Stephen Schwarzman Net Worth

Stephen Schwarzman Net Worth

Net Worth	$18.30 Billion
Known for	Business, Advisory, and Philanthropy Co-founder of The Blackstone Group Inc
Position	Chairman, CEO, and co-founder of Blackstone Group Inc.
Country	United States of America
Age	73
Last Updated	2020

Stephen Allen Schwarzman, widely known as Stephen Schwarzman or Steve Schwarzman is an American businessman, investor, and philanthropist.

He is the co-founder, Chairman, and CEO of The Blackstone Group Inc, the largest alternate investment company, and one of the largest private equity companies in the world. It is also the largest commercial landlord in the United States of America.

Although Schwarzman is currently involved full time in his company, he briefly served as the Chairman of Strategic and Policy Forum (now defunct) of the Trump administration.

As of 2020, the estimated net worth of Stephen Allen Schwarzman is $18.30 Billion.

Stephen Schwarzman Early Life

Stephen Schwarzman was born on February 14th, 1947 in a Jewish family, to Joseph and Arline Schwarzman. His father, Joseph owned a Linen store in Philadelphia. 

He describes that he and his siblings (twins) never got money from their parents, besides their regular allowance. So, they had to earn on their own. 

In his early days, Schwarzman would work in his family’s linen store, sell candy bars and lightbulbs door-to-door, and deliver telephone books to earn money. 

Big vision at a small age

Even at a young age Schwarzman had a big vision. He could identify a big opportunity for their business, lying unexplored. The 2nd World War had just ended and houses were being built rapidly. The birthrate was spiking too. What did all of this mean? Demand for more linen, of course! 

The Schwarzman were known for their high quality fabric and fair pricing. The one shop that they had in Philadelphia could be expanded to multiple stores to tap into this opportunity. When Stephen went to his dad to share his idea, he was put down because his dad didn’t want to expand. Young Steve didn’t understand why his father, a very smart person, wouldn’t want to expand the business given that there clearly was an opportunity. His father said, “I have two cars, a good house, and enough money to send you and your brothers to college. That’s really all I want.”

Later, Steve realised not everybody is the same and most people are quite happy in what they’re doing and don’t like to change things. They might grumble about it a bit, but they don’t have the gumption to go out and make the change happen.

Schwarzman also realised that there was a substantial amount of difference between him and his father, but that didn’t change his love and respect for him.

Stephen’s first business was a lawn-mowing service which he started with his younger twin brothers. They did the mowing work, while Stephen brought the clients. The profits were then divided 50-50 between him and his siblings. This business lasted for about 3 years.

Stephen Schwarzman Education

Back in the neighbourhood of Philadelphia, Stephen’s mother didn’t feel comfortable with the spoiled kids, and mafias roaming around the streets. The situation was further aggravated when one of Stephen’s friend’s father was murdered. So, his mother along with him, moved to Huntingdon Valley. There, Stephen went to the Abington School. He was good at academics and sports and led the state championship track team. 

Steve graduated high school in 1965 and attended Yale University. During that time, he became a member of the secret society, Skull and Bones. He graduated from Yale University in 1969. 

Stephen Schwarzman Career and Net Worth

The first job Stephen took in the financial services segment was at Donaldson, Lufkin & Jenrette, an investment bank that would go on to merge with Credit Suisse in 2000. When he joined the company, he didn’t know much about securities, but he was good at recognising patterns. This helped him visualise the problems, create projections of the future, and come up with ways to potentially solve the problems without getting lost in the numbers.

Six months after joining DLJ, Schwarzman got summoned by the U.S. Army Reserve and served there for a brief period. After that, Schwarzman attended Harvard Business School for his MBA and graduated in 1972.

Following that he started working at Lehman Brothers, the investment bank which is considered to be at the centre of the 2008 financial crisis. 

When working at Lehman Brothers, Stephen Schwarzman helped close the buyout deal of Tropicana to Beatrice Foods. His job was to explain, advise, and help the board of Tropicana decide which purchase structure was the best for them. It was the 2nd biggest Merger and Acquisition deal in the world that year.

It was the successful execution of this deal that secured him a seat in the Board of Lehman Brothers. Stephen became a Managing Director in the company at the age of 31, and later went on to become the Chairman of Mergers and Acquisitions division in the company. 

The fall of Lehman Brothers

Peter Peterson, the former CEO of Lehman Brothers and Stephen’s close friend was (informally) ousted from the company by a partner, Lewis L. Glucksman.

Lewis had turned greedy for power. Stephen asked Pete to stay and fight for what was right, but he refused. Pete said, he was about to retire and had fought for ten years, & didn’t want to fight anymore. Moreover, he served his purpose and turned the company around from the brink of collapse. It was better if he left now, so he did.

After Peter’s resignation, Lew’s greed made Lehman lose a lot of money in a trade. Schwarzman knew about the troubles at Lehman, and so did many others, but everyone stood silent due to fear of getting ousted by Lewis.

Knowing that the company had to be sold quickly if they wanted to protect their hard earned money, Steve quickly arranged a deal with Shearson American Express to sell Lehman Brothers to them. He knew Peter Cohen personally and was aware that he was looking to expand Shearson’s business. This was a win-win deal for both.

While Schwarzman succeeded in saving investors money, he had to sacrifice one year of his life and sign a non-compete agreement. That one year was very hard for him. He worked at various places including Shearson, American Express, and in the White House as an economic advisor.

Stephen Schwarzman and early days of The Blackstone Inc

After serving the non-compete period and settling everything, Stephen was ready for a fresh start. He wanted to work with his former boss, Peter Peterson.

The primary assets they had were their skill-set, experience and reputation. Pete had great contacts across New York, Washington, and Corporate America; while Stephen was known for his M&A expertise. After several meetings and giving much thought, they carefully planned a strategy and a business model for starting their new company.

They decided to start by helping companies with Mergers and Acquisitions, but due to its cyclical nature they had to figure out something else too. For that something else, they chose LBOs or Leveraged Buyouts. 

After that, they had to come up with a name. They took the English translation of their names. “Schwarz” in German means Black, and “Peterson” in greek form means Stone or Rock. In 1985, the duo registered The Blackstone Group, with $400,000 ($200k each) in capital and started doing business. 

Although they had planned really well and had high hopes for the company, the business that was coming in wasn’t even close to the numbers they had anticipated.

Pete and Steve had mailed over 400 letters with well crafted messages telling the recipients (mostly their old friends and clients) about their new business and how they could help them. But, to their dismay, only a few called. Of those who did, only did so to congratulate and wish them good luck.

The clients who kept them alive in those times were Squibb-Beech-Nut, a pharma company they’d worked with before, and Armco, a medium sized Steel company. Things looked bad for their company. They were covering their costs but not earning a profit.

One night, Stephen went to a Japanese restaurant for dinner by himself. Pete was away for a while with his family, and he was working alone with these two businesses. He was sad. He felt like they were failing. It was much harder than they’d thought. But he had hope. He knew he didn’t want to give up.

Blackstone’s first big deal: acquisition of Sea-Land by CSX Corporation

Shortly after his lonely and gloomy moment at the restaurant, Schwarzman received a call from Hays Watkins. Hays was the CEO of CSX, a large railroad company. They were looking to acquire Sea Land, but a guy by the name of Simmons held 39% of Sea-Land and was greenmailing. This meant that the guy had been buying up Sea Land stocks in anticipation of an outside acquisition; to hold up the sale until he got the desired price for his stake. 

This was a hard problem, and required both innovative solutions and psychological insight to solve. If it were easy, Stephen wouldn’t have been needed in the first place.

Schwarzman got an attorney and flew to Simmon’s place. They sat together and talked. Stephen explained to Simmon that CSX wanted to buy Sea Land. Simmons was getting a fair price on his stocks and he should take it. But, Simmons refused to sell. He said that he didn’t want to sell his stock. So, Schwarzman told him about his alternate plan. He continued, “I’ve prepared a special arrangement I’m making available for stockholders who don’t want to participate in our tender offer.” Simmon was the only one. “If you don’t want the cash, I’m going to substitute a private issue, PIK [payment in kind, i.e., not cash] preferred stock with no maturity date.”

What this meant for Simmon was that, if he didn’t take the cash, his Sea Land stocks would be turned into preferred CSX stock with no maturity date. Essentially meaning that he won’t be able to redeem it, ever! Selling the stocks would also be very difficult since those shares aren’t traded in a stock exchange. Besides all that, things could get even worse if something went wrong with the company. Owners of Preferred Shares get paid only after the creditors and bondholders. 

After some furious speech, Simmons agreed and the deal was closed. This was a big win for Blackstone. It was a very big deal, both in terms of size and importance. (about $655 Million)

The deal helped generate cash for Blackstone and built their name as an M&A shop. Stephen recalled that he had written dozens of fairness opinion at Lehman and agreed to do it for CSX for free. With that, Blackstone became the first major boutique advisory firm to write a fairness opinion.

Stephen Schwarzman Net Worth

Now that we’ve come to know all about how Stephen started and built his own empire, it’s time to talk about his net worth as well. His journey from a boy belonging to a middle class family in the suburbs of Philadelphia – to one of the richest and influential people in the world, certainly is inspiring.

Like most other Billionaires, the net worth of Stephen Schwarzman is also tied to his company, The Blackstone Group Inc. Schwarzman owns 48.8% of Blackstone Holdings Partnership units, or about 34% of the whole company. As of 2020, his estimated net worth is $18.30 Billion.

5 facts about Stephen Schwarzman you probably didn’t know

1. He changed the parietal rules at Yale using the power of the media and a survey.

This event helped him get noticed in the eyes of many, and also get him accepted into the Skull and Bones secret society. 

2. In an interview, when asked what he wanted to be, Schwarzman said he wanted to be a telephone switchboard.

“I want to be a telephone switchboard,” I told my interviewer, “taking in information from countless feeds, sorting it, and sending it back out into the world.” – What it Takes by Stephen A Schwarzman

3. Even today, the word Genesco can get Stephen sweating.

It was the first company whose annual report was presented to him on his table at DLJ. It was his first day at work, and he didn’t know what to do!

4. Stephen exposed a food stealing scam during his time in the Army Reserves.

When Stephen and his fleet of soldiers arrived at Fort Polk, a colonel told them to inform him if they saw anything wrong.

The food was always short. Since they were in Louisiana and not Vietnam, it didn’t make sense. Everyone knew it but they were too afraid to raise their voice. But not Schwarzman. He decided to take the colonel up on his offer and entered his office. After a lot of resistance from a clerk and a Lieutenant, Steve finally made it in front of the Colonel. Steve told him about the problem. After listening to him, the Colonel asked him to go back to the company.

Two days later, he was called back and by that time, all of the officers were gone. As it turned out, they were stealing and selling the food. The colonel thanked him for breaking the structure and bringing the incident to his notice.

5. During his first year at the Harvard Business School, Stephen wanted to drop out.

Before doing that, he asked Dick Jenrette, his former boss at DLJ for advice. Following DJ’s advice, he decided to stay, and recalls that his decision was right.

Steve got to learn corporate finance among other important things. The very lessons that he lacked and made him feel lost during his job at DLJ.

As of 2020, the estimated net worth of Stephen Schwarzman is $18.30 Billion.

Stephen Schwarzman Houses and Net Worth

It isn’t uncommon for Billionaires to own multiple properties in various locations across the world. Stephen Schwarzman and his company has been dealing in commercial real-estate for a long time, and they’re no stranger to residential real-estate either.

Stephen owns several properties including a 35-room Manhattan apartment, mansions in Palm Beach, The Hamptons and St Tropez – and a winter villa in Jamaica. The combined market value of his property is about $100 Million.

Conclusion

From working at his grandpa’s store for 10 cents to creating one of the largest companies in the world, Stephen Schwarzman has come a long way. His life journey is truly amazing and inspiring. If you’re an entrepreneur, and made it this far, maybe you learnt a thing or two to implement in your own venture.

If you’d like to learn even more about his journey, you should definitely check out his book: What it Takes – Lessons in the pursuit of excellence. 

As of 2020, the estimated net worth of Stephen Schwarzman is $18.30 Billion.

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