Blackstone's Jon Gray on Building a $1.3 Trillion Wall Street Giant

0:00 People often think, you know,

0:01 how do I get an organization to head in a certain direction?

0:03 And it's not by putting plaques up on the wall with mottos,

0:08 who you hire, who you fire, who you promote.

0:13 Then the younger people are going to look around and say,

0:15 Oh, that person who took a risk.

0:17 Oh, I want to follow them.

0:18 And I think that in many ways is the best way to model things.

0:23 This week, I'm speaking to Jon Gray, the president and chief operating officer

0:27 of the private equity giant Blackstone.

0:30 A so-called 'lifer' He joined the company in 1992 at just 22

0:35 years old under the mentorship of chair and chief executive Steve Schwarzman.

0:39 Gray began on the real estate side of the business,

0:42 helping it become the largest private equity real estate investor in the world.

0:47 And since assuming his current role in 2018,

0:50 Blackstone says its assets have nearly tripled to over .3 trillion.

0:57 So at a time of global upheaval, I was keen to catch up with Gray

1:01 about how he leads through crises while maintaining trust.

1:05 The challenges facing Blackstone's flagship private credit fund,

1:09 how he retains talent and what that tells us about his own sense of loyalty.

1:18 Jon Gray, thank you so much for joining us.

1:20 It's great to be with you, Francine.

1:22 You're known as the Hilton deal guy, right?

1:24 20 years ago, you take this massive bet on Hilton, you pay 26 billion for it.

1:29 At Blackstone with 20 billion debt.

1:31 What were you thinking?

1:33 I wasn't as wise back then.

1:35 I guess at the time, if you go back,

1:38 this is right before the financial crisis and I

1:41 was running our real estate business and what

1:44 we were looking for was how could we buy

1:48 great real estate or operating businesses at reasonable prices?

1:52 And there were so much debt in the market fueling

1:55 private real estate values that we found we could buy.

1:59 The public companies at better prices.

2:01 So we ended up paying a big premium,

2:04 30 plus percent over where the company was trading.

2:08 And we committed in July of 07.

2:12 We closed in late October by early.

2:15 Okay, things are going badly.

2:17 The financial crisis really picks up and the company has

2:22 a 20% decline in revenue and a 40% decline in cash flow.

2:26 And we put a lot of debt on it.

2:28 And I would say at that moment it did feel like

2:31 it was career shortening and that I shouldn't be sitting here today.

2:35 Did you think, what have I done or did you think that there was?

2:38 I think there was part of me that was what have I done?

2:41 But there was also part of me that was this is a great business.

2:45 We still thought that travel was a long term

2:48 growth business and that the core of the company,

2:51 the branded hotel business, where you manage in franchise hotels.

2:54 Hilton, Hilton, Garden, Hampton Waldorf,

2:57 that that business could grow a lot beyond the United

3:01 States and that we just had to weather this storm.

3:04 And so we ended up putting in an extra $800 million at the bottom.

3:09 By the way, we rode off quite a storm.

3:11 It was quite a storm.

3:13 We wrote down the investment by 71%.

3:16 So the largest investment in our firm's history, we wrote down by 71%.

3:22 You had to go to meetings with investors and I'd had to say to them,

3:25 Hey, I know we've done this, but it's unrealized.

3:28 We're going to get through this.

3:31 And there was obviously rightfully a lot of concern.

3:34 Ultimately, the sun came back out.

3:37 The business grew.

3:39 We took the company public and we made 4 billion.

3:44 And by all accounts, that should not have happened.

3:47 And so the question becomes, what do you learn?

3:50 One is the importance of staying calm.

3:52 So I always say to my kids and now I say to everyone in Blackstone,

3:57 stay calm, stay positive, never give up.

4:00 And I think that was really important in a moment like this.

4:03 And by the way, in all different times we've seen this in Covid,

4:07 we've seen it when markets react to Liberation Day,

4:10 having this sense of equanimity is really

4:13 important because you have to be clear thinking,

4:15 because sometimes you may have made a really bad decision.

4:18 In the case of Hilton, we actually had invested in a great company.

4:22 Our timing was terrible,

4:23 but if we had the staying power to get to the other side,

4:26 we thought we could make it.

4:28 So stay calm.

4:29 The second thing as an investor,

4:31 which has really informed how I think about deploying capital,

4:35 is so often in my training I'd focus on whether I pay 98 or 100 for something.

4:42 What the footnote on page 52 says in the investment memo,

4:46 But it's really that first paragraph.

4:48 You know what?

4:49 What is the basis?

4:50 How good of a business is it?

4:52 The biggest thing on the investing side is it led

4:54 to this idea of what are the best neighborhoods to invest in.

4:58 You know, there's a shortage of global housing or, you know,

5:02 consumers are moving to buying things from from stores to online.

5:07 So logistics will do well.

5:08 More recently, the importance of data centers and and fabs and energy

5:14 and and thinking about investing and not necessarily just the individual.

5:20 We're going to price everything,

5:21 but we've got a better chance of success if we pick better neighborhoods,

5:25 better management teams.

5:26 And in this case, we felt great about the business in the neighborhood.

5:31 But timing is everything.

5:32 So you can see how the world evolves,

5:35 but you don't know whether it's five years or ten years.

5:38 Yeah, I'd say timing is very important because it can impact your returns.

5:44 I think I would say it's slightly different

5:46 the way I'd see the long term trends.

5:48 If we had bought a different kind of business and gone through this crisis,

5:52 we may have lost it.

5:53 In this case, the underlying business and industry were

5:56 so good that we were able to ride through it, and that was the key learning.

6:00 I mean, it's very easy to say, stay calm.

6:02 Yeah, those moments, I mean, can you learn to stay calm or focused

6:05 or is it so is it temperament you're born with?

6:08 I don't know.

6:09 I think you can learn.

6:10 I think the more I feel like in my day job,

6:14 every day, I get pieces of bad news, right?

6:16 Because it invariably comes up.

6:18 And so you have to you begin to absorb

6:21 that in a better way when you're accustomed to it.

6:23 And so part of it may be your nature, your fundamental optimism,

6:29 but part of it is having experience and understanding.

6:33 That these crises, there is another side and you have to make decisions.

6:38 Keeping that in mind.

6:40 You're a lifer at Blackstone.

6:41 Lifer for 34 years plus.

6:43 34 years.

6:43 Is that what you want from your staff as well?

6:46 Loyalty.

6:48 Well, if they love what they're doing

6:50 and the people they're doing it with, then yes,

6:53 I think the culture that Steve Schwarzman has really

6:57 created a place where people are striving for excellence,

7:01 trying very hard to deliver for our underlying clients,

7:05 where people treat each other well.

7:09 And ultimately, if you do a great job, you get rewarded.

7:12 Your hope is that you can attract the best and the brightest

7:16 and that they're going to want to stay and grow.

7:18 And I'm very blessed to work with people who've been at the firm for decades.

7:23 At the same time, I think what's important at a firm is that it grows

7:28 because one of the problems with some

7:30 of the smaller firms is there's not a space.

7:33 You know, that smaller tree can't get sunlight.

7:36 And so what's great about this firm is its

7:38 push to grow gives young people a chance to say,

7:41 even though I'm joining a bigger firm today, I still have a lot of opportunity.

7:45 How do you think about retaining talent?

7:47 Do you first of all, do you see it as a personal mission?

7:50 And actually, what do people want?

7:52 I think it's a personal mission for sure.

7:54 I think what people want is the opportunity to grow,

7:59 to learn, to have responsibility, to be at a place they're valued, obviously,

8:05 to have professional advancement and also financial rewards.

8:11 And I do think they care about where they work and what the culture is like.

8:16 Yes, money matters, but if you genuinely like the people

8:19 you work with, if you feel a sense of mission,

8:21 you're proud of the place you work.

8:24 And and I would say if there's an entrepreneurial flair to the place,

8:28 then I think you're going to stay engaged.

8:30 As we've grown from the firm,

8:32 I joined with 75 people to a firm that now is more than 5000 people.

8:36 We've got to make sure people seem excited,

8:39 are excited about coming to work every day.

8:41 Have you ever thought of leaving?

8:42 No.

8:43 Never.

8:44 No.

8:45 And there's nothing.

8:45 What?

8:46 I mean.

8:46 What attracts you to Blackstone?

8:47 You're also seen as the heir in waiting.

8:49 I've woken up every day intellectually challenged by what I do.

8:54 And I love the people and I love the drive in the world to win.

8:59 How has your relationship with Steve Schwarzman changed over the years?

9:04 Oh, wow.

9:04 We you know, when I joined, I was a kid, right?

9:08 I was 22 years old, was a tiny little firm.

9:11 And obviously, as I've grown up over time, you know,

9:15 the relationship as somebody just learning the business

9:18 to somebody how running the firm is is different.

9:21 But I would say there's remarkable continuity.

9:24 Steve's just always pushing for the best.

9:26 And even at a young age, one of the great things about Steve in the firm

9:30 is this openness to listen at the table.

9:32 So even when I was very young, once I sort of got my sea legs and I said,

9:37 Oh, I don't like this transaction for whatever reason you were heard.

9:41 And so I think Steve just appreciates drive carrying an entrepreneurial spirit.

9:48 And for me, it's one of the great gifts of really my not only my career,

9:52 my life, to have been able to work so closely with him,

9:56 to be able to learn so much from somebody who's so wise,

10:00 who always has equanimity in in whatever the situation,

10:04 that's been really helpful.

10:06 And he's also pushed me.

10:07 I never would have been somebody who would have thought as big,

10:11 you know, that's his thing.

10:12 He extends the playing field and makes you think about,

10:15 can we build this business to a billion?

10:17 Why don't we build it to ten or 00 billion?

10:19 And when you work with and for somebody like that, it inspires you.

10:23 Jon, how do you you know, as the firm grows,

10:27 how do you make sure everybody feels like that?

10:29 Yeah.

10:29 So that feedback, yeah, it's like one eighties reviews, compensation.

10:32 Every Monday we do what we call B TV.

10:36 It's not Bloomberg TV, it's our internal zoom call.

10:39 But we're communicating messages about, you know,

10:42 what people are doing investing, raising money, providing legal.

10:46 We're constantly calling out people who find

10:49 interesting and new ways to do things.

10:52 And then we're rewarding and promoting those people because it's interesting.

10:56 People often think, you know,

10:57 how do I get an organization to head in a certain direction?

11:01 And it's not by putting plaques up on the wall with mottos,

11:06 who you hire, who you fire, who you promote.

11:09 If you have people who share your values,

11:12 who share the drive and they're the ones who are succeeding,

11:16 then the younger people are going to look around and say, Oh,

11:20 that person who took a risk, they moved to a new place.

11:23 They found this new way to invest capital.

11:25 Oh, I want to follow them.

11:27 And I think that in many ways is the best way to model things.

11:31 And also just the way you act, you know,

11:34 the way you conduct yourself sends a powerful signal to others.

11:39 Blackstone's flagship $82 billion private credit

11:41 fund B cred made headlines in March.

11:44 Bloomberg reported that around 25 Blackstone

11:47 senior employees were putting in roughly

11:50 50 million of their own money to offset record customer withdrawal requests.

11:55 The management move has been described as old fashioned door knocking,

11:59 and I wanted to know from Gray what it was

12:02 like to go out and ask colleagues to open their wallets.

12:06 Jon, talk to me about BCRED.

12:07 How difficult was it to convince employees to put money in it?

12:11 So in the case of BCRED,

12:13 which lends senior loans to basically private equity companies,

12:20 we built this to be an $80 billion plus vehicle.

12:23 It's done a terrific job,

12:25 ten plus percent annual return since inception six years ago.

12:28 There's been obviously a lot of noise around private credit.

12:32 And one of the things that's really important to us

12:36 is that our investors recognize that we're aligned with them.

12:39 So what we did recently was put up some capital

12:43 from the individuals of the firm because we wanted to show that alignment.

12:48 And the key is you're in the investing business.

12:51 It's a trust business.

12:52 And when there's a lot of noise and people are saying this is

12:56 that there's nothing more powerful than sort of putting some money in and say,

13:00 Hey, look, I'm aligned with you.

13:01 This is my money.

13:02 I believe in what I'm saying.

13:04 And in the fullness of time, again,

13:06 investors will look back and say, hey, they did a good job.

13:10 And I think again and again for us focusing on that Northstar,

13:13 which is performance and building trust with our clients,

13:17 that's what really matters.

13:18 But was it difficult for you to convince other employees

13:22 to join in or is it again just part of the culture?

13:25 I think it's part of the culture.

13:26 I mean, obviously when you're asking people to make personal contributions,

13:30 that's a that's something.

13:31 But I do think it's part of who we are.

13:34 And I do think people recognize that being seen

13:37 as caring deeply about your clients and being aligned matters.

13:42 I mean, what was the you've you've had difficult times.

13:46 Yes.

13:46 What was your most difficult.

13:49 Oh, well, definitely the most difficult would have been.

13:52 Last summer we had this horrible shooting at the firm.

13:57 We lost an amazing woman, Wesley LePatner,

14:01 who was somebody I had worked closely with, long

14:05 time senior executive in our real estate business.

14:10 Incredibly talented, rising star.

14:13 But beyond business, great mother, daughter,

14:18 wife gave back philanthropically and was probably the best mentor I knew,

14:26 particularly to other young women.

14:28 And I would send so many her way saying, Look, can you help this young woman?

14:33 She she wants to have a career in investing.

14:35 She wants to have a family.

14:36 And I'd always be like, call Wesley and to be in the office one day

14:42 and to have this kind of horrific mass shooting and then

14:47 also the trauma of a lot of people who were

14:51 in the building for hours with high degree of uncertainty.

14:54 That was a really hard thing.

14:55 And there's no playbook for that sort of thing.

14:58 And so I think the key learning from that was

15:01 just the importance of being sort of who you are.

15:05 And everybody was in pain at that point and then

15:09 having as much communication and then trying to find your footing.

15:13 How do you get back to work?

15:15 We have a lot of responsibility,

15:17 but also something really traumatic has happened.

15:20 That was hard, finding the balance, That was definitely the toughest thing and I

15:25 certainly hope I never experience anything like that again.

15:28 I remember you were you felt that you were quite close to employees.

15:33 How did you do that?

15:34 How did you learn how to do that?

15:36 How did you know that that was the right thing?

15:37 You know, I think for both Steve and myself,

15:40 it was just a natural thing to connect with human beings.

15:44 You know, we you know, we met everybody as we reopened the building.

15:49 When we had people come back, we did a bunch of sessions.

15:52 And one of my colleagues here in London actually said it was the worst of times,

15:56 but the best of Blackstone, because it really showed a humanity that that again,

16:03 made me proud in a very, very difficult situation.

16:08 Even in the worst situation, you've got to still,

16:11 particularly if you're in a leadership role,

16:14 you still have to maintain that calm.

16:17 You have to give people a sense.

16:19 Both one yes, you're in pain like they are, but two,

16:22 we're going to get to the other side because they

16:25 want to know that we're going to get through this.

16:27 And and we ultimately did.

16:28 But as I said, it was an awful thing.

16:31 And at the end of the day, we lost somebody who's really special.

16:35 Jon Gray has become well-known for his distinct online videos,

16:39 not in the boardroom, but on runs.

16:42 I've got a crazy week ahead.

16:44 It's Thursday morning.

16:45 I'm in Riyadh, Saudi Arabia.

16:46 We're also going to see, I think,

16:48 some of these geopolitical hot spots cool down.

16:51 We keep burning wherever we go.

16:53 I wanted to know how this casual approach came about and whether

16:56 it's just a bit of fun or a helpful business tool.

16:59 Jon, I wanted to talk to you a little bit about

17:01 your communications because a lot of people follow you on LinkedIn.

17:05 Do you enjoy communicating directly?

17:06 First of all, who are they for?

17:08 Is it employees or investors?

17:11 So if I roll the tape back, Christine Anderson, who you know,

17:16 who runs our corporate affairs, was pushing me for a number of years.

17:19 You've got to go on LinkedIn.

17:21 You got to communicate.

17:22 Our business is growing.

17:24 We have a lot of stakeholders.

17:26 And I was resistant,

17:27 but I ultimately conceded because I was like, you know what?

17:31 We should do this.

17:32 And I was in Australia and I often would send to my family not post,

17:37 but like, Hey, I'm here in London, this is what's going on.

17:40 And instead I did it for a broader audience

17:43 and we put it on LinkedIn and it went viral.

17:47 So I was like, Oh, I can do other cities.

17:50 This isn't that hard.

17:51 And what I found was that people really enjoyed seeing the travel,

17:56 seeing sort of the human side of this.

18:00 Seeing a little bit of self-deprecating humor.

18:04 You know, when you're doing TV, it's hard to sort of show who you are at times.

18:09 And this felt like a direct way to communicate unfiltered.

18:13 And yes, we've got a lot of stakeholders.

18:17 There are only so many then you can see

18:19 in a given year and they can see who you are.

18:22 And and going back to my earlier comments, it is about trust.

18:27 So if people are going to invest with us,

18:31 knowing who the people leading the business are

18:34 and that they seem like decent human beings, that's helpful.

18:38 And I describe what I produce as sort of dorky dad vibes.

18:42 And and I think it gives people a sense

18:44 of sort of who we are, what we care about,

18:47 some of the insights we can give in the world, and do it in a very informal way.

18:53 And that's worked at some point,

18:55 there will have been too many running videos and it'll be like, enough.

18:59 For now, We keep running.

19:00 But you you enjoy it.

19:01 Is that you?

19:02 Is it your personality?

19:04 Actually.

19:04 It's definitely my personality,

19:06 which is optimistic and and yeah, a little bit self-deprecating.

19:12 And I'm practically British and.

19:14 Yeah, exactly.

19:16 Not quite as dry on the humor side.

19:18 And when I show up in meetings so often people are saying, I saw that.

19:24 It makes for a good conversation starter.

19:26 And when we do want to get out a message on something,

19:29 we can do it in a direct way with a large audience.

19:31 So it has a business purpose as well.

19:33 And then you do these holiday videos, which are,

19:36 you know, a lot of people's highlights for the holidays.

19:39 Yeah.

19:39 Again, why?

19:40 Why do it?

19:41 The holiday videos are a little crazy.

19:43 I don't know who's inside that costume, but I love what Mr.

19:47 Stone is bringing to this firm.

19:50 Surprised I can dunk.

19:52 Yeah.

19:54 Well, I've got to go.

19:55 I've got some holiday cheer to spread and some books to sell.

20:01 When I got this job eight years ago,

20:06 we realized that we'd grown too large to have a Christmas party at the firm.

20:11 And I was like, Wow, I'm going to be like Scrooge.

20:13 I will have canceled the Christmas party.

20:15 So we need to do something that is more fun and make up for this.

20:21 And we decided to do this video and originally it was just internal

20:25 and it sort of got out and people thought it was really funny.

20:28 And so again, it was like, Hey, this works.

20:31 And I think again, the element of this that's helpful is it

20:35 shows the humanity of the firm that we can make fun of ourselves,

20:40 that it's not just tough Wall Street investors and now

20:44 it's become a thing and our clients love it.

20:48 Tell me a Jon Gray day.

20:49 So is it, you know, what time do you start?

20:52 Get up six ish in the morning.

20:57 Try to read the newspapers.

21:00 Bloomberg, of course, always,

21:02 always get a sense of what's happening in the world.

21:04 Catch up if I'm in New York on the Asia and Europe,

21:07 emails that have come in overnight probably read some stuff that if

21:13 I didn't get through the night before prepping for the day ahead,

21:18 get to the office and chockablock meetings, investment committees,

21:24 internal meetings, client meetings, policymakers run through the day.

21:31 If I'm not traveling,

21:32 I like to go home for dinner and then I do emails and calls and read documents,

21:38 investment committee documents at night.

21:41 And then I tend to read a lot of investment committee memos over the weekend.

21:44 So it's pretty all encompassing.

21:48 It's a 24 seven experience.

21:50 But again, you know, for me, using an American metaphor,

21:54 I get to play shortstop at Yankee Stadium, right?

21:57 I get to be in this amazing seat.

22:00 Thinking about ultimately investing is betting on the future.

22:04 And you're thinking about where are things going,

22:06 What does it mean for medicine,

22:08 for media, for real estate, for all sorts of things,

22:12 and doing it with incredible people.

22:15 Rapid Fire top tip for holding a highly effective meeting.

22:20 I think having action items when the meetings are over,

22:24 meetings that end with just a lack of clarity of where you're going.

22:28 To me that's not good.

22:30 So what you want is the meetings over and the takeaway

22:33 is we're going to go do this for this client

22:36 or we're going to go do this due diligence

22:38 on this company and then we're going to come back.

22:41 Action is the thing that matters.

22:43 Would you rather lead on your own or by committee?

22:46 On my own.

22:47 But but I still think of some things like investing.

22:50 I prefer the committee.

22:52 But in terms of final decisions,

22:54 I think one person has to have responsibility topped it for motivating people.

22:59 I think giving people a sense that there is no limit to what they can achieve,

23:05 that their potential is enormous

23:07 and really encouraging people to be entrepreneurial.

23:11 It's not just Steve Jobs in the garage.

23:14 You can be an entrepreneur as an investor,

23:16 as a fundraiser, or frankly, as an accountant, as a lawyer.

23:21 You can think about how can I do things better, How can I innovate?

23:25 You want to encourage people that there's tons of opportunity wherever

23:29 they are in the organization and they should think like an entrepreneur.

23:32 Jon Gray, thank you so much for joining us.

23:34 Francine.

23:34 It was great.

23:35 Thank you.