of the greatest CEOs of a tech company, uh, called Snowflake. And he outlined in this book, How to Build a Culture of Excellence and How to Truly Amp It Up Within Your Workforce. Now, the book, you can probably find a free version, but I think it's like 13 bucks, so it's not that expensive, but it will help outline how to be just a dog as CEO and have an incredible culture within your organization. I think it's a necessary read for every business leader.
And lesson number 13. Stay calm, stay positive, and never give up. You're probably asking, "How the heck did I come up with that?" Well, it's a little bit of plagiarism. I actually borrowed it from John Gray, the president of Blackstone. And when we were there, we actually went through COVID, where the world was on fire, markets were crashing. And he said to the team in every single meeting, stay calm, stay positive, and never give up. And that is a mission-critical lesson that I learned is because great leaders are very calm in good times and bad times. But more importantly, they can put on a face of resilience for their team when times get tough. Because as a leader, all your employees, all your customers, and all your stakeholders will be looking for you to make sound leadership decisions. And as a business leader in times of turmoil, your customers, your employees, and your stakeholders will be looking to you to make sound leadership decisions. And in order to be your best at that, you have to stay calm, stay positive, and never give up.
And if you've made it to this part of the video, shout out to you for investing in yourself to wanting to learn about leadership and growth and development and all the secrets of Blackstone. And if you're at this, I would like to do a cool little test. Put PhD in the comments down below just to showcase that we are all just poor hungry and determined at heart to just win and crush it when it comes to this world of business. And once you've learned and taken notes, and by the way, I encourage you to save this, revisit this video all the time. But once you've applied this stuff, then it's time to take it to the next level, which is my world of buying a business. And I highly encourage every single one of you all to understand that you do have the potential to buy a cash-flowing business and be an owner on day one. And as a little cheat code for you all, I found 10 of my favorite cash-flowing and boring businesses that you can go out and buy today. And you can take the businesses that I found, which are aka good neighborhoods, underpriced assets, and go find lookalikes or similar businesses and find them in your markets as well. So check out that next video for that and I will catch you guys on the next one. Make a smart money move, baby. Peace.