by | 26, Aug 2022

Book Deep-Dive: What It Takes

Schwarzman’s story is an empowering, entertaining, and informative guide for anyone striving for greater personal impact. From deal making to investing, leadership to entrepreneurship, philanthropy to diplomacy, Schwarzman has lessons for how to think about ambition and scale, risk and opportunities, and how to achieve success through the relentless pursuit of excellence. Schwarzman not only offers readers a thoughtful reflection on all his own experiences, but in doing so provides a practical blueprint for success.

Remember, with each episode, we will provide a helpful Deep-Dive infographic where we break down the entire book on to 1 page! And we finally have a link for you to find all of them! Visit invictusmultifamily.com/notes to find all of the sophisticated investor notes!

Here are our top 10 takeaways:

  1. Make It Easy
  2. Excellence Follows Enthusiasm
  3. Size Doesn’t Matter
  4. Big Talent
  5. Systematize Your Decisions
  6. Death By Time
  7. Ask For Help
  8. Art Of The Follow-Up
  9. Ego
  10. Fewest Players

Tweetable Quotes:

“The longer it takes, the more variables that are going to get introduced that you could just never have foreseen.”  – Anthony Vicino

“When you’re negotiating something, you gotta remind yourself, don’t let your ego get too attached to your purchase price.”  – Dan Krueger

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five rules of investing

The Five Rules of Investing

** Transcripts

What It takes

[00:00:00] Dan: Hello, and welcome to multifamily

[00:00:15] Anthony: investing made simple to podcasts. It’s all about taking the complexity out of real estate investing so that you can take action today. I’m your host, Anthony, the casino of Invictus capital joined as always by Dan Kruger, Kruger

[00:00:26] Dan: Kruger Kruger. Kruger the second. Oh, I’m the first does Kruger.

We talked about this already. This is Dan do Kruge. Oh, I like that. That’s kind of cool. Sounds very Spanish. Ah, Danielle,

[00:00:37] Anthony: Danielle do

[00:00:37] Dan: Kruge. Yeah, I got, I like that. Antonio Ben vibe. I’ve

[00:00:41] Anthony: always, I’ve always gone for that Antonio Bendo vibe. Am I hitting it? What happened to him? What do you mean? What happened to him?

He’s still out there being awesome. I haven’t seen him do anything. Really? Yeah. He was in a movie recently. I saw and I was like, Antonio Bendera still got. Yeah, but you got how with a name like in Antonio Bandera, do you ever really lose it? [00:01:00] No, you do. No. I mean, the cast him is Zora and I believe they put in his contract like, Hey, if you ever lose it, you’re gonna have to give us all your money back.

And he is like, no worries. I meant Antonio Bandera. I, I lose nothing. Um, which has nothing to do with multifamily investing or what we’re here to talk about today. But, um, for listeners at home, if you know, you know, And if you don’t, no. Let me explain I dunno what to do with that today. So today on this, uh, this episode, we do our book deep dives, and this is a really exciting one for Dan and I, because, uh, we don’t talk about real estate at all.

We actually talk about our first and, um, most important love books. Mm-hmm specifically a book that has been really impactful or been interest. For us to read and we wanna bring it to you guys. And, um, ideally 30 to 40 minutes of deep dive so that you don’t have to go and read the book cuz reading books.

Awesome. But very time consuming and listen, you’re busy. There’s a lot of Antonio Ben, Dennis out there to consume a lot and you can’t consume it all if you’re busy reading books. So we’re gonna help you out. We’re gonna, [00:02:00] we’re gonna break this book down today and then you can watch Zora on repeat for the 32nd time.

There you go.

[00:02:06] Dan: That’s not even that

[00:02:07] Anthony: great of a movie is. Not as finest hour. Yeah. I’ll be honest. Um, what is, okay. Segue. What is Antonio Bandera’s best movie.

[00:02:17] Dan: I’m trying to remember. I, it was all like in the nineties, the stuff I’ve seen unfairly, you’ve been keeping up with this recent work. I mean, yeah, there’s Zora there’s, uh, there’s something with Angelina Jolie, right?


[00:02:28] Anthony: I always think about Catherine’s Zeta Jones. When I think of an Antonio bandana, I think of Catherine Zeta Jones and I don’t, that is a good combo. That’s a killer combo. But she’s with Michael Douglas or something. Mm-hmm , that’s a weird combo. That is a weird combo. That’s a weird combo. Um,

[00:02:41] Dan: good for you, Michael.

Um, he’s still got it, apparently. Yeah. All right. Let’s talk

[00:02:45] Anthony: about today’s book. What is the book? This book is interesting. It’s called what it takes, and if anybody knew what it takes, Antonio would know also the author of this book, Steven Schwartzman would know mm-hmm okay. Audience listener. I want you [00:03:00] just to take a second close your.

if you’re driving don’t and if you’re running on a treadmill, don’t do that. Um, just close your virtual eyes. And I want you to think, okay, Steven Schwartzman, I should know that name. I should know this name. Who is this? Cuz most people will probably go. I have no idea who Steven Schwartzman is, but you should because here wait, why, why should they know?


[00:03:26] Dan: he is a pretty big deal, I guess, for, you know, investors like us. We, we know who he is, but, um, yeah, he is been, I think, pretty impactful on the, on the financial industry

[00:03:38] Anthony: world stage. Yeah. He runs, he started a company called, you know, might have heard it Blackstone. Mm-hmm honestly, and a lot of people, if you’d never heard about Blackstone, like that’s not super surprising.

They’re holding company that pretty much goes out there and does what we. um, it’s funny. It’s funny when I can, when I can like, say Blackstone is just out there doing what we do, where they go. We’re basically the same thing where we go in, we buy real [00:04:00] estate, we, we fix it up, we add value and then we make it, we improve it.

Right? So, um, value add operators. That’s what they do for real estate, but they also do it for primarily for businesses. They go make businesses better. And I think at this point, if you added up the market cap of all the companies that they own, and they’re part of like Blackstone, One like top 10 biggest companies in the world, right?

Like it’s gotta be at this point.

[00:04:23] Dan: Yeah, I think so. Um, I’m trying to remember any specific numbers on their, just like total holdings, total assets, but I mean, it’s in the trillions trillions. So

[00:04:31] Anthony: trillions so runs, uh, Steven Schwartzman really interesting guy started one of the biggest companies in the world.

If you know who Elon Musk Steve jobs is are, but you don’t know Steven Schwartzman like, um, he’s the

[00:04:42] Dan: finance equivalent, I’d say finance, those kind of engineering product guys.

[00:04:46] Anthony: So this book is. It it, uh, maybe a week or two ago, we talked about, um, Felix Dennis’s book, how to get rich. And this book kind of falls into a similar line for me in that it’s coming from somebody who’s done the thing at [00:05:00] the highest levels of the game.

And then he is like sharing his thoughts about his story, how he got there, what were some of impact, the impactful takeaways and those books just they’re so interesting. Mm-hmm cause anybody can write a book on like how to get rich or how to build a big. but very few people can write a book about what it actually takes to build a trillion dollar company.

[00:05:20] Dan: Well, typically the guys that actually do that kind of thing, uh, don’t have any interest in writing a book about it. Um, cause you know, why, why would they, so it’s rare when somebody actually has done that kind of thing and chooses to share that with the world. Cause usually they might share it with their kind of inner circle family, close friends, but they’re not gonna go through the effort of writing a book and publishing it and putting it out there.

Like, cuz that’s not easy. It takes a long time to it’s it’s hard work. Yeah. So, and honestly,

[00:05:47] Anthony: it’s kind of a thinkless task in a lot of ways. Compare it to. Writing this book and the legacy or the impact it’s gonna have on the world versus what he could have by just going, buying another billion dollar business.

Yeah. And then like [00:06:00] much more, many more avenues of impact. Uh, so a book is, is rare from these guys. So anytime we can get one, it’s fun to dive into. And we did,

[00:06:10] Dan: we did king of capital, right?

[00:06:11] Anthony: Yeah. While back, long while back. Yeah. And one of the first episodes we did actually is king of capital. Yeah, that is not a biography.

That’s somebody else wrote

[00:06:20] Dan: it, right? Exactly. Yeah. I was gonna say for our listeners, this is, um, his version. I don’t wanna say his version, but king of capital was a book about, uh, Steven Schwartzman and the, uh, uh, The building of, of, of, uh, Blackstone. And, but it was written by somebody else. I can’t remember who wrote that book, but it wasn’t Steven mm-hmm

Um, so this is gonna be Steven’s perspective, uh, as the guy who actually did the thing, which I enjoy

[00:06:44] Anthony: quite a bit more biographical. So, um, as always, before we get into these takeaways, Dan’s gonna give five of his takeaways. I’m gonna share five of mine, but before we do just know that, um, we’re taking all of these takeaways, we create what’s called a sophisticated investor notes, which is just a single page.

[00:07:00] Uh, infographic with all the takeaways, easily bite size consumable so that, uh, if you don’t ever want to listen to this episode again, to get the takeaways, you just keep those notes. You put ’em on the refrigerator and then you’ve got ’em forever. You can download those for free. By going to Invictus multifamily.com/notes, then you can go download ’em.

I think at this point, we’re up to 18 or 19 of them, so, wow. We’ve done a lot of books at this. so what do you say, shall we do another? Let’s do

[00:07:28] Dan: it. All right. Let’s get one more. What’s

[00:07:30] Anthony: what’s your number one? Uh, takeaway when I’m looking. I know you don’t do, ’em like by number

[00:07:35] Dan: one level of importance. Okay.

Yeah. Well, Nu the first one I have is probably not my number one. Um, I think honestly number five might be my

[00:07:43] Anthony: number one. Oh, do you wanna start strong and, and weak? Or do you want to, what do you wanna do here? Well,

[00:07:47] Dan: I kind of wanna answer your question. You ask my number one, one. What’s your number one. All right.

The first one on my page. Um, Not necessarily my, my number one is just the first one I wrote down. Um, but I like it. Uh, investors are always [00:08:00] looking for great investments. The easier make the easier you make it for them. The better it is for everybody. And there was a section in the book where it was early on in Steve’s, uh, career at, uh, he was working at Lehman brothers.

That’s where his career started. Well, it wasn’t, it wasn’t his first place, but that was one of his, his earlier, uh, positions in his, uh, role in, in finance, on wall street. And he was tasked his tasked with raising about a hundred million dollars for the IPO of student loan marketing association, which is basically, um, it was, it was set to be the biggest student lender.

In the business. And this was, I believe, probably back in the nineties, maybe early nineties. Uh, maybe it was even before that I cannot remember the the year, but for those of you who aren’t aware, it wasn’t until the nineties and into the two thousands that that market just exploded. So he was given the task of raising about a hundred million dollars, uh, for this, uh, student loan marketing association IPO.

And, uh, the first stop on his, uh, his road show was, uh, speaking with George put. [00:09:00] Founder of Putnam investments, um, which was, you know, I’d say one of the, one of the bigger, um, mutual fund, uh, places out there started a long time ago. Um, but anyways, uh, George Putnam was working as Harvard’s treasurer. and so Steve thought, Hey, what better place to go raise money for a student loan, uh, company IPO than all these universities.

And he went to Harvard. So he went, uh, and talked to, um, uh, to George Putnam and he shows up with his deck. He’s got all his dad, he’s got this big presentation. He’s new, he’s green, he’s pretty nervous. Uh, and he shows up and he starts to pitch George on, on this, in. And George kind of, uh, cuts him off and he is like, no, no, no, stop, stop.

All the things you’re saying, stop showing me all this data. Stop showing me all this stuff. That’s gotta be a bad feeling. Yeah, I’m paraphrasing. I don’t know if he said exactly that to him, but he effectively cut him off mid pitch. Anytime somebody cuts

[00:09:51] Anthony: you off mid pitch. Yep. Feels bad. It does feels real

[00:09:54] Dan: bad, but it worked out.

It worked out for him because, uh, he wanted to actually help Steve. And he said, here’s, here’s what you gotta do, [00:10:00] Steve. Uh, when you, we’re gonna start this over entirely, we’re gonna start this pitch over from scratch. And here’s what I want. You. Hi, my name is Steve Schwartzman from Lehman brothers, and I’m starting the largest student loan lending business in the us.

And I have you down for $20 million. That’s it? He’s like after this, you’re gonna go to this next school and this next school and this next school. And you’re gonna say effectively the same thing. Here’s what I’m doing. Quick bullet point. I’ve got you down for X amount of dollars stop. And what he said was what I started with there.

That investors are always looking for great investments and you wanna make it as simple as. And you’ve heard us say, say this, uh, many times before on this, this podcast that a confused mind always says no. And so you don’t want to go in and just dump a bunch of debt on people and, uh, you know, then ask them, okay.

Now, what do you want to do you wanna try to simplify that as much as possible? Um, and George actually did end up putting in 20 million because he had already actually done his research on the company before Steven him and showed up. Uh, he already knew he wanted to invest in it, [00:11:00] but he decided that he wanted to help Steve out and say, you know, here’s how you gotta do it.

Just simplify it, keep it simple, make it easy.

[00:11:06] Anthony: That’s some big, um, I don’t know, uh, that’s some big energy and it takes, it takes some energy, I think, to walk into a pitch when you’re new or any pitch and just like, here’s what I got you down for. Boom. You’re in. Um, you gotta. You gotta own that one. You gotta say it with a certain level of, uh, confidence.

So, yep. Yeah. that’s all I’ll say there. I don’t know if I could do it. That’s I think you gotta work up to I’m

[00:11:33] Dan: know Steven Schwartzman. I don’t think you do that on your first deal or even yours of deal or your third, but once you got a track record, I think you can go and just be like, here’s the, here’s the thing we’re doing quick and easy.

We’re looking for X amount of dollars a you and

[00:11:47] Anthony: a out. Yeah. The, the follow up, I remember from that story in particular was now you use this as your leverage point in every other conversation, you walk into the Yale, into the Yale conversation and you say, Hey, I’m George putting him over at Harvard down for 20 million.

I got you down for 20. [00:12:00] boom. Right now you use social proof and now gets even easier when you go to, um, Cornell. And you’re like, Hey, I got George Putnam from Harvard for down for 20. I got the guy from Yale. Then you call him the guy from Yale. Yeah. Um,

[00:12:12] Dan: down for, for 20, that that’s a, that was an important nuance.

I, I didn’t call out there. Uh, George was down for 20 and then each subsequent school he was telling, uh, Steve to go to the number, got less and less and less. So, uh, what he was pitching was, Hey, George, over here is doing 20. We’ve got you down for. Yeah, it, it’s got a nice little ring to it.

[00:12:30] Anthony: You gonna, you gonna beat George, screw you, George.

I’m coming in for 25. Boom. All right. Here’s my number one. Takeaway. And by number one, I mean the first one that I wrote down excellence follows enthusiasm. I, I, I, I re I realize now that you wrote your notes very differently than mine, you have stories and everything. I just took like key word phrases that were like, that’s a good, that’s a good one.

So my, I don’t have stories to back up mine, but I do think this concept is that that excellence follows enthusiasm is really, [00:13:00] really important because. In the beginning, you hear people say like Steve jobs and you gotta go follow your passion, do the thing that you love. And I think that message has gotten really misconstrued by a lot of young people and even middle aged people who think that means you just gotta go do the thing that you love and then try and find a path towards monetizing that and whatever, when in reality, like.

Steve jobs. Wasn’t really passionate about the thing like computers and personal computers back in the seventies. And when he started, right, like he was passionate about something else. But the thing that he was passionate about led to, um, like the development of skills, he was, he was enthusiastic about what he was doing.

And when you’re enthusiastic about a thing you’re gonna put in the long hours necessary. That are, that are a prerequisite of succeeding. So you put in long hours, you get good at the thing. And as you do that, that breeds excellence, right? And so if you’re not enthusiastic about what you’re doing, if you can’t muster enthusiasm for the opportunity or for the skill set that you need to acquire, you will never stick with it long enough to become [00:14:00] truly excellent.

And even if you do stick with it long enough to be excellent, you won’t be the most excellent because there will always be somebody else out there who. Has more enthusiasm and therefore we’ll be able to grind it harder and become even more. Excellent. So I think this is a really cool concept, which is excellence follows enthusiasm, and it’s a good benchmark to ask yourself, am I, am I capable of being truly excellent at this thing?

Like, am I really enthusiastic enough about it? Because it doesn’t have to be a passion. Like there’s a lot of things that I do that I’m not passionate about, but I’m very enthusiastic. .

[00:14:32] Dan: Yeah, I think a synonym might also be, um, uh, excellence follows, um, obsession. Right? So you could be obsessed with getting through like a really difficult thing, even though you might not really even enjoy the process.

It might be painful and comfortable and stressful, but if you’re obsessed with a accomplishing the thing, getting it done and, uh, achieving hurdle, um, I think we’ve talked about this before that, that feeling of success and, and accomplishment that comes from. [00:15:00] Uh, achieving that difficult thing is gonna make you enjoy doing it again.

So like putting together a puzzle, for example, like, it might be really hard, but it’s really rewarded when you get done. And then you do that enough times and you might actually start to like puzzles. I don’t like puzzles, not like the little putting the pieces together type puzzles. I do like figuring things out, but yeah, like a jigsaw or you like, I’m not a J.

[00:15:21] Anthony: What kind puzzle. What kind of puzzle are you? Um, do you refer to yourself as a

[00:15:24] Dan: puzzler? No. . Do you have any of your bios? No, not a puzzler. No. I like solving problems. Um, like business problems, a problem, or? Yeah, I like business problems. I like, I actually do, like, when people give me. Some sort of difficult situation that they’re in and I can try to find a solution for it.

I like that, but I don’t like jigsaw puzzles or crossword puzzles. I don’t know why I really

[00:15:46] Anthony: like being able to problem solve other people’s issues where there’s no consequence to me. exactly. I love that.

[00:15:52] Dan: That’s my favorite. If you don’t solve it,

[00:15:54] Anthony: you’re good. You just go home. If you’re, if you’re a listener and you got some problems that you need help with, uh, that, you know, ha bear [00:16:00] no consequence to me in my personal life.

Hey, shoot me an email. I’d love to help you out.

[00:16:06] Dan: all right. uh, was that your number one? That my nose, my UNO, your first I should say. All right. Uh, my number two, uh, second on the list. Not second best or anything. Uh, it’s hard to start. It’s just as hard to start a small business as it is to start a large business.

and, um, this was, uh, something that I think just one of mine real quick. One second. Yeah. I just stole one from you. I’m just keep going. I’m sorry. that means this is probably a good takeaway. If we both, if we’re doubling up on something, this means it’s probably important, but, um, and this is something we’ve, we’ve talked about in relation to real estate where we’ll say, and this almost cliche at this point, uh, it takes just as much work to go out and buy a 10 unit, uh, property as it does to go by a hundred.

and so you’d wanna make sure that you’re actually putting your time and your effort into the, the thing that’s gonna really move the needle for you. Um, but, uh, Steve talks about this concept as well. And this is one of those examples [00:17:00] of times where I find something that is just kind of confirming my way of thinking already from books like this.

Um, but Steve’s perspective was that, um, it is gonna take, uh, just as much time and effort, uh, to create, uh, small little rinky dink business as it is to do something really big. And so if you’re gonna be sacrificing your. Uh, your family, your friends, uh, maybe even your sanity, uh, to, to go and start a business from scratch.

Like you did it better, move the needle and be really impactful on your life because whether it’s small or it’s big, there’s gonna be a bunch of negative consequences to doing this. Um, like I said, it’s not gonna help with relationships or anything like that. Um, and there’s, uh, some parts in the book where he was talking about, um, his time at Lehman brothers and he was in the M and a business there, which is mergers and acquisitions.

Um, and so this could be, you know, taking a company public, or it could be, uh, facilitating the, uh, the merger of two companies. Um, but basically that is a very [00:18:00] transactional business, which requires a constant flow of new clients to be coming in. And there’s good money there, but there’s no really kind long term wealth coming from.

It’s very transactional and I kind of equate it to being a real estate agent or real estate broker. Yeah, you can make good cash, but it’s very transactional. As soon as that deal’s done, you gotta go find another. and he also advised a, uh, KKR, uh, deal, which was, um, uh, KKR was a really big private equity company way back in the day.

And they were, oh, they still are. Oh yeah, they still are. And they were, uh, they were kind of the K the Kings of the LBOs leveraged buyouts.

[00:18:34] Anthony: We, uh, this is, we almost bought a building from KKR. Do you remember that?

[00:18:38] Dan: No. Which, oh, that, uh, that’s fleet farm. Yeah.

[00:18:41] Anthony: Yeah. Yeah. Just wanted to put that in there. Cause like we we’ve crossed path.

We’ve crossed swords with, they would’ve been our. Yep. They would’ve been our tenant.

[00:18:48] Dan: Um, we did by the building. So they, I mean, I think they could make the rent pretty short yeah.

[00:18:54] Anthony: I feel pretty good about them making their rent. Yeah. Big company. Anyway, I’m sorry.

[00:18:57] Dan: But, uh, yeah, so these guys were the Kings of [00:19:00] LBOs, uh, way back in the day.

and, uh, Schwartzman noticed, uh, the stark difference between the M and a business and the LBO business where, uh, a leveraged buyout deal. It’s very similar to what we do with, with properties. Uh, it’s got a, a long timeline on, it could be five to 10 years. And there’s money made a few different ways. You’re not just getting a fee for services rendered, but you’ve got fees coming in from, uh, assets under management.

And you’ve got your carried interest, which is your, your equity. Um, and so you could do one deal and be making money off of that for five or 10 years. And so you can go through a little, uh, period where you’re not really doing more deals if, if you need to. And so he recognized that as a much more efficient way of generating wealth and growing a business, as opposed to the M and a business.

so the main takeaway here is that if you’re gonna be doing anything, make sure it is substantial. Uh, because starting a business is gonna take a lot of work and it’s gonna take a toll. So go big.

[00:19:58] Anthony: Yeah. And that ties into, [00:20:00] okay, so that took one of my takeaways, but I can pivot it because you also said something else related to this, which is, uh, big talent is attracted to big opportunities.

And as a result, um, doing big things is actually a lot easier. Yeah. He used the example of how hard it is to start a grocery store, for example, and how you’re gonna be spending all your time and energy on that as an owner. But the quality of help that you’re gonna be able to attract to help you in your grocery store is never going to be a plus superstar energy.

Like you’re never gonna get that like young Harvard grad who’s capable of moving mountains because the, the, the magnitude of the opportunity is just too small. And as a result, you’re gonna always have to settle for class B, class C uh, people. As a, it’s gonna be really hard to scale. I actually ran into this.

We ran into this at a, at escape because as a manufacturing environment and as a result, like there, there are great people for working in the manufacturing line. No doubt. However, it’s generally not the place that you’re going to be able to attract [00:21:00] really, really, really big talent. And it’s people who are really good with their hands.

I like doing the thing over and over, but they’re not necessarily thinking about how do I grow and scale this company and like bring a massive opportunity. And so that, that was one of the big takeaways is. Pursuing big opportunities in a lot of ways can be easier than doing the small opportunity because you’ll be able to attract a higher quality higher level of talent, which seems counterintuitive at, at a certain degree where you’re like, wait, why is the bigger thing easier to do?

But, um, it’s true. Doesn’t mean it’s easier, but, um, yeah, I

[00:21:32] Dan: wouldn’t say easier, but you can get better partners.

[00:21:36] Anthony: Yeah. It’s not as hard. It’s not proportionally as hard as you think it would be compared to the short, the smaller opportunity. Yeah. It’s, it’s very strange. But, um, the takeaway, the really big takeaways, just making sure that like, whatever you’re gonna spend your time and energy on is a, is like, make sure that juice is worth the squeeze, so to speak.

[00:21:54] Dan: Exactly. Um, alright, mine. Number three. Again, no particular [00:22:00] order. Um, this one’s actually probably near the, near the top of, uh, the list actually, but, uh, systematize your investment decisions. Um, so there was a, uh, a story in the book about, um, Schwartzman raising funds for a deal at Blackstone. So this was after you left Lehman brothers, after he started Blackstone and he was convinced by a, a new, uh, potential partner.

Uh, to move forward with a deal that had some inherent risk, which he, um, I don’t wanna say didn’t recognize, but, uh, underappreciated, this was, uh, Edgecomb. I believe this was some sort of steel industry company where there was a lot of risk tied to, uh, the price of steel. And Steve was convinced by a pitch, uh, that this deal was, uh, gonna be, was gonna be great.

And there was some emotion involved and he did. Ask around to all the analysts and all the team members about what everyone thought they ought to be doing. He was, [00:23:00] uh, he was sold by a, uh, you know, a, a potential partner who had some, some pretty good sales skills and he went ahead with it and they, that deal did not go well for them.

And he realized that, uh, there was actually an analyst on the partners team that wasn’t entirely confident in the deal had. He actually, uh, had everybody at the table voice their opinion. Um, those concerns would’ve come to. . And from that point on, uh, Steven, as his partners at Blackstone, decided that they needed to get all senior partners involved in decision making process for all investments and have an investment board and have the, um, uh, kind of the lower level guys in the company who are finding the opportunities, come and pitch to them as a team.

And they all needed to sign off. But specifically, they all needed to really focus on the downside risk and effectively try to break the deal in a very respectful way. So no one’s getting their feelings hurt, but everybody had to try to pick it apart and figure out where it was weak and doing that ensures that not one [00:24:00] person’s kind of emotional.

Um, brain starts to take over or their, their lack of insight into any particular area. So they kind of created this meritocracy type of environment where all the, uh, all the key players need to sign off on something in order for a deal to actually go through. And I thought that was. Uh, that was good because, you know, we, we’ve got kind of a team of two here.

We kind of do that, but I think that becomes, uh, more and more important as we grow. And as the team grows and as deals get bigger, we wanna make sure that everybody has a chance to, to check the box, make sure this, this fits the parameters that we’ve all identified and nobody gets emotionally attached to a deal because that happens.

sometimes some something will come across your desk and there’s, for whatever reason, you just really like the deal and you start to kinda sell it to yourself. You start to kinda get a little bit too, um, optimistic about your underwriting. So

[00:24:57] Anthony: this reminds me of, uh, our [00:25:00] boy Ray alio in the meritocracy system that they have there.

They have a, a process of, um, what is it called? Candid, radical candidacy or radical. uh, candor. Yeah. Where there’s this expectation of, of telling people exactly how that is and like what they think of a deal. Um, so I saw a lot of similarities here between how Ray Dalio runs bridge stone, Bridgewater, Bridgewater, and Bridgestone tires.

Um, and and Blackstone who probably owns Bridgestone, probably

[00:25:29] Dan: like one of these guys, probably

[00:25:30] Anthony: one of these guys owns it. All right. Uh, here’s my third take. time wounds all deals. Just a really simple, easy concept to get your head around, which is when you have a deal on the table, you gotta move fast because the longer it takes between when you get the thing under contract to when you close it and like, well, you’ve seen this, like things come up, people get cold feet, people get weird.

People like markets change. And so time wounds, all deals. And so it’s nice to have a long runway and have the [00:26:00] optionality of being able to extend things. But your goal should always be whether you’re the seller or the buyer is one to maintain as much optionality to extend as needed, but your ultimate goal should be to get the thing done as quickly as possible.

Cause the longer it takes, the more variables that are going to get introduced that you could just never have foreseen. and I think this, um, this particular story comes from, you know, he’s working on this global economic scale where, you know, he wants to get into steel. And then all of a sudden something happens in Thailand, which sets off this cascading of events, uh, in Russia, and then back into China, which then next thing, you know, tanks, the prices of steel, let’s say, so for him, it’s like a lot can change.

And the factors that we can see clearly right now, um, this is not all the factors, but this is, these are the very few that we know we can. Uh, the longer the deal goes, the more likely other completely irrelevant variables will suddenly become very

[00:26:57] Dan: T mm-hmm . Yeah, I think this was, I don’t [00:27:00] remember if this was the same section where he was talking about, um, the Sam’s Al deal, but I mean, Sam’s outcomes it frequently in the spoke book.

That’s good. One. That was a really good example of when time is of the essence, because, um, if you guys don’t remember from our, um, am I being too. Um, book, uh, book review episode, um, Sam Zel built up the biggest. Re ever, uh, equity equity office group, I believe is what it was called and he sold it to Blackstone.

But every, both parties in that transaction knew that they were at the tippy top peak of the market. And, uh, at any time, uh, prices were gonna start coming down and Blackstone wanted to effectively on the same day. Uh, sell half of the portfolio that they’re buying from ’em and only keep the gems. Um, and, and so in that instance, it was very much of the essence and those, these are, you know, billions of dollars worth of assets.

They’re trying to trade really quickly. That’s hard to do

[00:27:55] Anthony: very hard to, and that a cool transaction because they ended up selling like the half the portfolio, [00:28:00] which then funded the other

[00:28:01] Dan: half. Yeah. Their bases was like, I forgot what it was. I think things were trading for like, I’m just gonna make up numbers, like 400, some bucks, a.

But their basis was like 200 some a foot. Yeah. So like they prices could have dropped by 50% and they’re, they’re just

[00:28:14] Anthony: hitting their break even. Yeah, it was great. So what’s your number? Is it four, three?

[00:28:18] Dan: Oh yeah. I’m on number four. I think. um, ask for help when you need it. No,

[00:28:23] Anthony: I’m sorry.

[00:28:25] Dan: sir. Our listeners ears

[00:28:26] Anthony: are listeners.

I just had such a visceral reaction to asking for help. I can’t do it. Sorry.

[00:28:31] Dan: Um, so yeah, during Blackstone’s growth and I picked this one up because it’s, uh, you guys will notice as a trend, anytime, this kind of concept. Comes up in these episodes. I usually pick it up because it’s, it’s very, um, relevant for us right now.

Uh, but during Blackstone’s growth, Steve spar, Steve spart, Pete told him that, uh, he was getting burned out and he needed help on the operations side of the business. Um, Steve was aware that he wasn’t really the best manager or the best guy to oversee the day to day operations and he needed to bring in [00:29:00] somebody else to, to help him, help him execute.

and, um, he actually found somebody, uh, it was actually somebody from one of his previous employers that they had a lot of alignment on. They agreed on pretty much everything else. Uh, with the one exception that, uh, Steve doesn’t wanna do small deals. Um, and he was aware that this other individual, um, may wanna do deals that made sense.

They might have the, they might, they might check the right boxes for returns or small boy deals that. They gotta be big, even if they’re a good deal and they’re too small. That was the only thing they didn’t agree on. Not an issue. Uh, the point of this is that he realized that he needed help. He realized what his zone of competence was, what his area of expertise was, and it was not the management and the day to day operations.

And, uh, I pulled this one out because, um, we’re growing and we’re, um, you know, figuring out where we, where our seats are, uh, where we serve. Where we’re most valuable in the business and the sooner you can realize where that is and, and where [00:30:00] it’s not the better.

[00:30:02] Anthony: No small boy energy, no small bull deals.

This is from, uh, my first million, a great podcast. They talk about like no small boy deals. Um, okay. That’s that’s really what they’re talking about. There is like, no, just big boy deals all the time. I like it is, is that guy, was that his name? Gray. Some reason I have like gray in my head. Uh, no, Tony James.

Yeah. Tony James don’t know who that is.

[00:30:24] Dan: well, are you talking about the guy you found? Yeah, yeah. Yeah.

[00:30:27] Anthony: John James. Oh, who’s gray. I have, I have a guy named gray in my head.

[00:30:30] Dan: That was, I think, a real estate. Um, was it black rock? No. No, that, that was Larry Fink. That’s a fun name. Larry. Larry Fink. I don’t, there was a gray in there somewhere.

There was, I don’t think he was all that important. Somebody

[00:30:44] Anthony: remember that? No, no, he was great. Um, he was great. Anyways. Um, tot agree with everything you said, here’s my number. sales rarely get made on the first pitch. And this one’s really good because it’s a good reminder, [00:31:00] even in our business where we raise capital or when we’re working with brokers or sellers, like things rarely get done on the first ask.

And so the game really becomes artful follow. The art of the follow up, that might be a good book, like the art of the follow up, because that’s really where

[00:31:18] Dan: doesn’t, that, that sounds really familiar. It doesn’t exist. It

[00:31:21] Anthony: might, it might, but it would be a very good book to follow up with and read, read again, or write again.

Yeah. I think

[00:31:26] Dan: this chapter was called call and then keep calling or something. Oh, is that what it’s I remember what it’s called,

[00:31:31] Anthony: but it’s, it’s, it’s a really good reminder because a lot of. You think you can just get it done on the first, on the first go and it, it never works out that way, especially when you’re raising capital.

If you’re an operator out there looking to raise capital, like just know, like it, it’s gonna take a lot of touches. It’s gonna take a lot of conversations. Sometimes you get that unicorn and we, we get those every now and then where it’s like, oh, they’re ready to go. Um, first pitch they’re in, let’s do it.

But generally it’s much harder in all things in life, [00:32:00] especially with seller. You know, like it can, it can take a really long time from the moment that we met Joe, um, uh, last year in may or April to the time when we finally got everything under contract here on this deal, uh, that we’ve been working on this year.

That was a full year. Like these things take time, take, follow up, take relationship building.

[00:32:18] Dan: Yeah. Yeah. And I think the important part here is that, um, or at least what I’ve found in most instances where this is the case where the follow up is necessary. Maybe once, twice five, 10, , it’s not because people aren’t interested in either investing or selling or buy or whatever it is, whatever transaction you’re trying to get closed.

Um, it’s not that it’s, it’s lack of interest. It’s just that people get busy and, uh, they forget, or it slips their mind. They get distracted. And nine times out of 10, I’ve found with, with, following up with people is they appreciate it. And they thank you. Like, Hey, thanks for calling me back. I was meaning to get back in touch with you to get this buttoned up, but.

Life [00:33:00] happened. And I, and I just forgot, um, very rarely do people get irritated. They, by, by the follow up, unless you’re like doing it really bad, you can definitely do it really bad. Yeah. I’ve

[00:33:09] Anthony: seen that. I have, I have two things that, um, I think are important on this concept. One is to never assume the answer is no, until the other person tells you.

No, never assume that it is no for them. Mm-hmm the other thing is that. Assuming that we sit down, we have a conversation we get through that first pitch. And there is some sort of interest or alignment that you, the, the other person says, yeah, let’s keep in touch. Right? Like if they end the conversation, like absolutely not interested whatsoever.

Like this is not a good fit for me. Like okay. Exclude those people for every other person. The thing that’s going to probably hold them back from saying yes, in the future is merely. Mm, like generally, if they sit through the first pitch and they want to be involved in future conversations and like see future opportunities or whatever, the only [00:34:00] reason it might be a no is timing mm-hmm

And so it becomes a matter of, can you follow up at the right moment? And when you do everything is really easy and you’re like, holy crap, that was all it took. And if you, if the timing’s not right, it can feel very awkward, but you just keep following up until they tell you no, they finally say. Yep.

[00:34:20] Dan: And don’t be weird.

Don’t be, don’t be weird about it. Don’t be weird. Just be normal person. Be cool. Just be cool. Be like

[00:34:25] Anthony: us. Just be cool. Couple cool, relaxed kind of

[00:34:28] Dan: dudes. We’ve been called that we were

[00:34:31] Anthony: called that I want, I wanna pull this full circle because that was actually a deep reference, which just happened there.

[00:34:36] Dan: We, that was an inside joke. We got it. Everybody else is like

[00:34:39] Anthony: what? We were called. Two cool relaxed kind of dudes by a broker. Do you remember on what. uh,

[00:34:48] Dan: I mean, we didn’t actually, this isn’t not something we closed. This is something

[00:34:51] Anthony: we looked at. No, no, but do you remember what deal it? That we were looking at with this guy, this broker who called this two cool, relaxed kind

[00:34:57] Dan: of dudes.

I could kind of picture it. [00:35:00] Didn’t remember being think

[00:35:01] Anthony: back to the beginning of the, this podcast episode who do, what deal did we reference? Oh,

[00:35:06] Dan: was it that one? It was, oh yeah. It was the fleet farm deal. Okay. Was uh, oh yeah. That, yeah, that was a very interesting, so this

[00:35:12] Anthony: is coming full circle now. Like, this is why I was like, oh, we should talk.

Because we’ve already mentioned KKR, the fleet farm, and then this broker who called us two relaxed kind of dudes, it was very uncomfortable.

[00:35:23] Dan: Yep. yeah. And a lot of that. And then he asked us

[00:35:27] Anthony: into the jacuzzi. It was we’re like, there’s no

[00:35:29] Dan: jacuzzi here. Yeah. We got in, we got into jacuzzi. Not proud of it.

Yeah. All right. Uh, my number five, we’re on five. Look at us flying through.

[00:35:40] Anthony: I love that your voice raised like three Octa.

[00:35:43] Dan: Five really five. Uh, alright. Uh, don’t let your ego negotiate for you. Um, so this one I pulled out, um, because, um, I dunno, I just thought it was fun. Um, and it’s something that, that I’ve had to catch myself on a little bit as well.[00:36:00]

Uh, so in 1990, Steve met with Joe Robert, a, uh, real estate investor who brought Blackstone a two point. Uh, I wrote 2.4 million. That’s gotta be billion. Uh, 2.4 million he’s in the Billy club. Come on. Yeah, that’s that’s small for us. Um, this guy brought, uh, this guy, Joe Robert was a real estate investor. He brought, uh, Blackstone, uh, the potential for a bunch of properties and this was coming outta the savings and loan debacle.

And there was just a bunch of bank owned properties. Uh, I believe all, pretty much all apartment buildings, um, that. Selling for pennies on the dollar. And this guy, Joe Robert was just going around, selling him Willy nilly to, um, you know, couple like a five or $10 million to building to this doctor or this accountant or whatever.

Um, but he is looking at all these deals and he is like, these are, these are, these are great opportunities. We’re, we’re selling these buildings at pennies on the dollar. and I wanna work with you guys, uh, to take this down. We can actually take the whole [00:37:00] thing. And, um, so Steve called Bob Rubin over at, uh, he’s the CEO of Goldman Sachs the time and decided that they ought to partner on the opportunity.

Now, there was a little bit of difference in, uh, negotiating strategies between the two of them. Goldman Sachs, wanted to low ball the purchase price, and try to get it at the most rock bottom price. And Steve thought, um, cuz Ruben was thinking, okay, the, the, the risk here is, uh, that we pay too much. That’s what the perceived risk was on, on Goldman’s oxide.

But for Steve, he perceived the bigger risk being missing out on the opportunity as opposed to overpay. And, uh, I took a quote from the book here that is the returns to successful owner. Will often be much higher than the returns on winning a one off one off battle over price, which basically means all the [00:38:00] value that can be realized from owning these quality assets and fixing ’em up and making ’em better basically doing what we do to up our buildings.

Um, all of that would be lost if you get too caught up in price, try to low ball and then lose the entire. and I just, I just like that a lot. I think it makes a lot of sense. It’s a long term perspective. I think a lot of people, and this is very common in real estate. Get really emotionally attached to the purchase price, whether you’re a seller or a buyer.

Um, the amount of, um, contention and, and, and friction that I’ve seen over these, you know, in reality, little minuscule differences in price, uh, really don’t matter for anybody. And I’ve seen, you know, deals blow up over, over silliness like that. So I think that’s something that’s important to keep in mind, because I think it’s very easy to slip into that tendency.

when you’re negotiating something, you gotta remind yourself, don’t let your ego get too attached to your purchase price. Take a look at the big picture, all the wealth that [00:39:00] could be realized, uh, by securing a good deal. Even if you have to pay a little bit more than you feel comfortable doing the,

[00:39:06] Anthony: the way to look at this is to say, if we can two X the value of this property in the next three years, why.

Would we blow this deal up over potentially cutting 10% on the asking price. Exactly. Saving 10% and risking the two X makes no sense makes no sense. But when you look at it through that lens, it’s like, oh yeah. Like it would be nice to get that 10%, but it’s, it’s not worth putting the two X at risk and it it’s a, it’s a spectrum that you constantly have to be judging.

But I think far too often, we step over dollars to pick up dimes. Yep. And be real careful about that. All right. My number five, this one’s really fun because I heard a story recently that I’m gonna tell you guys kind of poorly here. Um, the, the takeaway is the harder problem. I’m sorry. I wrote this poorly, the harder, the problem, [00:40:00] the more limited the competition.

So the harder problem that you have to solve, like the fewer people are out there probably doing the thing. So like the, the, the story that I heard recently is there’s this there’s in the world of space travel. There’s really only two really big players out there. Right? You have, uh, what is it? Blue origin and SpaceX.

Those are really the two big players in that space. And the reason is like the barrier to entry space travel. It’s all very, very, very hard. Well, there’s this third company that’s stepping into this, into this sphere and they’ve already booked like $3 billion of presales on launches to space and. When you look at it and you’re like, why are you getting into this space?

There’s only two other competitors, but good. Golly. It’s so hard. The, the guy who’s starting this company, he is like, he is like, because we don’t, we only need to slice off like a very small percentage of this to [00:41:00] have a really large company, like sure enough, like their billion dollar company without EV having sent anything to space yet.

So like the bigger, the obstacle. The the fewer, the, the less competition that there’s gonna be in. And then if you can win in that space, there’s typically very big rewards to be had. So, um, I thought that was just a really interesting takeaway as I was rereading my notes on the book. And then thinking about that space travel story, which I heard recently, which is like, I don’t know, like the whole idea of starting a space company.

Um, just seems. Damn daunting, especially when you consider like, you’re going up against like the world’s two richest men

[00:41:39] Dan: they got deep pockets. Who, um, who is that? By the way who’s wear this. I can’t

[00:41:44] Anthony: remember his name or the name of his

[00:41:46] Dan: company. Are these commercial, like who are they selling? This? Is it commercial?

They’re not there’s there’s

[00:41:51] Anthony: there’s, there’s so much need for, uh, satellites. Yeah. Commercially like going to space, like not even talking about trying to get to Mars or anything like that or mining or anything. [00:42:00] Sending rockets to space. Is this

[00:42:02] Dan: massive industry, you know, SpaceX has more satellites up there right now than anyone else in the world.

Yeah. Well, what’s interesting

[00:42:10] Anthony: about this company, right? So there, I guess there’s only four. Uh, for landing or for, uh, takeoff sites in the country or maybe yeah, in the country. And there’s another one coming online. They have exclusive rights to it. Ooh. So it’s like, that’s one of their like competitive advantages right there is that like, they’re gonna have their own launchpad.

[00:42:30] Dan: That’s a good example of where not to try to low ball, just. Take, just get

[00:42:33] Anthony: in there, get in there, get those billions of dollars of presales. It’s

[00:42:36] Dan: crazy. Yeah, no, I, I like that takeaway. I was thinking about, um, pointing one, two.

[00:42:41] Anthony: Oh, here’s here’s the crazy part of this story. Okay. I’m I’m more of it’s coming to me now.

So this guy, he starts this company in like the majority of his engineers are former SpaceX guys and gals. So he is got like really deep pockets there. Um, what he used to personally work at blue origin and he had the idea for some like, um, 3d print. [00:43:00] Single shell concepts and they, for whatever reason, like he put that in front of like the, the team at blue origin.

They’re like, yeah, that’s a cool idea, but we’re not gonna go that direction. We’re going in this other direction. So he had this really great concept and like that’s his unique advantage right there. And then he is attracting all this crazy good talent from SpaceX. Wow. Yeah. It’s a, it’s a, it’s a wild

[00:43:19] Dan: story.

yeah, no, I think it’s, um, I think that, that, that’s an important takeaway for anybody who’s thinking about starting a thing, right. Because if. , you know, aside from the whole like space travel, uh, story there that that helped illustrate it. Right. If you just find a problem in the world that really isn’t that big of a deal for anybody and anyone else could easily solve.

I mean, you’re not gonna be able to charge that much for the solution. Mm-hmm however, space that’s, that’s a pretty big feat. There’s not that many people going and trying to do it. So, um, I wanna say Hermo might have talked about a little bit about this as. Um, yeah. Before

[00:43:58] Anthony: Rosie’s a little bit of a, of a [00:44:00] chicken, a little bit of a coward.

He’s a bit more like I’d rather find an industry that’s already doing really well. And that I think his quote that I heard today was like, find an industry that’s already killing it and then create that product and deliver it half the time. And there you go. Yeah. Um, that works too. I, so he did live your sons of value, but I don’t think hormones gonna go to space anytime soon.

[00:44:19] Dan: No, no, but I think he made the point about, um, I think he, he said something that was. Uh, your compensation’s directly correlated to the difficulty of the problem you’re solving, which I think is pretty, pretty similar to this. Like if you’re trying to solve a problem, that’s just not that big of a deal.

You’re never gonna build anything really big. So you’ve gotta try to find that hard stuff. The stuff that no one else wants to deal with, like own a bunch of property and dealing with that. I think,

[00:44:46] Anthony: I think that’s actually like, um, an Elon quote from a, a while back where it says, like, you’re, you’re compensated in proportion to the magnitude of the product you.

Yeah, maybe it was Musk, which is like a really great quote by the way. Yeah. Like you’re compensated in proportion [00:45:00] to the magnitude of the problem you solve. Yeah.

[00:45:02] Dan: That’s yeah, that would make more sense. Coming from Musk, actually

[00:45:05] Anthony: old musky boy. Like I know’s what he is doing. So, I mean, he’s sending people to space, he’s solving electric energy, um, all that stuff.

So yeah, of course he’s a trillion. He just gave you crane, internet. You’re walking in Ukraine, um, to enjoy your porn. I don’t know. What do people use internet?

[00:45:20] Dan: Everything. that’s a good point. Literally. That’s a good point.

[00:45:23] Anthony: Kind of the lifeblood of civilization at the moment. I

[00:45:26] Dan: don’t know what to do without it, like, I would just go back to bed.

If it was broken here, I’d be like, what it,

[00:45:32] Anthony: well, there’s nothing to be done here, people. Well, just call a day.

[00:45:36] Dan: I’d be,

[00:45:36] Anthony: it’s kind of scary to thing. I haven’t done that before where the power goes out. I’m like, well, I guess I’m going for a walk. like, what else is there

[00:45:42] Dan: to do? Yeah. It’s kind of sad, but it’s totally true.

Just wander

[00:45:45] Anthony: into the wilderness. all right, guys. So that’s gonna do it for us. That is the book, what it takes by Steven Schwartzman. Again, if you want the sophisticated investor notes, go to Invictus, multifamily.com back slash notes, you can download ’em all for free. And all I ask all I ask in [00:46:00] this world, and you can, you can ask my mom, like this is all I’ve ever asked since I was a.

Young boy is please go leave a review, please. That’s all I ask, um,

[00:46:15] Dan: that. Wow. I got a little choked up there. Yeah.

[00:46:20] Anthony: So that’s gonna do us guys again. Thank you for taking some time to join us. We’ll see.

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