Co-founded by Steve Schwarzman, Black Stone is seen by many as an investment firm, but it is not. On Wall Street, there are two financial firms that also bear the Black Stone name: Black Rock, helmed by Lawrence Fink, and Black Stone, led by Steve Schwarzman. The former is the world's largest publicly traded asset manager, while the latter is the world's leading private equity firm. They are known as the "Black Stones" of Wall Street.
After graduating from Yale University at the age of 22, Schwartzman went on to Harvard Business School, where he graduated with honours. At the university, Schwartzman impressed his teachers and classmates with his drive, confidence, ambition, integrity and great desire to create a career that would override everything else. Sure enough, after graduating from Harvard, Schwarzman soon joined Lehman Brothers, then a leading Wall Street investment bank, where he was promoted to partner at the age of 31, making him one of the youngest partners among the Lehman Brothers executives at the time.
If nothing else, Schwarzman had every possibility of further advancement in the firm, as Pete Peterson, then Chairman and CEO of Lehman Brothers, not only took a great liking to Schwarzman, but they also developed a very good personal friendship in work and life. However, civil unrest broke out at Lehman Brothers and Peterson resigned and left Lehman Brothers. Schwartzman resigned from Lehman Brothers out of loyalty to his boss, who was also a friend.
When he left Lehman Brothers, Schwartzman was glad that he had built up a figure of $200,000 in his bank account, and with $200,000 in Peterson's hand, Schwartzman took the initiative to propose a joint venture to form a small M&A firm, not wanting to receive a positive response and approval from Peterson. Half a month later, BlackRock, with only two partners and two assistants, was established without any opening ceremony. As Peterson's and Schwartzman's surnames are embedded with the German word for "black" and the Greek word for "stone", respectively, they named their new company "Blackrock" as a tribute to their ancestral roots. The name of their new company was "Blackrock".
On Wall Street, there was a wave of takeovers, represented by the Renault-Nabisco leveraged buyout, and the strategic buyers were almost all making a fortune. Schwartzman's idea of an M&A firm was certainly an attempt to make a big splash with a small one.
BlackRock's timely turn was inspired by KKR, a rising private fund on Wall Street at the time. "Look at what people are doing at KKR." KKR's glory in the leveraged buyout boom of the mid-1980s is fresh in Schwartzman's mind today, "We knew then that this was the kind of business that would make a lot of money."
Easier said than done, however. At the time, private equity was seen as a sideline on Wall Street, and it was tough for a new fund company like BlackRock to break through. A stubborn Schwartzman went out on a limb and knocked on the doors of clients who he thought might throw money at him, only to be met with numerous closed doors in the process.
But eventually Steve Schwartzman's honesty and ambition were seen, and the American insurance and securities giant Prudential decided to make a tentative investment of US$100 million, and it was this money that showed later generations the potential of BlackRock. Shortly afterwards, Jack Welch, the president of General Electric, also came on board. BlackRock's first fund attracted 32 investors, including MetLife, General Electric, Nikko Securities of Japan and several other large corporate pensions.
On Wall Street, Schwartzman, who has always been known as a militant, confessed that he started BlackRock in the first place to be a winner on Wall Street. There is no doubt that what Black Market Group has today has fulfilled his original ambition. With 52 partners and 750 employees, and more than $85 billion in diversified revenues per year, BlackRock's 47 companies combined could approach the top 20 of the Fortune 500, making it the fastest-growing financial empire on Wall Street today. And according to data it provided to the SEC, BlackRock has averaged annual profits of more than $1 billion over the past five years. Last year alone, its profits were US$2.27 billion, an annual growth rate of 71%, with US$1.12 billion in money management income. In terms of last year's earnings, each BlackRock employee earned $2.95 million for the company, nine times more than the employees of Goldman Sachs, the most profitable investment bank on Wall Street.
Schwartzman made BlackRock as well as himself. Some say Schwartzman's personal wealth has exceeded $3 billion. Schwartzman was named in Fortune magazine's list of the 31 most powerful people of 2006. Because he controls some of the hottest companies on Wall Street, Fortune magazine has dubbed him "the leading man of the new generation on Wall Street".
