From The Son Of A Postman To The $400 Billion Man: David Rubenstein

Harley Finkelstein (00:00):
I'm busting, Dave. I'm busting. That was incredible. David Rubenstein. When we first decided to start this little project called Big Shot, I remember one of the examples we gave of someone that we would eventually be able to get on the show would be David Rubenstein.

David Segal (00:15):
He's the big shot of big shots.

Harley Finkelstein (00:16):
He's like the Big Shot, right? And not only was he thoughtful and interesting, his stories are amazing, but it actually felt like we have so much in common with him. He talked about this amazing story where he was talking to his mom telling him to go be a dentist, [00:00:30] and it reminded me of our own stories. And when I told my mom, I wasn't going to be a lawyer anymore, that I was going to join this little startup with these two or three crazy programmers called Shopify. And my mother's like, "But you're a lawyer. Why wouldn't you want to go be a lawyer?"

David Segal (00:45):
Totally, take the sure bet.

Harley Finkelstein (00:47):
That's right, take it. But the fact that he had the same experience with his parents, I just thought it was amazing. What I loved about him the most was that everything that David Rubenstein does in his life is intentional. The way that he built his business, the way that [00:01:00] he parents, the way that he thinks about philanthropy, buying the Magna Carta, all he does, he's so thoughtful about these things, but there's also this layer of chutzpah and ambition, and he's so inspiring.

David Segal (01:14):
When I called my mom, I had had an entrepreneur venture that didn't work, and I called her, I said, "Mom, I'm going into tea." She goes, "What?" I said, "Tea." She puts down the phone, she yells, "Mel." My dad's name is Mel. She goes, "Mel, he's doing tea now."

(01:29):
And [00:01:30] what's interesting is that David Rubenstein's mother, for all of his enormous success, what is she most impressed with? It's a free coffee at a major coffee chain.

Harley Finkelstein (01:38):
That's right. She goes into Dunkin Donuts with her free coffee card and she says, "My son is the owner of this coffee company."

David Segal (01:48):
He started off his life in public office. He was the domestic policy advisor to Jimmy Carter. He has dined with Presidents. He has made an enormous fortune in private equity, one of the first [00:02:00] people to ever do private equity. And then he goes on and becomes a major philanthropist and he coins, we're going to delve deep on this idea of patriotic philanthropy, which is very different.

Harley Finkelstein (02:08):
Which is totally different and actually very entrepreneurial in terms of how he thinks about it. But the reason that he decides to build Carlyle, which is now one of the largest private equity funds on the planet, one of the most prestige, one of the most impactful, the reason he decided to do it, he talks about. The way that he thinks about investing, he talks about. The things that made Carlyle super. He kind of gave us a [00:02:30] secret sauce on what makes Carlyle so successful.

David Segal (02:33):
And what's amazing about it is that he's been in every industry you can think of. And he went from zero to a hundred really quick. This guy has 300 billion of assets under management. And he immediately started raising-

Harley Finkelstein (02:43):
Say it again. 300 billion.

David Segal (02:44):
300 billion with a B. And he immediately started raising multiple funds at the same time and going into multiple countries very quickly. Very quickly. And here he is today. He's one of the most successful private equity people you can find.

Harley Finkelstein (02:55):
And all of the big shots we've interviewed, we asked that one question, when [00:03:00] did you know that you made it? And like all the other big shots, he says...

David Segal (03:04):
I still haven't made it. I got lots to do. There's just so much to do.

Harley Finkelstein (03:07):
I still haven't made it. I have lots to do. I look at people like Bill Gates and I say, I don't have enough money. And I look at people like Elon Musk and I say, I haven't done enough. I haven't built enough. Ladies and gentlemen, the big shot of all big shots, we got a chance to sit down and interview, David Rubenstein. Incredible interview.

David Segal (03:22):
Let's go. [inaudible 00:03:25]

(03:30):
[00:03:30] David, there's no question, you're a big shot. Everyone knows you founded Carlyle Group. It's now close to 300 billion in assets under management, 1800 employees, 31 offices in six countries. You're a prolific writer, podcaster, philanthropist. But-

Harley Finkelstein (03:56):
Here's the question, why didn't you become a dentist?

David Rubenstein (03:59):
Well, I'm not a [00:04:00] big shot. My mother had a view. My parents were not college educated, but they always looked up to people who were professionals and the only professionals they knew were either doctors, dentists or lawyers. My mother had a number of people in her family who had gone to law school, night law school, and failed the bar exam. So they never actually practiced law, wound up driving taxi cabs. Doctors were always somebody they thought were just gods practically. And dentists, my mother thought that's a greater job than being a doctor [00:04:30] because you don't have any emergency hours and people call you a doctor. And my mother had a lot of dental problems. She was always paying bills to dentists. So she figured it's a very safe business and you don't have to work on weekends. I just tried to convince her that I would have arthritis in my fingers, perhaps, if I, at some point in the future, so I would lose my career. So I convinced her I wasn't going to do that.

Harley Finkelstein (04:52):
The reason we bring it up, the reason we were joking about it is because before, in prepping for this interview, I went to law school. I didn't really want to be a lawyer. My mom wanted me [00:05:00] to be a lawyer. I ended up building this company.

David Segal (05:02):
Actually something you both have in common is that you're both still members of the bar, as a fallback, in case the investment thing doesn't work out. And in case-

Harley Finkelstein (05:09):
He asked me that question. He said, "Are you still paying your bar fees?" And I said, "I am." And he said, "Why are you doing this?" I said, "Because it's my mom." My mom likes the idea that even though Shopify scraped the company-

David Rubenstein (05:16):
The same thing. Because my mother said, "David," when you started Carlyle, "David, keep your bar license because you have something to fall back." So I'm still a member of the DC bar for like 40 years and I just pay dues. I don't know why.

Harley Finkelstein (05:29):
You never know.

David Rubenstein (05:30):
[00:05:30] You never know what happens.

David Segal (05:31):
You never know.

Harley Finkelstein (05:32):
What is it about... So David as well, same thing. His parents wanted him to be an accountant. What is it about these Jewish parents and grandparents who want, all they want for their children, is to become professionals?

David Rubenstein (05:43):
Well, that's obviously a very historic kind of thing, but Jews who came to this country and Jews who lived in, let's say Europe, they wanted their children to rise up. Now, in Europe, you couldn't probably do business as readily unless it was just a sole entrepreneurship kind of thing. So [00:06:00] a profession, a doctor, lawyer, so forth, was somebody that something you could fall back on. And one of the advantages of that is, to be a doctor or a dentist or a lawyer, you have a profession and once you have that profession, you can leave that country if you're forced out and you can do it elsewhere. If you have a business and it's only local business and you have to be forced out of the country, you can't take the business with you necessarily. You can take the doctor skills, the lawyer skills with you. I think that's why Jewish people always put an emphasis on education because you can pick up your brain [00:06:30] and take it anywhere you go, and you can't always do everything the same way with business. So you can't always pick up your business and go, sometimes you can.

(06:38):
In the United States, when Jews started coming here and the first Jews early were in Charleston in the United States, they were Sephardic Jews. And then when they came to the northern part of the United States, they were coming from Eastern Europe, the Ashkenazi Jews. They were people who basically had no money at the time, and so they tried to build themselves up and become professionals because the Jews that first came over, they [00:07:00] were peddlers, they had nothing. They were just selling things. And then eventually they realized that if you have a professional career, you don't have to be a peddler. And they didn't want to be peddlers their whole life. So they got their children to want to be doctors, lawyers, dentists or equivalents.

David Segal (07:15):
Wow. Well, you did become a dentist. You became an incredible lawyer and you served in the government and then you went on to start a private equity group. Take us back though to your household, the Rubenstein household, growing up, with your mom and I believe, your dad who worked at the Postal Service.

David Rubenstein (07:30):
[00:07:30] Baltimore is one of the most rigidly segregated cities in the United States by ethnicity and by, I would say, religion. In the United States, the Supreme Court in 1948, said in a case called, I think Shelley v. Kraemer, you can no longer have restrictive covenants. A restrictive covenant means you can't say this house cannot be sold to a Jew or a black. And that was very common in the United States. You weren't allowed to sell homes to people who were Jewish or black. Outlawed by the Supreme Court, but Baltimore never quite got the word. [00:08:00] And so still, if you were Jewish or black, you couldn't really move into certain neighborhoods. And so if you were Jewish and you were not that wealthy, you moved in a certain part of Baltimore where there was no housing, the house were being built, but only if Jews were living there.

(08:13):
So in the area that I grew up, it was like a ghetto in the sense that everybody I knew was Jewish. There were no non-Jews in this area. I was probably 13 or 14 before I met somebody who wasn't Jewish. I thought everybody in the world is Jewish, and I've realized not that many people were Jewish later. So it was a blue collar [00:08:30] environment. I looked up my house, it was 800 square feet, two bedrooms, one bathroom, no air conditioning, a tiny little backyard, and that's all my father could afford. He had dropped out of high school to go in the World War II, came back, met my mother. She dropped out of high school to marry him. He was 20 years old, she was 17, and they had a blue collar life. And the only job he really could get was one that didn't require a high school degree, worked in the post office and basically did that for entire life as a blue-collar [00:09:00] person. The day he could retire at the age of 55, he retired-

Harley Finkelstein (09:05):
Which now seems kind of crazy, to retire at 55.

David Rubenstein (09:07):
I'm 74, an age too young to be President of the United States, but still an advanced age. And even at 74, I'm working as hard as I can. He just said, "I can't stand the job I have." So at 55, he could retire and move to what I call a suburb of Baltimore, West Palm Beach, Florida, where they moved. But I don't look back and say, woe is me, I wish I [00:09:30] had been in a wealthier family. I wish my parents had been educated. Maybe at the time, I thought it'd be nicer. But as I look back on it, if you don't have a lot of wealth and you don't have the ability of people opening doors for you, you have to do it on your own.

(09:44):
So today that I have the skill set to maybe do things on my own, I have much more self-confidence than I would have if my father just handed things to me. And I have the converse situation with my children. I became reasonably wealthy by normal standards, not by Elon Musk standards, but by normal standards, reasonably [00:10:00] wealthy and my children, as they were growing up, they lived in a reasonably wealthy setting. So how can you give your kids that kind of drive that I had, and it's not easy to do. As I've said, you may have seen me say this, the hardest thing to do in life is to be happy. Personal happiness is the most elusive thing in life. The second-hardest thing is probably to raise children who are happy and healthy. And third is to raise children happy and healthy, when you are yourself wealthy. You've probably seen people who are very wealthy, they spoil their children. They do all kinds [00:10:30] of things that maybe their children shouldn't be doing, and then ultimately, you produce a lot of kids that aren't driven.

(10:34):
So my three children are all in, what I call the highest calling of mankind, private equity.

Harley Finkelstein (10:38):
Of course.

David Rubenstein (10:39):
They're all driven. They all have their own funds. I help them a little bit, but they're doing pretty well. And so I hope that they in the end, can survive and do well when I'm gone, because that won't be too long from now. I'm not going to live forever, obviously. I hope they all outlive me. My legacy ultimately will be my children. I can buy this or buy that or do [00:11:00] something. But in the end, people will look at your children and whether you raised them well or not, and people who are Jewish, really particularly care about making sure their kids do quite well.

David Segal (11:09):
Were you just as happy growing up in Baltimore as a poor kid as you are as a wealthy private equity philanthropist?

David Rubenstein (11:18):
When I was growing up, I didn't aspire to be wealthy. I didn't have any interest in money. I know that sounds strange to you today, but there were no billionaires in the United States in the 1950s. Maybe there was one. [00:11:30] And so if you were Jewish, you couldn't aspire to be that wealthy because there were no examples of Jews who were fabulously wealthy. Jews who were in business generally were in their own family business they built. If you were a Jewish and you graduated from Harvard or Yale or Princeton or the equivalent, and you wanted to go to Morgan Guaranty or Procter & Gamble or IBM, you probably knew there was a totem pole. You weren't going to be rising to the top of the totem pole because Jews didn't rise up in large corporations. That's why they often set up their own businesses or [00:12:00] they went in their family businesses.

(12:03):
Look back on it, I guess I was reasonably happy. I didn't mope around and say, boy, if it was me, I wish I had been a better athlete. I wish I had been smarter. I wish I'd done better in school. I wish a lot of things. But none of the things are associated with not having money so much.

Harley Finkelstein (12:16):
When you were in school, were you motivated to get to do well? Was there a pressure from your parents to say, David, if you're going to do this, do it all? Was there ambition built into the childhood?

David Rubenstein (12:25):
I wish. It would be nice if I could say yes, my parents pushed [00:12:30] me. They didn't. My parents had no great ambition for me. They were not educated. They didn't really necessarily think I had to go to college. They thought, if you go to college, fine, but if I had said I want to be the same as my father, work in the post office after high school-

Harley Finkelstein (12:43):
They would've fine.

David Rubenstein (12:44):
They would've said, fine, whatever you want to do. If I'd want to say I want to be a shoe salesman, whatever. Whatever I wanted was fine. They didn't really care and they didn't have any grand ambition. They never said, you should go to a great college. They didn't really care. When I turned out to be a reasonably good student, they were happy, but they didn't really say, wow, [00:13:00] now you're going to be making a lot of money and now you're going to make us proud. It wasn't something, they didn't put that kind of pressure on me. There are Jewish parents and parents who aren't Jewish too, who really pushed their kids to do well, and they try to live their life through their children. And my parents weren't trying to relive their life through me. They were just happy that they had one child and they wanted him to do reasonably well, but they weren't obsessive compulsive. They weren't a tiger mom or father kind of thing.

David Segal (13:24):
And yet you're very driven. So where did that come from? Was it later in life?

David Rubenstein (13:29):
My drive, [00:13:30] I think, came from that I wanted to just make something of myself, and I was in a youth group in Baltimore and actually-

Harley Finkelstein (13:38):
BBYO kind of thing?

David Rubenstein (13:39):
Well, it was like that. There was a judge in Baltimore who took young Jewish preteen boys and became teenagers. It was a youth group that did athletics, we came to Toronto to play lacrosse, which is the national sport of Canada, as you may know. And we did cerebral things as well. And a lot [00:14:00] of the people, there were people that I would look up to and say, they're very accomplished. They're going to go to good colleges. But my parents didn't put pressure on me. I think I put pressure on myself to just say, I want to make something with my life and do something productive.

(14:11):
Now, I got lucky in my life. When I went to law school, I got a scholarship. I just spoke to my 50th reunion, and of course, I looked at everybody and said, wow, they all look old. Of course, they looked at me saying they look old too. But I realized when I went to law school that I was reasonably intelligent, but not a genius. If you're really a genius, first in your class in law school, supreme court clerk, [00:14:30] you might get diverted into being a law professor.

Harley Finkelstein (14:32):
Definitely.

David Rubenstein (14:33):
Or something else. And it's often said the A students become law professors, the B students are judges, and the C students probably make money.

Harley Finkelstein (14:38):
I was a C student in law school.

David Rubenstein (14:40):
So you know the phenomenon. When I started practicing law, I realized I wasn't great at it. I was okay.

Harley Finkelstein (14:45):
What was it about it that you weren't great at it? Was it the details of this micro? Were you on the wrong side of the table?

David Rubenstein (14:52):
I think that I was interested in the time, when I was starting to practice law, I was really interested in politics. I went to practice law, Paul, Weiss, Rifkind, Wharton & Garrison, [00:15:00] a unique firm that was half Jewish, half not Jewish, and had a lot of political people in it. Like Ted Sorensen, who'd been John Kennedy's, top speech advisor, pop advisor-

Harley Finkelstein (15:07):
Whose speech really inspired you.

David Rubenstein (15:09):
The inaugural drafts, among other things. And so I really wanted to go into politics. I had no interest in making money. I know, today people say, how could you say that? I was only interested in politics and government, not as a candidate, but being an advisor like Ted Sorensen had been to Kennedy. And so he helped me get a job in Washington, ultimately led to the campaign in Carter. Carter got elected President, I went along for the ride [00:15:30] and I'm in the White House, and this is all that I wanted to do. So I worked around the clock for seven days. I loved it. I wasn't married and I just loved it. And then we lost the election. I remember telling Jimmy Carter, you don't have to worry about re-election Mr. President, because you got hostages, yes. And you got gas lines, yes. And inflation's high, but Ronald Reagan is 69 years old. Nobody that old can get elected President. Now-

Harley Finkelstein (15:53):
Different time.

David Rubenstein (15:54):
Sixty-nine seemed like a teenager. [inaudible 00:15:56] at 69 years old. So I didn't think anybody at 69. When I turned 69, I thought, oh [00:16:00] my God, I'm still young, but people... Anyway, so when I had to go back and practice law again, again, I didn't like it. And nobody ever won a Nobel Prize hating what they do. You have to love what you do to really make a success of it. And I didn't really like the practice of law. Because what is it? It was in law school, it was seen as a profession, and when I got there, it was a business. Every month, the partnership meeting is, how much money we made this month, how much money can we make next month? It was not about the great principles of law. And so I figured if I'm really going to be in business, which is the law firm world [00:16:30] is, I should be in a business where I can make more money than the law business.

(16:34):
But I didn't really aspire to make a lot of money. When I started the company, Carlyle, I'll never forget, I said to the leasing agent, "Look, I'm going to start a 10 person firm. The most will be 10 people." And she said, "Okay, we have leasing space for that." And she said, "But we have a special thing here. You can have an option for another 5,000 square feet. It's free. The option's free, we add it in." I don't want it. She said, "It doesn't cost you." I said, "I don't want to be tempted to have more than 5,000 [00:17:00] square feet. I don't want to be tempted to grow." So I thought it'd be a tiny little firm.

Harley Finkelstein (17:03):
How many square feet today?

David Rubenstein (17:05):
It's more than we need probably because nobody comes in the office-

Harley Finkelstein (17:09):
Hundreds of thousands of square-

(17:10):
We can talk all about that as well.

David Rubenstein (17:11):
We have space everywhere and nobody shows up anymore because everybody's working at home.

Harley Finkelstein (17:16):
I do have a question though. One thing that is obvious when I research you, when I talk to you, and David and I are like this too. We have this thing that my mother, my Bubby would say, we're sitting on shpilkes, meaning we're always going, we have 10 different [00:17:30] things going at any one time. There was a period of time, David, where between Carter losing the election and you actually starting Carlyle, where you were kind of unemployed.

David Rubenstein (17:41):
Well, it was a different period of time.

Harley Finkelstein (17:42):
Six months.

David Rubenstein (17:43):
What happened was this. Carter lost the election. So Carter said, "Okay, I'm going to do all the things I wanted to get done administratively." Started working around the clock, getting things done administratively. I'm saying, what about my career and what am I going to do next? And so all the people used to come to me and say, you're a bright young man. If you ever want a job, call me [00:18:00] up. I started calling them and they said, well, maybe we meant when Carter was President, we'd like you and now that Reagan's President, well we really don't want you.

Harley Finkelstein (18:07):
Because your brand was connected to Carter in a way?

David Rubenstein (18:09):
Well, the theory was, what do Washington lawyers really do? They're selling access to a large extent. There are serious litigators and other kinds, but a lot of times, if you work in the White House, you're really a good guy selling access to the White House.

(18:19):
So when Carter was President, people said, if you want to quit and sell access to Carter administration, you can do that. I didn't really want to do that because I thought Carter would get reelected. I'd be the senior domestic advisor in the second term, [00:18:30] just like Ted Sorensen had been. But obviously the voters heard that. They didn't want that to happen. So I left and then all the people told me how great I was, they didn't want to hire me.

(18:40):
And so it was somewhat embarrassing, humiliating to say, all right, I'm a guy that went to a good law school, went to a good law firm, worked in the White House, and all of a sudden I'm nothing. And so a lot of interviews, and a lot of people said, you're a really nice guy. Let me think of somebody who might need you. But it wasn't them.

(18:57):
So there were no great firms that wanted me. All the [00:19:00] big famous firms didn't want me. Finally, some modest size firm felt sorry for me I guess, and they had me come in, not as I expected to be a partner, but as a senior associate. And if I did well in a year or two, maybe make me a partner.

David Segal (19:11):
So they all said to you, you're fabulous, you're smart, we love you, but we're not hiring you.

David Rubenstein (19:15):
See, the practice of law is one where you have to specialize. You either have a specialty or you don't. And the years when my law school classmates were learning how to be lawyers, I was at the White House or I was working on Capitol Hill. So my classmates are becoming lawyers, [00:19:30] I'm just having a good time in the White House. I didn't really have the legal skills. So I didn't have a specialization. If I was an energy expert or I was a securities expert, maybe somebody would've hired me. But I was a generalist. And so I didn't want to tell my mother, look, your only child has no employment and he's unemployable. I kept saying, I have so many offers.

Harley Finkelstein (19:50):
Should've been a dentist.

David Rubenstein (19:51):
I said, "Look, I have so many offers, I don't know which one to take." And after about four months of this, five months of this, she said, "Dave, just take one of those offers." Finally, somebody made me an offer. I took [00:20:00] it. I think I started in June of the year after we lost the election, and then I started practicing law and I realized the practice of law is two things. You're either doing the work or you're getting the clients. And those people who get the clients generally get rewarded more than the people who do the work. So I started figuring out how to get clients, meant by selling whatever service I had or selling my law firm. But after a while I realized, look, this isn't what I want to do for my life and just selling access and selling my services, I didn't like it. So I started a private equity firm and I didn't really think it would be more [00:20:30] than a modest firm, but it turned out to be-

David Segal (20:32):
Let's talk about how you got the inspiration to start the firm. We were doing our research for this interview. One of the most interesting stories we came across was, originally you were seeing a firm as getting a bunch of finance guys and yourself as a legal person. You'd be the lawyer lawyer for the firm.

David Rubenstein (20:47):
Correct.

David Segal (20:47):
And then you heard about, I believe it was William Simon, the Deputy Treasury Secretary, who started Gibson Greeting Card Company.

David Rubenstein (20:53):
That's correct.

David Segal (20:54):
So he bought it for $1,000,000 worth of equity and 80 million of debt and then took it to IPO around 300 [00:21:00] million.

David Rubenstein (21:00):
Essentially, that's right. What happened was, in the early days of private equity, this is hard to believe. You would put in 1% equity and you'd put in ninety-nine percent debt, and sometimes the 1% equity we would take out as a fee. So you had no money. You'd take out the 1% as a fee. So Bill Simon, who had started a company called Wesray, he did a deal where they bought Gibson Greeting Cards from RCA.

David Segal (21:21):
I think it was sort of Hallmark kind of thing.

David Rubenstein (21:22):
Yes. It's like Hallmark, a junior version of it. I think they paid 234 million or something like that, and he [00:21:30] put in a million of his own money and in about 18 months, he paid $80 million. Now remember, these are the days when you're highly levered and the sellers are relatively unsophisticated. They're selling things at six and seven times cash flow, not 15 times cash flow. And with that much leverage, it doesn't take a lot to make the thing work, if-

Harley Finkelstein (21:46):
And $80 million then, inflation adjusted is-

David Rubenstein (21:49):
It's a staggering amount of money. So I went down the street to Bill Miller who was the Secretary of Treasury in the Carter years and said, your predecessor Bill Simon just did a leveraged buyout. Why don't you start a leveraged buyout firm [00:22:00] and I'll be your legal advisor. Now, I think he realized I wasn't a great lawyer, so he demurred and didn't really want to do that. So then I went to some other people and said, why don't you start a firm and I'll be the lawyer for it. And nobody really wanted to do that. I tried to get people to come together.

(22:13):
And then finally, a guy who had been one of my clients, he was the head of Marriott, of taxes. He came to me one day and said, "I finally figured out how you can start this firm." I said, "How?" I said, "Who did you find you want to do it with?" I was trying to pair him up with somebody. He said, "I'm going to do it with you." I said, "No, I'm a lawyer." He said, "No, you [00:22:30] can learn how to do this."

(22:31):
So I gave him an office next to mine in the law firm and we started plotting how to put this together and then we ultimately went out and hired some people. Then I had to go out and raise the money. I didn't have any fundraising experience, but a guy from T. Rowe Price helped me raise $5 million and that's all we had to start.

David Segal (22:46):
Which is impressive because T. Rowe is a fairly conservative firm and-

David Rubenstein (22:49):
Very conservative.

David Segal (22:50):
For you to have no track record. You're a lawyer.

David Rubenstein (22:52):
Correct.

David Segal (22:53):
A good lawyer, but a lawyer nonetheless. And how did you get T. [00:23:00] Rowe-

David Rubenstein (23:01):
This person is Ed Mathias and he's still at Carlyle now. He was a person who was very good at connecting people. When I was at the White House, he connected with me and I made some speeches at organizations he was involved with, so he knew me and he kept in touch with me as he does with many other people like me at the time. And so, he said he had some investors. T. Rowe Price, he was a senior person there. He could convince them to put, it was only a million and a quarter. Then Alex Brown, which was also in Baltimore, close to T. Rowe Price, a million and a quarter. Then the Mellon family, [00:23:30] he had known and they got them in and then First Interstate Bank in California, later bought by another bank. So it was a million and a quarter, four people, and ultimately the Mellons bought the others out because they weren't that interested in doing this.

(23:45):
I'll give you an example. One of the first deals we were going to do was an unfriendly kind of deal where we were trying to bear hug a company, which is to say, we want to take you private and take you from being in public. And the company was called Chi-Chi's. We bear hugged them a bit [00:24:00] and it turned out that Alex Brown was trying to get them to be one of their investment banking clients. So Alex Brown said, "Wait a second."

David Segal (24:06):
You can't do this.

David Rubenstein (24:06):
We're investing with you and you're trying to take over a company that we're trying to take. So they wanted to get out. Ultimately the Mellon family bought everybody out and they owned 20% of us for quite a while, and then we ultimately bought them out. But it was one of their best investments ever. They owned 20% of us for quite a while, and then it did well.

David Segal (24:21):
But it didn't go so well at first. I think airline, food-

David Rubenstein (24:24):
We had some deals that didn't work so well because we didn't know what we were doing so much, but we [00:24:30] bought some companies. We had a style that wasn't probably working so wonderfully. In those days, sometimes you did a bear hug. A bear hug means you buy 5% of a company. You go to them and say, we wanted to buy the whole company. We didn't want to do what's called green mailing, which is to say, you buy our stock back, but we'd like to take the company and make it available for sale. We might buy it or somebody else might buy it.

(24:53):
The problem is, the first deal we did was Chi-Chi's. We went to see the CEO and we only had enough money to buy-

David Segal (24:57):
What kind of company is that?

David Rubenstein (24:58):
It was a Mexican restaurant, [00:25:00] Mexican food chain.

(25:02):
So we went to the CEO. The four of us went, the four partners. We went down there. We saw the CEO. We thought he'd throw us out of his office. He'd never heard of us. And we said, we own 5% of your company. We're going to file a document tomorrow. And we expected him to say, "Get the hell out of this office. I don't want to be going private, and I never heard of you guys." He said, "Thank God. Somebody like you showed up. I don't really want to be a public company. Let's go private." Of course, we didn't have enough money. We had only enough for 5%. So we went-

David Segal (25:26):
So wait, you own 5%. It gives you some clout to be [00:25:30] able to influence the board. And you come and you say, we want to go private.

David Rubenstein (25:34):
Right.

David Segal (25:35):
He's like, all right, let's do it. And then you're like, we don't have 95% of the money.

David Rubenstein (25:39):
We went out in those days, there was a man who had invented the ability to create money just like Picasso could put his signature on a painting and it's money good-

David Segal (25:50):
Or a napkin.

David Rubenstein (25:51):
When Henry Kaufman was the chief economist of Salomon Brothers, he would say the stock market's going down. You knew in advance. If you knew that you could bet it [00:26:00] the way he told you it was going, you would make money. Mike Milken had invented a way of creating money. He basically had invented the high yield, so-called junk bond, and he had invented a way to perfect it for people like us by saying, "I'll give you a highly confident letter that I can raise the money and all you have to do is show this letter to an investment banker and he'll know that the money will be good."

David Segal (26:18):
He's the bond king, right?

David Rubenstein (26:19):
Right. He was everything. And so we went to see him at four in the morning because he met early in the day.

Harley Finkelstein (26:25):
This is when Milken would meet people at four o'clock in the morning?

David Rubenstein (26:27):
Four in the morning, five in the morning, yes, he'd meet. [inaudible 00:26:29] show up there [00:26:30] and this was the great Mike Milken. I now know him pretty well, but then I didn't know him and we started to make our little pitch. He said, "Mexico is a great country. It's going to be a really terrific country in the future." I said, "No, it's Mexican food. It's not Mexico." But he didn't quite get it. And he kept talking about Mexico and I said, okay, this is not going to work. Then he left the room and then we explained it to the other guys. He signed us to an investment banker named Leon Black, and he was our investment banker and he ultimately said, guys, you don't really know what you're doing. Let me get somebody else to take over this deal for you. But [00:27:00] anyway, we did a number of deals and ultimately some of them worked out and then-

David Segal (27:03):
And this is a tiny deal.

David Rubenstein (27:05):
It was a tiny deal.

David Segal (27:06):
And this isn't Chipotle we're talking about here. This is Chi-Chi's, right?

David Rubenstein (27:09):
Tiny.

(27:09):
But what happened, the reason the firm had grew was not that I was so brilliant or so talented, that was certainly not the case, I had an idea and that idea enabled us to grow. And here's what it is. In the early days of private equity, you had a private equity fund or a venture capital fund or a debt fund or a real estate fund, you only did that. That's [00:27:30] all you did. And you did only in your own country. So if you were a KKR, which was an early buyout fund, they only had six, seven people. They were tiny, tiny firms, but they just did buyouts. Or if you're a venture capital firm, you just did venture. I said, why don't we do like Fidelity or T. Rowe Price, have multiple funds doing many different things, each fund and then centralize fundraising, legal, tax, accounting at the center, and therefore we'd have these funds and so to you, if you're a buyout investor with us, give us a chance in venture. If you're a buyout and venture investor, give us a chance to real estate.

(28:00):
[00:28:00] So we would basically do that, and that was the idea. Have multiple funds. And then the second idea was to globalize it. In those days, the early private equity firms all did things only in their own country. If you're in Europe, you only did Europe, if you're America, only in America. I said, let's get a dedicated group in Europe, dedicated group in Asia, Japan, Latin America, Middle East, Africa. And I went around the world and recruited these people, and then I would raise money for the funds, and then I had my partners oversee the investments. So that's what enabled us to grow.

David Segal (28:25):
But what's your track record at this point? You have this grand vision, which ended up materializing [00:28:30] and becoming enormous success, but when you first conceived this idea of raising multiple funds at the same time across multiple geographies, how successful are you?

David Rubenstein (28:39):
Let's say anybody that's an entrepreneur, take Shopify as a good example. When Shopify was getting built, how many people said, this is never going to work, or Amazon?

Harley Finkelstein (28:51):
TAM is too small, we're not in the right place. The e-commerce trend is not going to last. Of course.

David Rubenstein (28:56):
When Facebook was getting started, it was started by a Harvard undergraduate [00:29:00] named Mark Zuckerberg. He was the classmate of my now son-in-law, and he told me about this company. I said, look, this is the dating service. It's not going anywhere.

Harley Finkelstein (29:09):
And you had seen dating services, I think, in the 60s. They don't go anywhere.

David Rubenstein (29:09):
They go bankrupt.

Harley Finkelstein (29:12):
And I believe you had a similar situation with Jeff Bezos?

David Rubenstein (29:16):
Right. Same thing, a Bezos company-

David Segal (29:17):
You could've owned 20%.

David Rubenstein (29:18):
We could have owned 20% of it, but we turned it down because we didn't really think it was going to go anywhere. Anyway. So I've turned down a lot of great things, but my point is, entrepreneurs, if they dream about [00:29:30] something, by definition, if it's really different and unusual, people will say no. Because if everybody's doing it, it would have been nothing left to do. But if people thought it was a great idea to do Amazon or do Facebook, presumably people would've done it before. Every entrepreneur has to beat down the doors of somebody to convince them that it's going to work. I'm sure it's true with Shopify, anything... Apple.

David Segal (29:51):
It sounds like you went from zero to a hundred very quickly. You didn't start with one fund and then another fund and then another fund, in one country, another-

Harley Finkelstein (29:58):
There was real chutzpah there. There was audacity to this [00:30:00] whole thing.

David Segal (30:00):
You just dove right in. You were like, we're going to do 10 things at the same time.

David Rubenstein (30:03):
I went out to raise a $200 million fund and I couldn't raise it. So you declare victory by saying, I really only wanted to raise a hundred million, so I raised a hundred million. Then after that 100 million, what we would do is this. We would say, all right, we'll put five in from the fund for a deal, and then we'll co-invest or get outside investor to put another 15. And so after a couple of years, we had co-invested 630 alongside the hundred. So we had invested 730. So I said, okay, we did 730, [00:30:30] we should go raise a billion dollar fund. Now it's actually 10 times bigger than we really had as our fund, but I could convince people we actually could invest [inaudible 00:30:37] in 730. And the track record turned out to be reasonably good. And that's because one of the partners I brought in was really a pretty solid investor, and we pretty much knew what we were doing, relatively speaking. We weren't perfect, but we made mistakes, for sure.

Harley Finkelstein (30:50):
One of the things I want to ask you about is, you talk about obviously building Carlyle, you talk about your relationships, your philanthropy, and we want to talk about philanthropy a little bit also. It's very important. [00:31:00] In fact, a mutual friend, Laura Lauder, who's mentoring me now in philanthropy, uses you as an example about patriotic philanthropy and how that works. I want to hear more about that. But there is this one thing that I'm curious about, which is, your level of ambition today, David, is so remarkable. What did your father, what did your mother say, as you're dining with Presidents? As you're becoming a billionaire? What did mom and dad, what would Bubbie and Zadie have said?

David Segal (31:26):
Getting honored at the Met.

Harley Finkelstein (31:28):
What would they say about this?

David Rubenstein (31:30):
[00:31:30] They didn't really understand a lot of this because they just were in a different world. It was an article about me in the newspaper. Somebody might send it to my mother and she'd be proud of it and so forth. And my father was really not as excited. They didn't really understand this world. Now, when I worked in the White House and took him to see President Carter, they see the President of the United States, a big deal to them. But as I became wealthier and better known, they were surprised that I was successful. What can you say? When [00:32:00] you raise somebody from a kid, you changed his diapers, and then all of a sudden, he's meeting with Presidents or making a lot of money, you say, how can this possibly be? They knew all my faults, I guess. My parents were not bragging about it. My mother didn't brag about it, she was not a bragging type person. The things that she was most impressed with is when we bought a company called Dunkin Donuts, which is a coffee company really. And then-

Harley Finkelstein (32:24):
We have Tim Hortons here.

David Rubenstein (32:25):
So I gave her some passes to get free coffee. She would go into local [00:32:30] Dunkin Donuts and say, my son owns Dunkin Donuts. And the sales lady would say-

David Segal (32:36):
It's real big [inaudible 00:32:37] My mummy used to go to every DAVIDsTEA store-

David Rubenstein (32:36):
They would roll their eyes. She would say, my son gave me a little certificate for free coffee. And she was, sure lady, sure. She didn't brag about it, but she didn't-

David Segal (32:50):
Did she comment about the service? You know David, I went into the Dunkin on 34th and 7th, and...

David Rubenstein (32:56):
She usually was happy, she was very easy to please, but they were not in the world [00:33:00] of traveling with famous people and meeting famous people. So they would read articles about me. But interestingly, when my mother did pass away, I went in and got all of her possessions and so forth, and she kept every article about me relating to my philanthropy. What she did is, she didn't really care that much about the business success or the money, but she took all the things philanthropy and my mother didn't have money and she didn't know what the word philanthropy really meant. She knew what charity meant, she knew that.

(33:27):
But as a woman who had no money, she apparently [00:33:30] couldn't resist a request for money. When she passed away, I got all of her mail forwarded to me and I get like a hundred letters a day from every Alzheimer's association or Diabetes Association or St. Jude's, because she gave five or $10 to everyone every year, and she gets on the mailing list. And now I'm on the mailing list on her behalf. She was giving away the little money she had. I gave her a fair amount of money when I became wealthy, but she didn't want it. And she just would say, I don't need the money. I don't want money, but whatever [00:34:00] I give her, she would mostly give away.

David Segal (34:02):
Was she alive when you signed the Giving Pledge?

David Rubenstein (34:04):
Yes, she was.

David Segal (34:05):
And the Giving Pledge, for everybody watching is, you are committed to give away half of your money.

David Rubenstein (34:11):
Yes and no. The Giving Pledge was something created by Warren Buffett and Bill and Melinda Gates. It was modeled on Chuck Feeney who passed away recently. Chuck Feeney was one of the founders of Duty Free Shops, and he apparently gave away $9 billion or $10 billion, and he had started a company called General Atlantic. They [00:34:30] were very successful. He took all these profits from that and gave it away. He gave away all of his money, nine or 10 billion. He lived on $5 million for him, his family, and his four kids. He didn't want money. He lived cheaply. He just passed away, sadly, about a week or so ago. He was the model for it.

(34:44):
The way it works is you have to have a net worth of a billion dollars and then you have to give away or commit to give away half of your net worth upon your death or during your lifetime. Now it's voluntary. If you say, look, I'd like to be in the Giving Pledge, I'd like to hang out with Bill Gates [00:35:00] and Warren Buffett. I'm going to give it all away when I die, and then you die and you don't give it away, we can't disinter you. But we try to get people that really are giving away.

David Segal (35:08):
It's kind of a bad thing to do from an integrity perspective-

David Rubenstein (35:13):
When I first went to the first meeting, I said, okay, I'm now going to meet the richest people in the United States. They're giving away this money. And I thought, I'm going to meet these people that are all well-dressed, and they're all really looking like, right out of Hollywood, as a CEO. They're all older people. They look like they're people that [00:35:30] you wouldn't have predicted. These people started great companies 50 years ago, 40 years ago. Now, they're older and they're giving away their money. Now, we have recruited younger people. Mark Zuckerberg is an equivalent. But wealthy people, increasingly, when you get a lot of money, what are you going to do with it? You can build a pyramid to yourself, what the pharaohs did, but, is that going to make you better? I don't know.

(35:52):
You either have to give it away to your children, which is the most common thing people do, to their spouse and their children, or you give it away to some other cause, in a project. [00:36:00] And that you either do upon your death or during your lifetime. And I have concluded that better to give it away during your lifetime. You can see the benefits of it because I'm not sure I'm going to go to some place where I'm going to be able look down and see what people are doing with my money. So I am trying to give away. I've given away a lot of my net worth and I tend to give away a lot more. I keep saying to my children, I'm giving away all my money so that they hear these speeches and they realize maybe they should work hard, so they won't wait for me to die.

Harley Finkelstein (36:26):
You don't know this. I haven't told you this yet, but as we're modeling how we want to give away, we don't have [00:36:30] money like you have, but we've a little bit of money now to give away. You actually described a bit of a philosophy around philanthropy, which is, you want to be a part of something where if it wouldn't start without you, it wouldn't end without you. It's deeply personal, and I think you can see the actual-

David Rubenstein (36:45):
Benefits in my lifetime.

Harley Finkelstein (36:46):
The benefits in your lifetime. Those four criteria. My wife and I have now adopted those. I want to talk about your philosophy around philanthropy and particularly as it connects to... You're on all these boards. In fact, Laura Lauder said one thing that's funny about David [00:37:00] is, David was chairman of Yale, I believe-

David Rubenstein (37:02):
No Duke.

Harley Finkelstein (37:03):
Sorry, Duke, while your children all went to Harvard. Just to show that it wasn't just about helping your children, it was places where you could have an impact. There was a particular way that you give away money, David, which has this leverage impact philosophy, and I assume the reason you're on so many boards and you chair so many boards is because you want to actually see the efficacy of it. You want to actually be strategic about it. Is that how you think about philanthropy?

David Rubenstein (37:27):
Philanthropy is a word that's derived from an ancient [00:37:30] Greek word that means loving humanity. And you can love humanity by doing many things, but one of the best ways to help other people is giving your most valuable resource, which is your time. You can make more money if you're in the business world and you're inclined to make money. You can't make more time. It's a finite thing and everybody's got a limited amount of it.

(37:47):
So I think that one of the best things I can do to help people is to give my time. So I have overdosed on nonprofit boards. I'm probably on 23 or 24, and I chair now, I think, seven of them. Large boards. And I like to do that because I can make the [00:38:00] organization go in a certain direction. I can feel I'm giving my time as well as my money. Obviously, if you're chair of a board, you're going to be giving a lot of money too, or you probably wouldn't be the chairman of the board.

(38:09):
I am not any different than many other people who get lucky in making money, give money to universities that gave me scholarships or hospitals or other kinds of things, medical causes. Everybody thinks they're going to solve cancer. They give money to some cancer institution. But I stumbled into what I call now patriotic philanthropy. If I'd hired McKinsey and said, how can I give back to [00:38:30] the country that made it possible for me to be so lucky, they would probably have come up with some projects and I would probably have ignored them all. But like many things in life that are good, it happens by serendipity. I'm minding my own business. I worked in Washington. I lived in Washington, but I'm minding my own business. I didn't have any patriotic philanthropy concept. And then somebody invited me to go look at a viewing of something called the Magna Carta.

(38:50):
Now, I know enough about history to know what the Magna Carta is. I had not actually seen it or been that interested in it. It was only a couple of blocks away from my office in Washington. I'd never been over to the one copy in the United States. Turns [00:39:00] out there's 17 extant copies, 15 in British institutions, one in the Australian Parliament and Ross Perot had bought one that a family had sold because they were land poor, and he brought it to the United States and paid in, I think about $1.2 or $1.3 million dollars in 1984. He put it up for sale. The curator at Sotheby's-

Harley Finkelstein (39:17):
Why did he put it up for sale? Ross Perot doesn't need money.

David Rubenstein (39:19):
Because I think he got into a little bit of a dispute with the National Archives where he had placed it. And he then therefore said I wanted to sell it, so I could have revenue money to give to Iraqi [00:39:30] war veterans. But he probably had other money too.

David Segal (39:32):
For people listening, Magna Carta, I believe, is a contract from the 13th century between King John, was it? And the barons. But it was ultimately a failed contract that ended up in the Barons' War. It restricted the power of the king, but I believe he broke the contract ultimately.

David Rubenstein (39:47):
Yes, you're right. The famous thing that everybody knows about is Magna Carta, 1215. And King John, who was such a bad king, no other king of England's ever taken that name again. There's only one king John. [00:40:00] He basically agreed to this thing. He was trying to get revenue to go back and recapture part of his territory that was lost in France. To do that, he was trying to tax the barons. The barons said no. They went to war. The Archbishop of Canterbury orchestrated a compromise. And the compromise was the Magna Carta, which said essentially that the barons had certain rights. Rights of habeas corpus, punishment had to be proportionate to the crime, things like that. And no taxation without representation you're going [00:40:30] to affect. They would be involved in, whether it's going to be taxation.

(40:34):
It had a number of provisions in there that are applicable to people who are Jewish, because it said, if you owe money to people who are Jewish, you don't really have to pay it so quickly.Why is that? Well, the Jews had to be moneylenders in England because they weren't allowed to do a lot of professions. So they were moneylenders, and a lot of the barons owed money to the Jewish moneylenders. And they stuck in there a provision that said, if you owe money to people who are Jewish, you don't have to pay it so quickly.

(40:55):
Now, King John, in 1215, he put a [00:41:00] provision in there, or provision was put in that said, that a council of barons could overrule whatever the king said. If the barons and a council said, "King, you're wrong. We're not going to listen." That was the law under the Magna Carta. That meant something that was very significant. Kings were thought to be ruling from God, and if you can overrule a king, what about the Pope? You could overrule the Pope. And the Pope didn't like the concept that you could overrule somebody who's got power from God.

(41:27):
So he said to the King John, if you don't abrogate [00:41:30] this, I will excommunicate you. King John, probably looking for an excuse to get out of it anyway, he didn't like the deal, because the barons could overrule him, he got out of it. They went to war. He died in the war. His eight-year-old son became the king under a regent. And ultimately there were several other versions of the Magna Carta, and I bought one of them. That's the only one that went into effect legally, 1297. It's the only one in private hands. There's no provision about Jews in that one. Now, I said, why is that? Maybe they liked the Jews better in 1297 than 1215. Turned out they kicked all [00:42:00] the Jews out of England in 127-

Harley Finkelstein (42:01):
There were no Jews anyway.

David Rubenstein (42:02):
There were no Jews to worry about.

Harley Finkelstein (42:04):
Ironically now, a Jew bought the actual Magna Carta, which is amazing.

David Rubenstein (42:07):
Right. But what happened is, when I bought that document, I went to Sotheby's. I'd never been to Sotheby's before I won the auction. They said, you want to hide who you are and you can step out the side door or let these reporters know. And I said, "No, I'll tell them." I went out and said, "Look, I came from modest means. I want to give back to the country. I'm going to give this to the country as a modest down payment on my obligation to give back to the country."

(42:29):
And so I started saying, [00:42:30] well, okay, maybe I should buy some other historic documents. And I started buying copies of Emancipation Proclamation, Declaration of Independence, and I put them in places so that people can see them. And the theory was, people don't know much about history. And if you see an actual document, you're more likely to appreciate it and understand it than you are if you just look at it on a computer slide. The human brain has not yet evolved such that if you look at a computer slide of the Magna Carta, you get the same thing as if you go in person, you have a curator explain it to you, you read a book about it later because you've actually seen it in person.

(42:59):
So [00:43:00] I started buying these historic documents, put them on display, and then the Washington Monument had its earthquake damage. And I said to the head of the Park Service, how much is it going to take to fix it? He said, "I'm not sure yet." I said, "You got the money?" He said, "No, I'll get it from Congress. It would take a couple of years." I said, "Forget the Congress, I'll put up the money." And so people were stunned to my amazement that a private citizen would fix the Washington Monument.

David Segal (43:20):
Did you get to put your initials in it?

David Rubenstein (43:21):
I did go up to the top and do that when I went up to the top.

(43:25):
So I started fixing historic buildings on the same theory, the Jefferson Memorial, Lincoln Memorial, Mount [00:43:30] Vernon, Thomas Jefferson's house, the Monticello, James Madison's house at Montpelier. And I started doing that on the theory that, make these places more attractive, more people will come, more people will learn about American history. And then one day, I just came up with the idea, calling it patriotic philanthropy. All philanthropy is really patriotic. This was just philanthropy designed to remind people the history and heritage of our country. It's a large part of my philanthropy, but not the only part of it. And it's something that when my obituaries are written, they'll probably say Mr. Patriotic Philanthropy. But it's really designed to educate people. That's why I do it.

David Segal (44:00):
[00:44:00] And for everybody listening, David, you've given not just patriotic philanthropy, but the more traditional hundreds of millions of dollars to academic institutions. But let's go back a second, not to the giving away of the money, but the making of the money and the early days of Carlyle. What was your first big deal?

David Rubenstein (44:17):
We bought an aerospace company that did pretty well. It was spun out of another aerospace company. We had brought in Frank... I had recruited Frank Carlucci. See, nobody ever heard of me [00:44:30] those days. So, I wanted to get people who people would've heard of. So I brought in Frank Carlucci, former Secretary of Defense, and he had credibility in the aerospace industry, and that was a good concept. Four years later, Jim Baker was available, the great Secretary of State. So I brought him in and he said, what about my friend George Herbert Walker Bush? We brought him in. And he said, what about my friend John Major? So we brought him in. And so we had a lot of ex-government people, and so therefore people-

David Segal (44:51):
And ex-President too.

David Rubenstein (44:52):
Yes. We basically could get in to see a lot of people. Now, if I invited you to see me in London at [00:45:00] a dinner, David Rubenstein is going to make a talk about the U.S. economy, nobody would show up. If I say, George Herbert Walker Bush is going to make a speech about whatever you want to talk about.

David Segal (45:07):
Everyone's-

David Rubenstein (45:07):
Everyone's going to show up. So it was an effective fundraising device. It wasn't illegal or immoral, but it was effective to get people to come and listen to us.

Harley Finkelstein (45:14):
But they also wanted, presumably they were also leaving government, leaving D.C. They wanted to know what's next. Some of these people had not made a lot of money either yet, right?

David Segal (45:21):
Just a sec. You didn't go from Chi-Chi's to this massive aerospace company, did you?

David Rubenstein (45:26):
We had some smaller deals, but it wasn't that massive. [00:45:30] And these were not billion-dollar deals. These were a hundred-million-dollar deals, and we did okay. But look, everybody gets a deal or two that turns out well, and you get lucky and you build it on that. We had some deals that didn't work out as well. If you're in the deals business, you can lose money on deals from time to time, but yet, if you do reasonably well, more deals will work out than not. And then our investors got to be happy with us. I didn't go to get an MBA. I wish I had a JD/MBA. My son has one. All my other [00:46:00] children have MBAs. I don't have one. So I didn't have the finance skills. So I said, what are you going to do? In any organization, to make yourself useful, even if you're the founder, you have to come up with something that makes yourself useful, otherwise people will kick you out. So I came up with the idea of becoming the fundraiser for the firm because nobody else wanted to do it.

Harley Finkelstein (46:14):
On the LP side? By running the fundraiser on the limited partners that you're-

David Rubenstein (46:20):
To raise the money. In other words, the way all these deals work, you have to go out and raise money from limited partners. So my partners were doing the deals. I said, okay, I'll go out and schlep around the world [00:46:30] and ask people for money. It was okay in the United States, and I started trying Europe. Then eventually I was going to go to the Middle East. I've never been to the Middle East. And Jim Baker joined our firm. He said, "Well, David, it's not a problem if you're Jewish, if you're Israeli, it could be a little challenging to go to Saudi Arabia."

(46:44):
And I remember, the first time I went to Saudi Arabia, I get off the plane and Jim Baker gets off before me and I thought they were going to say, "Hey, Jim Baker, thank you for coming, and what'd you bring this Jewish guy for?" But they didn't say that. And actually now I've been in the Middle East for 30 years and I know the place pretty well. [00:47:00] And I go to Israel and I go to all the major Arab countries that have money for this kind of thing. And there are large investors with us, but with other firms too. [inaudible 00:47:08] the idea of getting there.

Harley Finkelstein (47:09):
One of the things that David and I are fascinated by is this concept of building 100-year companies, and as we're researching Carlyle, you said this so well earlier, you said, you were able to bring in the best and the brightest to come work with you, whether it was George W. Bush-

David Rubenstein (47:23):
H.W Bush.

Harley Finkelstein (47:23):
H.W Bush-

David Segal (47:24):
H.W is the original.

Harley Finkelstein (47:25):
Or it was defense secretaries or these incredible people came [00:47:30] to work with you in Carlyle. It seems though that continuity has continued. There's a longevity to it. If you look at the people now who work at Carlyle, they're also the most exceptional people. We're so curious about how do you continue to have longevity at a fund and a firm, and frankly, a brand like Carlyle, that is not cool in the eighties, but not in the nineties, but rather has a staying power. What's the secret to it?

David Rubenstein (47:53):
Obviously if you do reasonably well, make money, then you can afford to bring in some people. If you're in Washington D.C, [00:48:00] and you leave government, you don't have that many options to make a fair amount of money if you want to stay in the Washington area because it's not a place where investment banks or commercial banks are. So by being able to say, you can be getting the kind of profits that private equity firms can get and live in Washington still, people were interested in, and we became very profitable for some of these people that joined us. In the end, other people came up with the same idea, and when other government officials now leave, and they often go to other firms. David Petraeus went to KKR. Other firms are doing the same thing. It's [00:48:30] no longer something we have to ourselves. But it worked out well because we were pretty profitable. We knew what we were doing in the end. It took us a while to get there.

Harley Finkelstein (48:38):
How do you think about sharing those profits with your partners? How do you think about making others around you wealthy?

David Rubenstein (48:44):
Everybody participates in this. Everybody gets something. I wasn't the person who said, look, it was my idea to start the company. I'm going to get the lion's share of the profits. I took the early guys and we all made ourselves equal partners, and we shared. Now, I'm not as wealthy as some of the people that created these firms because I gave [00:49:00] away a lot more of the wealth to people in the firms. Some of the people that started these private equity firms own much more of it than I do of my firm, and they've done better in some ways. I'm not complaining about my net worth, but I would say we spread the wealth a bit and it worked out reasonably well, and we're happy with it.

David Segal (49:15):
Something you said that I found very interesting is, you don't want to hire geniuses, which is a bit counterintuitive. Usually you think you want to hire the smartest person in the room and you're like, no, we want to hire reasonably smart people, not geniuses.

David Rubenstein (49:27):
Geniuses are people, like I just finished reading an interview of [00:49:30] the author of the book on Elon Musk. Elon Musk is a incredibly brilliant man who's built a lot of great companies, but difficult to manage, let's say. And maybe you could say he's a genius. Steve Jobs, probably a genius, but difficult to manage. If you're in the business of growing a firm, you can't manage geniuses because they all are so unique that they have their own ideas and you're probably not going to get them to do things. So what I want is people are reasonably intelligent, but not so much so that they're off the charts and they're difficult to work with for other people.

Harley Finkelstein (50:00):
[00:50:00] I want to talk to you about the plight of the Jewish people, Jewish entrepreneurship, in specific. As a percentage of the population, Jews make up a tiny percentage. It is almost laughable. But in terms of impact, particularly in business and subsequently in philanthropy, their impact is so much bigger. Why do you think that's the case?

David Rubenstein (50:18):
If I ask people what percentage of the population of the world is Jewish, you get-

Harley Finkelstein (50:24):
Under 1%.

David Rubenstein (50:25):
What is the percentage? It's 0.2%, I think, is the global population. And the [00:50:30] total population of Jews in the world is 13 million or something like that. Maybe half in Israel and almost half in the United States and a few in other places, not that much. Nobody knows the answer to this. There's lots of books have been written about it. Why are Jews, relatively speaking, pretty talented? Why have they won 20% of the Nobel Prizes when they're 0.2% of the population? Nobody really knows. I'm not going to have the answer today. I would say that Jews have valued education over the years, though other people, other groups [00:51:00] do too. But they've valued education. They are maybe driven because they're always afraid somebody's going to move to get them kicked out of the country, and they have to have a lot of things in their brain, so that if they have to leave, they can take their greatest asset, their brain with them. Nobody really knows why that is.

(51:17):
But as the philanthropy, I think Jews have a historic tradition of helping other people, and they are very large donors to the philanthropic organizations. There are a couple of organizations I am involved with, and I say [00:51:30] to them, well, look... They say, how can we get to raise more money? I said, you have nobody Jewish on your board, not one Jew. I said, get somebody Jewish, and then maybe they make some changes. Jews tend to give away a larger percentage of their net worth than non-Jews. I think that's just empirical data. I don't know that I have the answer to it. I think it's that Jews are always thinking they ought to help other people. They always realize that they have had a lot of challenges in their life and that they want to help other people who also have challenges in their life. I guess.

Harley Finkelstein (51:58):
We've had some guests talk about the fact that [00:52:00] Jews couldn't get into the hospital, so they built Mount Sinai. Now, Mount Sinais are everywhere.

David Segal (52:04):
We didn't write an op-ed-

Harley Finkelstein (52:05):
That's right. Jews couldn't necessarily get into medical schools. They built their own medical schools. That seems to be almost entrepreneurial in some ways, where if the system is not created and helpful to me, I'm just going to create my own system.

David Rubenstein (52:19):
Jews have historically tried to integrate into society, and it has often backfired. In Germany, before World War II, the prominent Jews were integrated [00:52:30] into society. They didn't want to be wearing traditional Jewish clothing. They didn't want to look like they were different. And then they thought, then when Hitler came along, he would say, they're integrated into society. It's no difference. We're no different than the non-Jews. But in the end, that didn't happen. And in the end, if you say, I'm not that Jewish, when Hitler came along, he didn't say, oh, you're not that Jewish. Okay, you stand here. Oh, you're very Jewish, you stand here. You have any Jewish blood, you're seen as Jewish. And so I think that there's always been a situation [00:53:00] where Jews always feel that they're going to be treated differently no matter how integrated they are in a society.

(53:07):
And Jews would build their own hospitals or own universities, their own other kinds of facilities because they weren't sure that they could use the other ones. Take country clubs. There are country clubs today in the United States, which are still prohibited, not prohibited. They really don't have any Jewish members. You can say, in this day and age, in places like Palm Beach or New York area, there's still clubs that won't take Jews. So Jews built their own country clubs. The discrimination [00:53:30] that Jews face is less in some respects than African-Americans face, because Jews can maybe hide by changing their name or doing other things, what their background is. But blacks couldn't really do that. But there's still plenty of discrimination. And the anti-Semitism, which has now arisen in the United States and around the world, is probably as virulent as it has been in almost any time in history.

(53:50):
The anti-Semitism in Europe is so terrible that many Jews have moved to Israel from France or from England. Whereas you would think civilized countries [00:54:00] like France and England would have a really enlightened view towards Jews, but that's not the case. The panacea for most Jews has been the United States. In the United States, Jews have risen to the top of almost every profession and done quite well. But that's not the case all over the world. In many cases, Jews are really held back a bit, and that's why Israel thrives a bit, because many Jews got tired of trying to be something successful in their own countries. They would move to Israel.

David Segal (54:28):
We ask every guest this question, David. [00:54:30] Was there a moment where you knew you made it?

David Rubenstein (54:32):
I still don't think I've made it because I always look at other people and say, hey, they're more successful than me. I am still working hard. I am 74 years old. I'm still working at many different things, and I don't really feel I've made it because I compare myself to people who are much more successful, and I say, look what they've done and look what I did compared to them.

Harley Finkelstein (54:50):
The irony of that is we do the same thing. David and I do that all the time. We're not doing enough. We're not building enough. We don't have enough-

David Segal (54:56):
Every guest we've had-

Harley Finkelstein (54:57):
And every guest we've had-

David Segal (54:57):
Have said the same thing.

Harley Finkelstein (54:58):
And incredible guests, [00:55:00] like you, have [inaudible 00:55:02] still hasn't felt that yet. Big Shot is part documentary and part kibitzing in a Jewish deli. And so I'd be remiss not to ask you one thing because one thing that I think you've done very well, beyond business success and philanthropic success is, everyone, our mutual friends, let's say, have said that you've raised three incredible children. They're ambitious, they're kind, they're smart, they're thoughtful. David and I are both young dads, young parents. Any advice on [00:55:30] parenting that you have felt has worked really well?

David Rubenstein (55:32):
It's very difficult to be a parent when you're wealthy because you can easily spoil your children. So the trick is, in my view, not to flash your money, not to be arrogant, not to avoid the things you should do as a parent, being with them and trying to educate them. But in the end, children learn the most by looking at people as role models, and you have to do what you want your kids to do.

(55:54):
There are three ways you can influence people as a leader. You can be a great speaker and say, follow me. I'm [00:56:00] Martin Luther King. Follow me. Or you can be a great writer and you could be Abraham Lincoln. Write the Gettysburg address and listen to what I wrote. Or you can lead by example. George Washington, Valley Forge stayed there with his troops. If you're a parent telling your kids what to do or sending them a note, probably it's not as effective as doing what you want them to do.

(56:19):
You work hard. They're going to work hard. You obey certain rules, they're going to obey certain rules. If you break the rules or you do things you don't want your kids to do, that's not good. If you'd say to your kids, don't [00:56:30] smoke, but you're smoking. What do you think your kids are going to do? Or don't drink alcohol and you drink a lot of alcohol. What are your kids going to do? So I think you should try to do what you want your kids to do, but being a role model and doing those things as opposed to just telling them something.

Harley Finkelstein (56:44):
Last question before we let you go. What does chutzpah mean to you?

David Rubenstein (56:47):
Chutzpah is a Yiddish word for boldness or willingness to take risks that other people might not take and a little bit out of the norm. Obviously, anybody that's an entrepreneur has [00:57:00] some chutzpah because by definition, if you didn't, you wouldn't start the company because who would think that you could start Facebook or Apple or whatever company it might be, if you didn't have some chutzpah.

Harley Finkelstein (57:10):
Is it a positive or a negative term?

David Rubenstein (57:12):
If you're Jewish, I think the word chutzpah is good. If you're anti-Semitic, you'd probably say chutzpah is not a great thing. But I think as a general rule of thumb, the equivalent of chutzpah in whatever non-Yiddish word it might be, which is probably a good thing because if people didn't have leadership chutzpah, the world would be [00:57:30] very boring and things wouldn't get done and things wouldn't change.

Harley Finkelstein (57:34):
When Dave and I first decided to start this archive, to start Big Shot, we said, as an example, one day we'd love to have the David Rubenstein on and hear your story. David and I are proud Jewish leaders, Jewish entrepreneurs, a little bit younger than you, but you should know that we stand on the shoulders of giants like yours in our own ambition, in terms of how we build our communities, our cities, and our companies, and we are very grateful that you just talked to us.

David Rubenstein (57:55):
You guys are very good interviewers.

Harley Finkelstein (57:57):
Thank you. It's been a honor.

David Rubenstein (57:58):
Okay, thanks a lot.