>> Neil Irwin: I'm--I'm Neil Irwin. I'm the chief economic correspondent at Axios. I'm thrilled to be here at the National Book Festival with David Rubenstein, who, if you've followed the world of business over the last few decades, you know the name, you know some of the work he's been involved with. Founder, co-founder of Carlyle Group, one of the world's largest private equity firms who has made a second career of of being an interviewer, television presenter. How would you describe what you do? I'll let you do that, but welcome David Rubenstein, who has written a wonderful book called "How to Invest", that features interviews with some of the world's leading investors in a wide range of varieties of investment that we'll be talking about over the next 45 minutes. My first question for you, David, is why are we here? Why-- you're 73. You've made several billion dollars. Why are you writing books and doing interviews? And, uh-- >> David M. Rubenstein: Well, the implication of your question is that money is more important than ideas, and it's not the case. Money is, you know, a fungible kind of thing. But I--I'm interested in ideas as much as I'm interested in money. And I sign I was original sign of the Giving pledge. I'm committed to giving away all my money anyway, so I'm not that focused on my money. [Applause] But you know, I have a love of books. I-- my parents weren't wealthy, and so to get books when I was young, I go to the library in Baltimore and and I just love reading books. And the real question is, why didn't I write books when I was in my thirties, forties or fifties? Now I'm an old man by, by some standards and I'm writing books, so I'm trying to churn them out and kind of what I call a sprint to the finish line, try to get as many books as I can before I can't write them anymore. >> Neil Irwin: So--so you have an interesting-- this question of how to invest, how do the great investors do what they do? You know, you're a co founder of one of the biggest investment firms in the world. You say in the, I believe the intro, you're not really an investor yourself. Elaborate on that. >> David M. Rubenstein: Yeah, I've-- Carlyle. When I started Carlyle in 1987, I'm a lawyer. I worked in the White House for President Carter. I managed to get inflation to 19 percent, which nobody thought would ever be seen again. We'll see whether that comes back. But, um, so I had to go back and practice law, and I wasn't really that good as a lawyer either. So I decided to try something different. I started the first buyout or private equity firm in Washington and it took off. But to build it, I really brought in people that had MBAs. I have a law degree, not an MBA, and they knew how to invest. So I decided I would take on the role of fundraising or recruiting, strategy, and so forth. So I wouldn't say I'm the investor-- investor. Nonetheless, I sat through and have sat through several thousand investment committee meetings. And so I learned a little bit. And I serve on a lot of nonprofit boards and I serve on the investment committees of many of them. So I picked up something. But in the end, I didn't say, here is the way to be a great investor. I interviewed these other people who are great investors and I gave some of my ideas, but that's it. >> Neil Irwin: If nothing else, you've had a good ringside seat to, uh, >> David M. Rubenstein: I did. I've seen some really good people, and I've, over the years, gotten to know some of the best people. And I dedicated the book in part to my two partners that helped build the firm with me, but also to Warren Buffett, who is-- who I didn't interview for this book, but I've interviewed him before and written about him in other books. And he is, you know, role model of being a great investor. >> Neil Irwin: So--so you write that great investors were usually raised in either a blue-collar or kind of middle class household. Why--why do you think that is? >> David M. Rubenstein: As a general rule of thumb, investing is designed to make money and to do it well, you have to probably have a certain hunger and a certain passion and a certain drive. And very often, if your father or mother is a multibillionaire, you may not have that drive. [Laughter] So usually people that have the drive are like me, came from blue-collar backgrounds. My parents didn't complete high school. And very often you see that kind of drive from people that that really have, you know, a need to kind of prove themselves in the world and they haven't been given everything. >> Neil Irwin: So you also write that, that many of these people had some major setbacks along the way. Talk about setbacks. Is there a way to distinguish the good kind of failure from the bad kind of failure? >> David M. Rubenstein: Yeah. I mean, anybody in life that gets anywhere has failed. And some people can pick themselves up and get back into the arena. And other people say, look, I just I'm not good at this. I'm just going to stay, not trying to accomplish anything. And if you look at the great investors in the world, the ones that I've interviewed, certainly they've all had sort of failures and they all kind of pick themselves up and got back in the game. And--and they've all learned from it. And I've often said that, you know, when you get somebody that's never failed, you have somebody that's, that is probably either not trying to accomplish that much or they're not going to be that great later. And one of the classic examples, I try to disguise the person's name, but I met somebody early in my career who went to Harvard College summa cum laude. Rhodes Scholar, president of the Harvard Crimson. PhD from a major university in Economics. Yale Law School-- Yale Law School. Yale. Editor in Chief of the Law Journal. Supreme Court Clerk. White House fellow. That person. Everything. Every time people. And also blue-eyed, blond-haired, chiseled, everything you want. And you kind of say, this person has got everything, you know. And so anytime anybody see this resume or look at this person, they say, we're going to give him a job. So he kept getting these great jobs. But any time when finally there was a crisis in a job that he had, he wasn't prepared for it because he'd never failed before and he didn't know how to really deal with the trauma of failure. And so I think failure is probably a pretty good thing because it makes you stronger. >> Neil Irwin: So we're going to go to some of the specifics of the investors you interviewed and the book is about. Can I ask a philosophical question first? Is it--is it good or bad for for America, for society, that people who have this particular skill at investing can become worth billions and billions of dollars? You know, a very good surgeon might only be worth a couple of million dollars. Is--are the numbers out of whack in some way? >> David M. Rubenstein: Well, look, if Warren Buffett was a schoolteacher, would the country be better off or not? I don't know, because the truth is, many very talented people go where there is a fair amount of money to be made. On the other hand, there are many very talented people who go into professions that don't pay a lot. Schoolteachers, or firemen, or policemen or others. So it depends on what you really want out of life. Would it be better if people were capped at how much money they could make? You know, I don't think that's realistic or likely to happen. I'd say that the investment world is a world where you make a lot of money if you're really good at it. But most people who are great investors, they're not trying to flash their wealth there. They love what they're doing so much so that this is what they want to do. And after they have enough to pay for their basic family needs and so forth and their children's needs, they basically are giving away the money. And so I wouldn't say it's the greatest system we have in the world. On the other hand, trying to reinvent it is probably not realistic. And I don't think we should fault people for wanting to be good investors. And this is the reason I think it's an important skill set. My son-in-law worked at a company called Moderna. Now, he wasn't the one who came up with the with the vaccine. >> Neil Irwin: But not the reason we're actually in a room today instead of on Zoom. >> David M. Rubenstein: But in fact, when he was at Moderna, he kept trying to get me to invest and I said, hey, this company is not going anywhere. [Laughing] So--So--I--you know, the people that put up venture capital money and there was a flagship ventures is the group that put up the venture capital money for Moderna. They did a pretty good job for United States and society. And so when people allocate capital in an appropriate way, you create a company, you save a company. I think it's good for an economy. So in the end, what you're getting is you're getting more tax revenues out of those companies. You're getting people that are going to give away a lot of their money because they're made a fair amount of money out of doing this. So I don't think it's the end of the Earth to say that being an investor is just a matter-- or a matter of of just greed and trying to make money. I think people that do this are really they're doing some things useful for society, our society or whatever society they might live in. And so I don't fault people for being great investors. >> Neil Irwin: Well, let's-- you mentioned a self-deprecating opportunity you missed. There's two more you mention early in the book. Tell me about why you passed on Mark Zuckerberg and Facebook when he was a college student. >> David M. Rubenstein: My then son-in-law to-be is now married to my daughter for about ten years or so. But when he was an undergraduate at Harvard, he had been a classmate of Mark Zuckerberg, he said Phillips Exeter and a classmate at Harvard. And he told me about this classmate. He said he's starting this company. And he described it to me. And I said, Look, I've been around before. All these student dating companies never get anywhere. This is not going to work. I've seen them implode before. So no. So somebody who did put up 30 thousand dollars, when they needed 30 thousand dollars, who was a classmate of Mark Zuckerberg's, I think made 13 or 14 or 15 billion dollars out of it. So that was a mistake I made. Yes. [Laughter] >> Neil Irwin: You also said you you missed how important Jeff Bezos and Amazon would end up. >> David M. Rubenstein: Yes. Carlyle had bought a company that was called Baker and Taylor, the second biggest book distributor in the United States, started in the 1850s. Hadn't made a profit since the 1850s, never made a profit. We bought it from W.R. Grace, and it didn't really have that much going for it. And it turned out that a salesman one day told me, guess what? Somebody wants to buy a bibliography or rent a bibliography we had. And since we already had the bibliography of books in print, I didn't think it was that big an idea to sell it to somebody. We rented it. The guy apparently said he wanted to give us 20 or 30 percent of the company we were starting, and our smart salesman said, well, I don't we don't take stock in newly-formed companies. We want cash. So we got 100,000 a year. And after about two years, I said, hey, maybe this company is going somewhere. Maybe we should take in a stock. So I went out to see Jeff Bezos and I said, you know, I'm the guy that is a part owner of this company. I think I'd like to take the stock in Amazon as opposed to the hundred thousand a year. And can you give us the 20 or 30 percent of Amazon now? I said, but David, that was a year and a half ago. I don't need you so much anymore. But he did give us a little bit of stock. And when it went public, we sold it right away because we had no confidence it was going to get anywhere. So that was a mistake. [Laughing] >> Neil Irwin: You mentioned Warren Buffett a minute ago, and dedicated the book to him. And he's--he's not interviewed in this. But--but what is it you admire about Warren Buffett in this? >> David M. Rubenstein: Warren Buffett is a person-- in terms of his track record. Have you put your money in the bank? Let's say over the last 60 years, you probably would have averaged maybe a half a percent rate of return a year or so because bank interest rates are not that high, historically. He's averaged 20 percent a year for 60 years. You know, over a 60 year period, he's averaged 20 percent a year. So he's obviously very good at this. And he took a 1,000 or 2,000 dollars that made it into roughly 800 billion in terms of net worth. That's what the company is worth today. And plus, they've--they've obviously done other things with it, the money. But he's a very focused person. He likes what he's doing. He loves what he's doing. He doesn't--he's living in the same house he bought in the 1950s. He doesn't really go out and buy lots of art or other kinds of accoutrements of wealth. He just is a person who loves what he's doing and this is what he does all all day. So I admire his intellect, I admire his focus. And so he's also very, very charitable. He was the person who set up the Giving Pledge with Bill and Melinda Gates. >> Neil Irwin: So you argue at one point that, um, that this nation was essentially a speculative investment when it was founded, that the settlers in Jamestown were basically a venture capital type of situation. Is this DNA in our nation of investing? >> David M. Rubenstein: Well, this country has-- does value entrepreneural activities and does it value investing. And think about it, Jamestown was basically a situation where people in England put up some money to create a colony in Virginia with the idea they'd make money on it. It turned out to be a terrible investment, but-- and many other colonies were created as investment activities. So our country has that-- that-- that instinct to kind of create something out of nothing. And we valued people here for their Horatio Alger kind of abilities to kind of rise from nothing, to go up to what we now call the American dream. Sadly, many people in United States don't believe in the American dream anymore. It's ironically, people from outside the United States who come here. We have 50 million immigrants in this country, 50 million. The total population is 330 million people. 50 million people have come here, presumably because they thought there was an opportunity for a greater life. And many of them have gone on to great fame and fortune because they've built great companies and so forth. So I do think the American dream is alive to some extent. And the the entrepreneurial instinct of the country is pretty strong. >> Neil Irwin: So another thing you write, so in more the mechanics of investing, you write that the depth and breadth of an investment committee memo, which can be 2 to 300 pages, does not guarantee the best investment outcomes. Can you talk about intuition and instinct versus kind of very thorough analysis in investing? >> David M. Rubenstein: Warren Buffett has been doing this for a long time, so he has a pretty good instincts and a pretty good intuition, and he does not have a big committee of people giving him memos. He does it very often by reading something himself, and he makes a decision. In the way that the private equity world, the venture capital world, those kind of worlds work. You tend to have teams of people, they do the research and then they send you a memo, which is typically three or four hundred pages at this point, and you're supposed to read this thing, and overnight, and make a decision. And I try to tell the younger people in our firm, look, the quality of a deal does not vary directly with the fatness of the memo. And basically a ten page memo would do the trick, too. But people don't tend to get that message. So instinct is very important and great investors are great people in any industry have a certain instinct and intuition and gut feeling for what the right thing to do is that they don't really need a three or four hundred page memo to tell them what to do. >> Neil Irwin: Okay, one more quote I'm going to read you from, from your book before we talk about individual great investors. You say some of the wealthiest individuals I've ever met are not really happy people. Some individuals with comparatively modest professional success are extremely pleased with their lives. How does that apply to? >> David M. Rubenstein: Well, my point was that a lot of wealthy people are tortured souls. Some of the wealthiest people I know have very terrible personal lives. They have very sad situation. They don't really happy with themselves. But some people I know who had no money or have no money are very happy with their lives. And, you know, expectations is a big issue. Of course, your expectations are lower. So money, obviously, and we've all heard this before, it doesn't buy happiness. Now, people can make jokes about it, say, well, I'll try it anyway. But but, you know, the truth is, I can't say that I'm a happier person than I--than I was before I got a lot of money. And in the end, you know, I think the biggest challenge with having money, among other things, is raising children. The hardest thing to do in life is raising healthy and happy children. And it's even harder if you've got a fair amount of money because there's obviously a tendency to spoil your children. So all of you who raise children know it's not easy and it's always a, you know, experience. And if you're doing it now, people ask me, When do you stop worrying about your children? I say, When they turn 60 or something like that. You're never stop worrying. About your children. And and if you get a call late at night from your child or are you ever worried about what they're going to tell you? So there's always a challenge in raising children, but I would say I'm reasonably happy. I don't go to a psychiatrist. Nothing wrong with them, but I have never been to one. Maybe I shouldn't go to one. I don't know. But--but I'm pretty, you know, I'm pretty happy and, you know, and as I-- Thomas Jefferson in the Declaration of Independence talked about the pursuit of happiness. But he never, in these subsequent 50 years of his life, actually defined what happiness means. And so it's the most elusive thing in life is personal happiness. And so I'm pretty personally happy. But, you know, other people are happier than me and there are people are sadder than me. >> Neil Irwin: All right. Let's start talking about some of the individuals you-- you interview and profile in the book. Larry Fink is the founder of BlackRock, largest asset manager in the world. Trillions and trillions under management. Good chance your 401k is in their portfolio. >> David M. Rubenstein: A lot of people here might have some BlackRock facilities. What I point out in the book is that he was from modest circumstances. His father I think had a retail business of some type, and he grew up in middle-class circumstances in Los Angeles, went to UCLA, UCLA business school, went to first Boston, was a mortgage trader, mortgage backed securities trader, and he was the youngest partner at First Boston. But then he lost 100 million dollars one year for the investment process that he was doing. And he was ostracized, and people kind of said, hey, you're terrible. And ultimately he quit the firm. He then built the biggest money management firm in the world. So you might say he's the most influential investor in the world. Blackrock now manages more than 10 trillion dollars, trillion dollars. And so he has an incredible impact on on the investment world, and and pretty impressive in person. >> Neil Irwin: So yeah, your quote was, uh, when they were formed, BlackRock was created in 1988. You thought this would just be another bond firm seeking its place in the sun. You did not think they would in time actually become the sun. So it's a very, very competitive business. How, what did they see? What was he able to do that most people were not? >> David M. Rubenstein: Well, the bond is one where it's a very small margin business. And basically they built a--a platform that was pretty good in research. They had returns are probably good, but not necessarily much better than others. But they ultimately bought some-- they made some acquisitions. They bought Merrill Lynch's asset management business. They ultimately bought the Barclays Global Index business. And by making these acquisitions, they were able to manage them pretty well. And so it's one thing to buy things and have them, another thing to buy them and have them and manage them well. And when you get to be as big as they they are, you have a hard time retaining people because they feel they're not adequately paid, they're not rewarded enough. So he's done a pretty good job of keeping this going. >> Neil Irwin: You talk to Larry Fink about ESG investing, environmental, social, and governance, kind of being concerned about those issues. There's--there's that's become a more controversial area. Republicans are concerned companies are too woke. How do you think? >> David M. Rubenstein: About-- for people who aren't familiar with the investment world, ESG has become a major factor in it. E stands for Environment, S stands for social, and G stands for governance. And the idea is that historically, if you were an investor, you wanted to get the highest rate of return you could get, legally. And so you would invest in oil drilling or anything that might destroy the atmosphere. You don't really care. You're just going to get the highest return you could. The concept of worrying about the ESG impact, the environmental impact, the governance impact, the diversity and inclusion impact of a company has become very important recently, And Larry Fink has been a big leader in the ESG. And as you suggest, now, people are saying, well, maybe that's not such a good thing because we weren't so much about ESG that now when Ukraine is invaded by Russia, because we've been worried about renewables so much, maybe there isn't enough oil and gas to help fuel Germany and other parts of Eastern or Western Europe. So some people have been rethinking whether we're focusing so much on ESG that we're maybe losing sight of some other values we should have. But on the whole, I think ESG is more or less here to stay as a factor in the investment world. And the theory always was if you worry about ESG, you'll get a lower rate of return, because by definition, you're excluding certain things you could invest in. I point out in the book by interviewing David Blood, who's a leader in ESG, that actually their rates of return have been higher than the average rates of return. So you can make pretty good returns in this area if you focus on it. >> Neil Irwin: So one of the people you interview is John W Rogers, the investor who told you, I don't email because of every moment something's beeping at you. Instead of being able to read and concentrate and think about the long term values of companies, you're constantly swept up in the current noise. Does that make sense? Does it take that kind of focus to-- >> David M. Rubenstein: Well, to be-- John Rogers, if you don't know him, is an African American businessman. I served with him on the University of Chicago board. He was the captain of the Princeton basketball team. He's a very good friend and basketball colleague of Barack Obama, chose not to go into the Obama administration because he really has this obsession with investing. He's like a value investor, like Warren Buffett. And he built the largest African American owned investment company in the world. He started it only two years out of college, when it was fairly audacious to do that. And now it's it's very, very large, very successful. And he's a person who-- he doesn't, he's unusual in one respect. He's on the board of McDonald's. And to be a loyal person, he goes to McDonald's for one meal a day every single day. [Laughter] And he's been doing this for 20 years, and he seems to be reasonably healthy. So. [Laughing] >> Neil Irwin: You interviewed John Gray, who's the president of Blackstone, another big private equity firm. He came up through the real estate practice, which he built there. You know, he tells a story in your book about when he was starting out in that line of business, really kicking the tires of individual properties. Now they do tens of billions of dollars deals. At the first, it was a 6 million dollar shopping center, and he was interviewing every tenant and counting the cars in the parking lot. Is there something to be said for kind of starting small and learning? >> David M. Rubenstein: It's-- usually you have to start small. John Gray, for those who don't know, is a person from Chicago, went to Wharton undergrad at Penn and then went to Blackstone when Blackstone was very, very small. I think he joined in 1992. Blackstone was started in 1986, I think. And so he was doing M&A, investment banking. But then they decided to buy some properties in real estate and he got into it, and he built the largest single real estate business in the entire world. I think Blackstone now manages maybe 200 billion dollars in real estate assets, and he's done some spectacular deals and now he's the president of Blackstone, and and essentially running it day to day. He's also very philanthropic and very, very talented, likable person. He talked about a deal in the book where he bought bought Hilton Hotels for Blackstone as part of a real estate and corporate deal and black-- and during the Great Recession, Hilton was going this way and it looked like it might go bankrupt, and his career might go with it. But he they turned it around and turned out to be the most successful buyout deal in history. They made a 14 billion dollar profit, which is not bad. >> Neil Irwin: You also spoke with Sam Zell, who's a legendary real estate investor, a very colorful character. You know, he, again, highly successful real estate investor, less successful, he tried to go in the media business with Tribune. Is there something different about real estate and managing other types? >> David M. Rubenstein: Well, he was a very, very iconoclastic real estate person, and he's very direct and very, you know, colorful. He wrote a book, the title of which is "Am I Not Being Subtle Enough For You" or something like that. He's very direct, and uses some words you won't--we won't use on the stage. But also, you know, now in his eighties, he's still riding motorcycles around the world. He basically was on the other side of a major real estate deal with John Gray. And he sold the largest real estate company in the world at about a 29 billion dollar valuation and made a lot of money doing it. But he, as you suggest, he went then bought some used some of that proceeds to buy the Chicago Tribune and went bankrupt. So he wasn't good at everything, I'd say. >> Neil Irwin: I think that's a recurring theme in this book. >> David M. Rubenstein: Nobody's at everything all the time. Nobody. Everybody has their failures. And the trick is something that I don't have the trait of. I mentioned the Amazon deal. I mentioned the--the Facebook deal, because I'm still thinking about these 10 and 20 and 30 years later. They're really great investors. They go on to the next thing, the next minute and they make a bad trade or make a bad deal. They say, okay, I made a mistake. I learned from it. Go on to the next thing and they never talk about it again. I don't have that trait. I love to talk about it for 20 or 30 years later. [Laughing] >> Neil Irwin: So this ties back to what we talked about earlier, about having some failures and learning from them. You spoke with Ray Dalio, the founder of Bridgewater, one of the biggest hedge funds in the world, and you tell a little bit of his story. He says he wasn't a very good student in high school and his first job at an investment firm. He and his boss got in an argument on New Year's Eve party and got a little drunk and he punched his boss. He ends up starting Bridgewater, he made in 1982 a big error of judgment that almost sunk the firm. Tell me about those. >> David M. Rubenstein: Okay. So, Ray Dalio is from Long Island, was a terrible high school student, barely got into Long Island University, but he did reasonably well there and got into Harvard Business School subsequently. But he built the hedge fund called Bridgewater, which is the largest hedge fund in the world. And let me explain it, what this means. In the hedge fund world, you typically have a hedge fund that will do well for four or five, six years, but then has a bad spot and very often they go out of business. His been in business for 50 years, 50 years, and it's managed now about 150 billion dollars. And of all the hedge funds in the world of all of them, his has been the most profitable, produced the greatest profits for investors. But he has his downside. As you mentioned, early on, he, he punched his boss in the face. He got fired the next day for that. He then lost all of his money, had to go to his father to borrow money to pay the rent. But ultimately, he had a techniques that he used, principles he calls, and he's built this incredible firm. And it requires a lot of self reflection in the firm. It's very intensive analysis about mistakes you've made. And this is how the principles in which he's built this firm and lived his life. Very impressive person. >> Neil Irwin: So I'm going to mention two people you interviewed who I believe back-to-back in the book who said if you read carefully, kind of directly opposite things a little bit. So I'm going to get you to weigh in. Stan Druckenmiller worked with George Soros, said you only need about 120 IQ to be a great investor so long as you have an extraordinary work ethic. You also talk to Jim Simons, the founder of Renaissance Technologies, off the charts, brilliant mathematician, mathematician. Are there just different forms that being a great investor might take? >> David M. Rubenstein: I divided the categories in different types of investing. So. Jim Simons For those who don't know, was a world-class mathematician, not a pretty good mathematician, but world class, one of the top ten mathematicians in the entire world, and he was the chairman of the board of the math department at Stony Brook and New York University at the age of 29 or 30. And after a while he got tired of doing mathematics and he's kind of stumbled into investing in-- through mathematics and using quantitative algorithms to decide, essentially, where there's an inefficiency. And today this is a gigantic industry, which is to say mathematics or quantitative skills are used to figure out where there's a market inefficiency. And you get in there quickly through a computer trade, typically before the inefficiency is closed. And he's made staggering rates of return. For the last 30 years, he's had a rate of return on his main internal fund of 40 percent a year. So 40 percent a year is pretty good. And so, uh, but he's iconoclastic. He doesn't wear socks ever, and, and, uh, I interviewed him. We gave him an-- we were together on the board of the Institute for Advanced Study where Albert Einstein taught, and he, uh, Einstein never wore socks either. His theory was that the big toe will eventually push a hole into the socks. So why bother with socks anyway, they're going to get a hole. But this guy had a black tie dinner. I interviewed him and I looked down. He had no socks on. He also, to my amazement, he smokes two packs of cigarettes a day and he carries around his own ashtray. And you kind of say, you know, is this a smart thing to do, but you're not going to change them? He's a very smart person. He's made a staggering amount of money, but he's giving it all away at this point. >> Neil Irwin: But does it take-- is work ethic alone, and-- and reasonable intelligence enough, too? >> David M. Rubenstein: It's always tempting to say, look, you don't have to work that hard, you know, mother might say, don't work so hard. But the truth is, hard work is really going to get you further than not hard work. And I'd rather invest with people that are smart and hardworking than people that are lazy and not that smart. As a general rule of thumb, hardworking, smart people will probably make you more money than lazy people who aren't that smart. You know, as a general rule of thumb. And Jim is very, very smart. >> Neil Irwin: So two things from--from two different chapters that--that kind of struck me as similar. So Stan Druckenmiller had a famous trade with George Soros that it broke the Bank of England. He was betting against the British pound in 1992. John Paulson famously bet against US mortgages in the housing boom and made a great deal of money from doing that. Both of them described that as an opportunity where they saw a relatively small potential loss but a huge potential gain if they were right in their thesis. >> David M. Rubenstein: Yeah, these are called asymmetric trades, where on the downside you might lose one or two or three percent of the money if you, if you're wrong. But on the upside you might make 100 times your money. So in the trade you allude to, John Paulson made the biggest, most profitable trade in the history of Wall Street. He bet against subprime mortgages and basically guessed right that the way he structured and made roughly for himself and his investors roughly 20 billion dollars, which is a lot of money. The other trade is Stan Druckenmiller. You may all remember or maybe not remember in 1992, the British pound was was under pressure and Druckenmiller was working for George Soros, a very famous hedge fund person. And he said we should short the British pound. And George Soros listened to the argument and said, okay, but let's double down and do it more. And George Soros' argument, a famous investor would always say, if you have a really good idea, they come along rarely double down, triple down on it, because rarely are you going to get a great idea. If you have a great idea, put as much money as you can into it. And that's what they did there. And they kind of made a fortune. What was then considered a fortune, one billion dollars, when the British pound had to be devalued. >> Neil Irwin: How much do you think John Paulson, who has an amazing trade that makes his investors a lot of money, makes him a lot of money, how much does that predict future success? How much is that a replicable kind of process? >> David M. Rubenstein: Well, it's--it's rarely the case if you have the greatest trade in the world, you're going to make another trade as great. John Paulson hasn't had a success as good as that one since then. And while Stan Druckenmiller has done very well, he now is not managing money for other people. So it's hard to know how successful he is. But as a general rule of thumb, if somebody made a fair amount of money, and they know what they're doing, and they're still willing to work hard at it, they'll probably do well in the future. They may not have as heroic a deal as John Paulson had. But generally people that do this, this is what they do for a living. They enjoy it. They don't just say, okay, now I'm going to go sit on the beach. They're pretty hard working people. And as a general rule, hard working people are smart and generally do pretty well in life. >> Neil Irwin: So a lot of the people in your book talk about teamwork and having investment committees that reach decisions in a collaborative way. I gather that's how it works at Carlyle most of the time. Marc Andreessen is a famous venture capitalist, describes a different approach at his firm, 22 different general partners at Andreessen Horowitz. They all have authority to make investment decision on their own, up to a certain threshold. What are the trade offs of the more individualistic versus? >> David M. Rubenstein: Well, in the venture capital world, the private equity, or the buyout, where generally you have committees, and the committees generally have to operate by unanimity, or certainly consensus, but even typically unanimity. What you're referring to is at Marc's firm, invest, the partners in the firm can pick the investments to make themselves. In other words, if they really feel strongly about something and the committee has turned it down, they can allocate a certain amount of the firm's capital to it. And that's a little bit unusual. At another firm, I referenced in the book, Sequoia Capital, everybody has to agree to it or the deal doesn't get done. Marc Andreessen, for some of you may have heard of him, he's a very famous venture capitalist, but he invented a company called Netscape, and this is another one of my mistakes. He was brought to me in my office at Carlyle. He was just out of college. He came in with, I think, sandals and jeans and very long hair and looked like a college kid. I thought it was the son of the man who was bringing him in, who was a very famous venture, very famous Silicon Valley executive. And his name is James Clarke, who built Silicon Graphics. And they said that they wanted to get us to invest at Carlyle in a company that was going to navigate the Internet. And we brilliantly said, well, what is the Internet, and why would we want to navigate it? And we didn't understand it. But then they wanted us, so for a company that had no revenue, no employees yet, they want us to value the company making 125 million dollars. And we smartly said, No, that's ridiculous. They came back later, I think at 75 million. We turned it down again. That became Netscape, and they sold it to AOL for four and a half billion. So. >> Neil Irwin: So--So you asked a lot of your interview subjects about cryptocurrency and blockchain. I think it's fair to say more. A majority were pretty skeptical that-- and you were doing these interviews when that market was, was very hot. How have things-- what's your view? >> David M. Rubenstein: As a general rule of thumb, people over the age of 40 are fairly skeptical and people under the age of 40 are less skeptical. And that's often because this is a very novel idea. John Paulson hates cryptocurrencies, but I interviewed Mike Novogratz, who at one point I think had ten or 12 billion dollars of Bitcoin. And so he bought it at a very low prices. So my own view is that cryptocurrencies are not for the faint of heart. It's very complicated and you might lose all your money if you go to Las Vegas and you're willing to spend some money and you know you're going to lose, then you can allocate the same amount of money to crypto. And maybe it won't be disappointed because you enjoy the fun of it. But for people who are serious about making money, I think there is money to be made at some point in crypto. It's going to be shaking out for a while. I interviewed the other day for a TV show I have, Sam Bankman-fried, who is 30 years old and had a fortune at one point have 22 billion dollars. Basically, he built FTX, which is a leading crypto exchange. It's really for younger people, and I think the Congress of the United States is unlikely to regulate it because I think many of the people who are in this business are fairly active politically. They're libertarian and tend to be maybe more Republican than Democratic in some respects. And they really, I think, got in Congress excited that this is the wave of the future and we shouldn't overregulate it. So I don't see any regulation that's going to put it out of business anytime soon. >> Neil Irwin: I'm going to ask one more question of David, but we can line up with about 10 minutes for your questions. Okay. You cover a lot of people in this book, who have I not covered? Who would you like people to know about who we've not discussed? >> David M. Rubenstein: Michael Moritz is a person who built-- helped to build the largest, most successful venture firm in the world called Sequoia. He has an, uh, unusual background. His parents were Holocaust survivors. He grew up in Wales, which is not where you see a lot of Jewish refugees, I would think, in Wales. But he came to the United States, went to college here, went to graduate school here, and ultimately became a reporter for the-- for the Time magazine, wrote some stories about technology, and ultimately got out of that and got into the business of venture capital. And he you know, he put money into some of the greatest venture capital deals of our time that say things like Amazon or Google. And so they made a lot of money and they're very-- maybe the most successful venture firm. >> Neil Irwin: All right. Let's start on the side of the room. >> MEMBER OF AUDIENCE: It's about the investors that you've talked about are--are essentially workaholics. And you describe that in other interviews. So when they're not working, and they're not sleeping, what do they like to do? Warren Buffett likes to play bridge, for instance. >> David M. Rubenstein: Well, they all have some other things. Some people play golf, a sport that I don't do, but they generally tend to be hard working people. But they do have some time off. And they I would say they--they tend to spend time on philanthropy now, or some of them have collections of art or whatever it might be, but generally they don't have nothing else. They all have something else they do. And Warren Buffett, as you just-- he played-- he plays bridge, I think three or four hours a night, which to me seems like not a way I'd spend a lot of my time. I don't know how to play bridge, but but obviously it may work, you know? So there's a story. One time I you know, I was thinking I heard about Warren Buffett and Bill Gates. They were calling somebody and somebody said, let's call the girls. And people were saying Warren Buffett and Bill Gates are calling the girls. And we wonder what it was. They have these female bridge players that they play bridge with, and they had a free evening one evening. So they're bringing these female bridge players up who are much better players than they were. They're pretty-- Warren Buffett is pretty serious about bridge, apparently. >> MEMBER OF AUDIENCE: Good afternoon. So I'm a college student studying finance and law. And basically at the beginning of my personal and professional development. You spoke about the importance of work ethic, perseverance and being able to learn from failure. I was wondering what other skills or character traits you believe were integral to your success that were largely overlooked by many people? >> David M. Rubenstein: All right. One, read. You can't read too much. All the people in this book that I talk about, they all have an incredible thirst for knowledge. They will read anything, even if it's not relevant to their day to day lives. They just think you can-- you can't learn too much, and never know what will come back and help you. Secondly, I think humility. The people I interviewed, they've accomplished a lot of pretty good things. They're pretty successful and very wealthy, but they're pretty humble. And, you know, humility isn't a virtue that all of the leaders in our country have, as we have observed. But--but it's a virtue that I think is pretty good. And they are pretty humble. And I also think teamwork is something important. Learning how to work with other people is really important, and learning how to share the credit is something that a lot of them have-- they don't usually talk about about "I, I, I," they talk about "we," even though maybe they made the best decision themselves, they tend to talk about their partners. So those are some of the things, teamwork, sharing the credit, taking the blame, humility, reading, and I think, you know, generally, hard work. >> MEMBER OF AUDIENCE: I was wondering if you could talk about university endowments. More specifically, those chief investment officers that you admire at, at various universities such as the-- David Swensen. >> David M. Rubenstein: So for those who don't follow this business, in 1900, the Endowment of Yale was 10 million dollars, the Endowment of Harvard was about 5 million. And because tuition paid for everything, but as universities got to be bigger, more buildings, more students and so forth, and they subsidized students and so forth, they needed to develop endowments that would provide income for tuitions and research and buildings and so forth. And so in college, endowments became a big thing. Harvard's endowment, I'm on the Harvard Corporation board is now over 50 billion dollars. And these money is used for, I think, very good purposes. David Swensen was a person who, at the age of 33, was put in charge of the Yale Endowment, and he came up with a way of managing the Yale Endowment that now is called the the Yale motto or the portfolio motto, which is to say, put a heavy amount of money into so called alternative investments, private equity, venture capital and so forth, and also seeding a lot of new firms. So he would get much better terms. And this model is one that's used around the the United States now and around the world. And he's really dramatically influenced the way college endowments are managed now. And they're-- big, much bigger than they used to be. I mean, some of the biggest endowments are Harvard, Yale, Princeton, Stanford. They're all 30 billion dollars or more. And this pays for a lot of scholarships and so forth. Swensen sadly died last year of cancer, but he, he created a lot of proteges, and one or two of them are in the book. And one of them I'll mention is Paula Valeant, who used to work for him. And the last ten years or so she was managing the Bowdoin Endowment and it turned out in managing the Bowdoin Endowment, she outperformed all the fancy Ivy League endowments, and including the Yale one. And so she-- and he pointed out to her that she had exceeded the master. And so, you know, she's in the book, and a very impressive person. >> MEMBER OF AUDIENCE: Hi. I'm also a college student, like the other guy before, we go to the same school. But what is your personal philosophy when it comes to philanthropy, and you apply principles that you use in investing to your philanthropy? >> David M. Rubenstein: My philosophy on philanthropy, and what's the second part? >> MEMBER OF AUDIENCE: Do you apply principles that you use in investing to your-- choosing your philanthropic causes? >> Neil Irwin: Do you choose-- use principles from your investing in philanthropic decisions? >> David M. Rubenstein: I did-- was an original signer of the Giving Pledge. And you're supposed to give away 50 percent of your net worth upon your death or--or during your lifetime. Of course, it's a voluntary thing. And so if you die and you haven't given away any money and you don't do it in your will, they can't disinter you. So it's a voluntary thing. I have you know, I've been involved in a lot of philanthropic things that I care about in this--in this city. I've tried to, you know, help out in some--some--some organizations here and other monuments, memorials. But I--you know, I don't have a foundation. I do it all myself. I kind of know sort of what I want to do. And the principles are trying to make sure you know what you're interested in, trying to help other people, trying to figure out whether you've actually made progress by getting some reports back about what you've done. But in the end, my main philanthropic efforts to try to give back to the country, which has made it possible for me to kind of come from modest circumstances. And so I--I'm giving back most of my country what I call most of my money and what I call patriotic philanthropy, which is to give back to the country, to remind the country-- the country of the history and heritage of the country. And they use the same principles of trying to do the research, know what you're doing, talk to a lot of people. There's no perfect way of doing it, though. You know, in philanthropy, we don't have a metric-- in business, world, we have a metric called profit and loss profitability, internal rates of return in metrics. In philanthropy, you don't have a metric that's equivalent, so you don't really have quite as good a way to measure whether you're successful or not. >> MEMBER OF AUDIENCE: Thank you. >> MEMBER OF AUDIENCE: Hello. Minus the endowment answer, and the mention of Melinda Gates, we really didn't hear much about women in this world during this talk. So what do you see as encouragement for more women to be involved in the field? And who are some women within the industry? >> David M. Rubenstein: In the field of investing, or-- okay. in the book, I think 25 percent of the people in the book are female. I should have been maybe more. I tried very hard to find leading women investment professionals. As we all know, there weren't-- It was largely a white male profession for a long time. Paula Bohlen, who manages now the Endowment, not for Boden, but Rockefeller University, is in it. Kim Liu, who managed the Endowment for Columbia University, is in the book. Sandra Orbach, who is in my firm at Carlyle, is the most senior professional in the private equity world. And so you have to have role models and get other people to follow, follow the women or their role models. I would say it's been tougher than you would think to get women to rise to the top of these organizations. For example, in the business I'm in the private equity world. There are no women running major private equity firms. There just are none. In the venture capital world, of the famous venture capital firms, none are being run by women. So we've got a long way to go. Now, in business schools today, roughly 50 percent of the business school classes are at Harvard, Princeton-- Harvard, Wharton, Chicago, Stanford. Good business schools, are roughly 50 percent. At some point, hopefully in my lifetime, you'll see the major firms having women at the top. But it doesn't exist right now, honestly. And you probably know that, right? [Laughter] >> Neil Irwin: Yes, sir. >> MEMBER OF AUDIENCE: Mr. Rubenstein, when you started your lecture, you mentioned that you're more fascinated by ideas than than money. What do you think of this idea that the famous phrase life, liberty and the pursuit of happiness? Isn't the pursuit of happiness, by the Founding Fathers, was used as a euphemism for acquiring property? >> Neil Irwin: In life, liberty and pursuit of happiness, was pursuit of happiness a euphemism for-- >> David M. Rubenstein: Ah, okay. All right. Well, you're obviously a scholar in that merit. Um, happiness did not mean, you know, going out and having a nice party. Happiness was a plagiarised a bit from a--from another piece of work that Jefferson was referring to. It generally meant the ability to pursue the ownership of property, and that's what it really meant. So it wasn't in the happiness sense, but I sometimes use it because it's a word that people understand. What Jefferson didn't mean in the same way that we mean happiness, honestly. And you must know that. All right. >> Neil Irwin: Yes, sir. >> MEMBER OF AUDIENCE: David, you've written a number of books on how to succeed or what is success in politics, in investing, when are you going to do a biography? >> David M. Rubenstein: Yeah. I'm trying to figure out whether, you know, anybody would buy it. So, um. [Laughing] The only person that actually encouraged me to write it was my mother, and she's passed away. So I'm not sure anybody else would, would read it. I--I don't know. You know, it's an act of-- when you write a autobiography, you have to kind of, you're saying I've done something useful and you should-- others should read about it. I'm trying to figure out whether I'm comfortable writing such a thing yet. But but I also know as I get older, if I don't do something at some point, you know, I won't have the brainpower to do it. So I am doing what I call sprinting to the finish line. You know, I'm now I just turned 73 and, you know, it's--it's an older age. Then, of course, I'm not old enough to be president of the United States yet, but-- [Laughing] But it's an older age. And I remember when I was growing up, I looked Dwight Eisenhower looked like an old man to me, and he was--he left the presidency when he was, I think, 69 or 70. So I remember telling Jimmy Carter, you don't have to worry about re-election. You're running against an old man. He's 69 years old, Ronald Reagan. So it turned out that Reagan is now four years younger than I was. I am now. So and I remember when I started my practice of law, I went to a large firm and the head of the firm, a famous federal judge, came in and I thought he was a doddering old man and he was giving us his words of advice. I looked it up recently. He's two years younger than I am now, so I realized I better get something done. I haven't decided to do that. My publisher's thought about it, but I have-- I'm thinking of some other books right now. But anyway, I will get your name, and if I write one, I will send you a copy. Okay? [Laughter] >> Neil Irwin: Sir. Will be the last one, I'm afraid. >> MEMBER OF AUDIENCE: Thank you. You mentioned a number of the opportunities that you missed. Do you have any personal rules of thumb that you could share to avoid missing any future opportunities like that? >> David M. Rubenstein: To avoid missing-- >> Neil Irwin: You talked about opportunities you missed. Is there a rule of thumb for avoiding missing future opportunities? >> David M. Rubenstein: Well, yes. One, listening to people who disagree with you is probably a pretty good thing. And trying to be more open minded, you know, not thinking, you know everything. I'm more willing to try things. And I used to try them. I, I made a lot of mistakes in investing world and like the fishermen like to talk about the fish got away. I tend to talk about the deals that got away, but I'm more worried about the deals I did that didn't work out because then you're actually losing money as opposed to things that you didn't make money on. Anyway, I--I--I'm--my--I have three children there are in the private equity world. You can say I did a bad job of parenting or or whatever. I mean, I have no poets, no playwrights, no artists. They're all in private equity. And, you know, we'll see whether that was a good thing for them to do or not. But I'm trying to help them a little bit, and now I listen to them more than they listen to me. [Laughter] >> Neil Irwin: With that we have to conclude. The book is "How to Invest". Thank you. Thank you very much. >> David M. Rubenstein: Thank you. [Applause]