Blackstone Co-Founder, Chairman, and CEO Stephen Schwarzman, in an exclusive conversation with NDTV Profit’s Sajeet Manghat, reflected on the firm’s 20-year journey in India and its rapid expansion from an initial $1 billion investment to a $50 billion portfolio.
Schwarzman shared insights on how Blackstone adapted its strategy in India, the company’s future plans to bring in new business verticals like credit and infrastructure, and his personal connection to the country.
Below is the transcript of the conversation.
Full Transcript:
Sajeet Manghat: Welcome to NDTV profit. Blackstone is completing 20 years in India, and with me today is Steve Schwarzman, co-founder, chairman and CEO of Blackstone Group. Steve, thank you very much for joining us on NDTV Profit. It’s been 20 years in India, and Blackstone has completed 40 years globally as well. How has been the journey in India? For you?
Stephen Schwarzman: The journey in India has been fascinating, actually, when we decided to come here the first time in 2005 but we announced that we were going to be having an objective to invest $1 billion in India. And at that time, that was a huge amount of money, and we ended up being on the front page of every newspaper in the country, on television, as it was very unusual and unexpected for us. And now, of course, we’ve grown massively here in India, one of the top 10 business houses in the country, we have aspirations to be much, much bigger.
Over the next five to 10 years, we’ve learned how to work in India. It’s not like everywhere else. And we actually didn’t have great success our first few years. And what we realised was that we weren’t doing what we used to do. What we do almost everywhere else in the world is when we’re buying companies, we buy the whole company. Sometimes the people who sell it to us keep some of it, and then we decide, how can we make this business grow better? Because Blackstone are business builders, and we started out buying minority interest, which is what people were doing at that time. What we found out is that that was a frustrating strategy for us, and didn’t always have a good outcome. And so we changed what we were doing, and we went back to our roots around the world, and we said, okay, India is different in a lot of ways.
But controlling and managing a business is pretty much similar around the world, and once we made that change, we’ve done amazingly well, and our results in India are our best any place in the world, and we’ve grown to be the largest foreign company in India — the largest owner of real estate in the country, the largest leverage buyout firm, private equity firm, you call them now in the country, and it’s been a remarkable experience, and you don’t do that without having amazing people working in India. And what we’ve learned is that the talent pool here of extraordinary people is very high and so we feel very lucky to have been here. We were here really early.
I always thought India would be an interesting place. When I grew up, my father had been in India for World War Two. He was in Calcutta and for the US Army. And I had a little jar of carved ivory that he brought home with pictures of elephants on it. So I grew up looking at that every day, and so I always wondered, you know, what it would be like. So I had this very positive feeling about India just from childhood, and it’s turned out to be an absolutely wonderful experience for us at Blackstone, and we’re going to be bringing more of our business areas here.
Sajeet Manghat: I would like to speak to you about that, because you’ve been able to adapt to the Indian conditions. Grow your portfolio in India to $50 billion. Globally, you have an asset base of $1.1 trillion and when I say that in 20 years, we’ve been able to grow from $1 billion which you first envisaged, to $50 billion now, what is new that Blackstone is going to bring to India, with respect to the kind of investments, thematics, sectors, what is new which is going to come in the next 20 years?
Stephen Schwarzman: Things will happen faster than 20. And you know, we continue building great companies here that we acquire and continue building our real estate, we will probably be bringing, at some point, our credit business around the world. We’ve extended about $450 billion of credit, and we have nothing here in India. And Indian economy is quite vital, and so it’s logical that we should want to do that.
Another area that’s interesting in India is infrastructure. We have a marvellous infrastructure firm within Blackstone. And so this is another logical area that we can look at.
A third one is we sell products, investment products, around the world to what’s called the private wealth area, which is individuals. And we think over time, that would be a wonderful thing to do here. So those are only three things in addition to the two huge areas which people see us now as very substantial and large.
But I remember when we had nothing, and so you can build very substantial businesses in a country like India, because of the growth, because of the flexibility of the people, because of their intelligence, because the government is improving the ability to do business here, it’s never been easy. India is a complex place, which everybody knows, but it’s becoming slowly, little less complicated. So I think the central government here has made a lot of strides to the leadership of Mr. Modi.
Sajeet Manghat: Over the last 40 years, you began, began as a property fund, and then transitioned yourself into various sectors which you spoke about as well, that want to bring to India, which infra, private credit, in thematics, you have data centres and others. What has been the kind of experience that you have when you moved out and diversified from just being the largest real estate owner to other thematics?
Stephen Schwarzman: You have to be curious in life. And I’ve always been interested when things are changing, and I like to try and figure that out as soon as I can, with as little information as I can. So to enable that, at Blackstone, what we do is we have all of our business units meeting every Monday, and there are about six of us who sit at a big table, and each group comes in, we learn about everything they’re doing in terms of new deals, new investments, problems or good pieces of luck with our existing investments.
And because each one of our groups operates globally, that we learn things by the end of the day sitting at a table of how the world is changing, and little pieces of information have enormous power most people, when they hear something that is inconsistent with what they have seen and believe don’t have any interest in that piece of information. They just keep doing the same thing. The way we’re trained is that little piece of information that’s inconsistent is the pathway to change happening, and we just have to figure that out. And as soon as we figure it out, then we say, okay, where else in the world is that same change that other people don’t see going to be happening? And then we buy something there, or we sell something because something bad is going to happen.
That exploration is fascinating, and that’s what gives us an edge. Once you see that something’s happening, you absolutely move to accomplish. What that tells you? You don’t hesitate, you don’t consult five other people. You know that that’s happening, and that ability, that predisposition to action with paradigm changes, is what’s enabled us over time, along with great people, to accomplish something that is very rare in the business world.
Sajeet Manghat: You’ve been one of the early movers in strategic shifts —data centres being one of them. What is your view on how data centres business is going to be? Within Blackstone, you have nearly $80 billion of assets in data centres, and I think, if I’m not wrong, another $100 billion under development. So how do you see the database centre business growing? And where do you see India in the whole scheme of things?
Stephen Schwarzman: Well, the database, the data centre industry, is going to continue to grow rapidly because artificial intelligence is going to grow rapidly. And you cannot have artificial intelligence without data centres, because that’s where the computations and the computer is located. And so if you believe in artificial intelligence, which I do, and so do almost everyone who knows something about it, then data centres will expand in terms of scale. Conventional wisdom is that there’ll be a trillion dollars more of data centres built in the United States over the next five years, and a trillion dollars outside the United States.
Right now, India is quite small in that regard, probably for a variety of reasons. That will change over time. So these are early, early days for India, and we have a company here doing that. We bought another company in Australia that’s actually much bigger. We’ve made a commitment here in India to put $11 billion into data centres. So this will be a trend that increases over time here. As I say, it’s early days.
Sajeet Manghat: You mentioned the fact that artificial intelligence will play a big role going forward. And you’re very bullish on artificial intelligence, but there’s a huge debate which is going on this cost of artificial intelligence. Do you think that investments into artificial intelligence will continue? And as cost efficiency brings in more low cost AI into it, will the use of data centres increase going forward?
Stephen Schwarzman: Well, I think that’s all true. And, you know, I think that the power of the artificial intelligence movement, if you will, is going to be growing at a very accelerated rate. You’re just seeing the beginnings of that. One of the experts told me that ChatGPT, which was the first artificial intelligence application that the public saw, was like a very smart person with maybe an IQ 180 to 200. The experts have told me that then, that 180 to 200 IQ for artificial intelligence is going to end up as 12,000 IQ.
If you can imagine dealing with something that has a 12,000 IQ, just let your mind wander as to all the things that it can do to help you have a better life and have interesting experiences. It’s really stunning to think about that, and that should be happening as soon as we can let the technology develop, which will happen over the next 10 years, and build as many data centres as the system can take, because they consume a lot of electricity, so different countries will start running out of electricity in the developed world.
And you know, imagine what all of that can create for the human being. Some amazing stuff; accelerated drug development, so people will have better health, better lives, different ways of developing education through your smartphone, which will be particularly good for a country like India, where the wealth of the country is, besides being uneven, there’s only a $3,000 GDP per capita. So there are lots of people who could use enhancements in their life. The people who were experts in AI believe that they’ll be able to deliver to that cohort of people. How wonderful will that be if people’s lives can be improved?
Sajeet Manghat: If AI is going to have an IQ of 12,000 where does it leave all the tech companies?
Stephen Schwarzman: Well, where does it leave humans? Where it leaves humans is wanting to have a friend that’s AI that can do things that we can’t do in a commercial setting. In terms of doing research that AI will be able to do things that take weeks of work. You can do that in five minutes or less. So it will increase the human’s ability to accomplish things.
Sajeet Manghat: You know, you mentioned in one of your answers that the world has changed, and the world is changing now drastically in the last couple of quarters. There are issues of growth, inflation, interest rate, you have tariff all those coming into play, and that changed the dynamics in which businesses flourish or work. How do you navigate this kind of volatility, given that you have seen the entire cycle of business in the last 40 years?
Stephen Schwarzman: Well, there are certain things that people get very excited about because they’re happening today and they weren’t happening six months ago, so they think that that will be exceptionally disruptive, or they sometimes get overly worried about certain things that I’ve seen over time. The system adjusts to those and we have a number of things going on as you mentioned at the moment, so you’re seeing securities markets respond to those uncertainties, You know, mostly by going down. But not everywhere, Europe, which was a real laggard, economically, is going up. And China, which was very much a laggard, its securities markets are going up. So different parts of the world get affected in in different ways.
I found it’s important to try and figure out where you think the biggest impact will be. Try and get a sense of how long period of uncertainty will exist. I don’t get excited when things go down when they should, and there are a lot of people who try and change that trend by changing behaviour. And so as humans, we tend to think things move in straight lines. We extrapolate either things that are bad, they’re going to be terrible, or things that are really good, they’re going to go on forever. I’ve learned that trees do not grow to the sky and the world is also not ending and so figuring out which of those trends are short term, you can take advantage of that.
Most people get so worried, they almost panic, and they stop doing anything. That’s the wrong answer. And so I’ve seen a lot of cycles, and you usually can tell where you are, in that, you don’t buy things right away, let it get bad, and then when everybody else is sort of really, really worried, that’s usually a time when things are going to switch. And that’s when we try and invest.
Sajeet Manghat: Is this the new normal for the world?
Stephen Schwarzman: Its a new normal, because technology and the use of the internet is taking reactions that never would have happened, and now they become shared by groups, and so that increases volatility, because the instant communication that we have. We used to read newspapers to find out what was going on. It’s a huge lag with that, and we went to television, which has the ability to reach people simultaneously. And now everybody has their own little communications network, and they get things immediately. And that’s how Silicon Valley Bank went bankrupt, because somebody said, I think they might go bankrupt in a few hours. That was communicated to other people who said, “Give me my money. now!”
There was nothing wrong with Silicon Valley Bank, which was the second biggest bankruptcy in US history. What was wrong is that everybody could take their money out at the same time. So that kind of almost harmonic move introduces risk and change. So you have to be aware that when certain things happen, sometimes they end up, over the short term, having a bigger amplification factor. But you know, I’m comfortable with that just because that’s the way the world is. So you have to manage people’s money in a way that protects them from that kind of overreaction.
Sajeet Manghat: Steve, I’m running out of time, but my final question to you is, as a business leader, how do you navigate and what is the kind of message that you have for the business, small businesses and big emerging businesses in India to navigate this volatility?
Stephen Schwarzman: I think with India, because there isn’t as much of that connectivity as there is a developer, that India has some natural protections. They also have quite good regulators who are alert to protect their society. So if I were a small business person, I would not worry, because India has shown that it can grow through virtually every one of the problems that have affected the wider world. And maybe the world is slow to work by but it’s not the end. So I think that the prospects for India are very good, despite the fact the stock market has been sloppy here over the near term. It was probably a bit frothy and overvalued before and India has been around, you know, for thousands and thousands of years. And you know, it’s always been a major country. And as a small business person, you have good government, you have a lot of very positive things here. I’d be happy to be careful.
Sajeet Manghat: It was pleasure talking to you and congratulations again. Twenty years in India and many more to go. Thank you very much.
. Read more on Business by NDTV Profit.From initial struggles to becoming India’s largest foreign investor, Schwarzman shares insights on Blackstone’s journey and what lies ahead. Read MoreBusiness, Notifications
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