Legacy, philanthropy, and the power of persuasion! Co-Founder and Co-Chairman of The Carlyle Group, David Rubenstein


The Carlyle Group’s David Rubenstein has built a legacy that goes far beyond his business success. On this episode of the Walker Webcast, he discusses his remarkable career journey, including building The Carlyle Group, the evolution of the private equity industry, investment advice, the importance of giving back, and so much more. 


Willy is joined by David Rubenstein, Co-Founder and Co-Chairman of The Carlyle Group, one of the world’s largest and most successful private investment firms. Established in 1987, the company now manages $301 billion from 26 offices around the world. David is also Chairman of the Boards of the John F. Kennedy Center for the Performing Arts, the Council on Foreign Relations, the National Gallery of Art, and the Economic Club of Washington, as well as serves on the board for many other arts, international affairs, and educational organizations.

Willy begins the conversation by asking David about his work in higher education. At his alma mater, Duke University, David has contributed to the libraries, athletic teams, and business school. David believes that the higher education system in the United States is the envy of the world, and he encourages people to give back to their university. 
Serving on so many boards can require some juggling, something David says he’s never been great at. Giving his time to these organizations means he doesn’t devote time to hobbies like playing golf or watching television. David explains that he doesn’t serve on these boards for his resume or adoration, but rather does it because he believes in their mission and wants to offer support and guidance. 

In his book, How to Lead, David discusses the impact of luck. He considers finding his co-founders for The Carlyle Group to be a stroke of luck and says the company’s trajectory could have been much different without them. He also outlines his views on hard work, focus, and failure. During the Great Recession, The Carlyle Group lost about one billion dollars of investor capital. He and his employees had to fight to bring the organization’s reputation back. Life, David says, is about persuasion. He explains that he has worked on those skills to bring people into his philanthropic efforts. Persuasion has also helped him grow The Carlyle Group, though David says, in the beginning, he did not anticipate their growth.

David is considered a great fundraiser, and his unique fundraising forward approach has contributed to the growth of The Carlyle Group. Through the years, David has developed three rules for money management: 1) don’t lose what you have; 2) diversify; 3) have realistic expectations about rates of return. David discusses the balance of not losing what you have while diversifying and investing. For people interested in investment but wouldn’t call themselves investors, David recommends putting money into investments the way you would another hobby. This will allow you to follow his #1 rule, and not lose your personal savings or wealth. For his own investments, David does research and some trend predicting, but stresses that no one can predict the future. The world and markets sometimes do not do what you expect and good investors pivot. 

David has interviewed hundreds of people throughout the world. He believes that the happiest, most successful people have a strong family life. They receive support and joy from those around them outside of work. When he thinks about his own impact on the world, he says he hopes that he’s remembered as someone who spent his time and effort in making things better than how he found them.

Key ideas:

0:48 – Willy introduces this week’s guest, David Rubenstein 
3:47 – Willy asks David about working with universities
7:23 – David discusses juggling different organizational needs
10:21 – David and Willy discuss the current state of college sports
12:30 – Willy asks David about the importance of luck
15:41 – What enabled The Carlyle Group’s growth?
18:29 – The power of persuasion
21:53 – Willy asks David about his favorite books
24:09 – Willy asks David when Carlyle became successful
28:58 – The Carlyle rules to managing money
34:18 – David’s advice to non-investors
38:34 – Personal board of directors
42:31 – Reflecting on what makes successful people happy


Learn more about David Rubenstein on his website and follow him on Twitter.
Check out Walter & Dunlop’s website

Webcast Transcript: 

Willy Walker: Good afternoon, everyone, and thank you for joining us for another Walker Webcast. This is a really special one for me. We're now on episode 88 and today’s guest, David Rubenstein, is somebody that I have admired, tried to emulate, and learned a tremendous amount from over my professional career. And so, to any of you who have joined us for Walker Webcasts in the past and have enjoyed the way I either ask questions or do my due diligence on my guests, it is 100% attributable to watching David Rubenstein and the way he interviewed his guests at the Washington Economic Club and how he does it on his two shows with Bloomberg Television. 

And so to introduce David, who really needs no introduction, I want to start by reading Former Harvard President Drew Faust remarks when David was named to the Harvard Corporation: “David Rubenstein’s acumen in finance, his experience both in leading a complex organization and then serving as an institutional trustee, his capacious intellect and global outlook, his devotion to universities and to the arts and culture, and his capacity to inspire generosity and others all promise to serve the corporation and the university well. He has served on a remarkable range of nonprofit boards, reflecting his equally remarkable span of interests in higher education, the arts, public policy, medicine, international affairs and American history and culture.” 

David, I find that introduction to be very appropriate. What I loved was your self-deprecating response to it, which was quote, “I am humbled to be associated with such an institution in this way. I hope John Harvard would approve.” You've read enough to be considered a historian; would John Harvard approve?

David Rubenstein: Probably not, because I'm not sure he was a capitalist, but first of all, let me just say that I'm honored to be here. And for anybody listening, I'm not nearly as good as you just heard. And Willy is pumping me up because he wants me to maybe sound better than I really am. But I'll do the best I can to respond to your questions. 

Willy Walker: That's great. Well, David, the Harvard Corporation is the oldest corporation in the Western Hemisphere, chartered in 1650, and I believe that you and Carolyn “Biddy” Martin, the president of Amherst College, are the only two members of the Harvard Corporation to not have gone to Harvard. I'm just curious, do you ever get insecure sitting in the room with all those Harvard degrees? 

David Rubenstein: When I was younger, I'm sure I would have. But now I've gotten to a point in life where I've gotten rid of a lot of my insecurities. Harvard Corporation is a terrific organization. Harvard was run for many, many years just by a corporation, had about six people on it, including the president of university A number of years ago hey doubled the size. Still, it's relatively small. I'm on other university boards, which are much, much bigger. Harvard's done a pretty good job of going from its founding in the early days of our country to now one of the best-known universities, and maybe not the best, most respected university in the world, at least for its brand name, I think is second to none in the education world. So quite an impressive organization. I'm humbled to be on it, and I've been on it now for about five years or so. 

Willy Walker: You've supported your alma mater, Duke University, in so many different ways: the rare book library, the art center, the Innovation and Entrepreneurship Institute, the School of Public Policy, the Freeman Center for Jewish Life, et cetera. I'm just curious, isn't it time that television announcers say “coming to you live from Rubenstein Arena” rather than Cameron Indoor Arena? 

David Rubenstein: I think they're better off with Cameron Indoor Arena, but Cameron Indoor Stadium is a place where Duke has done pretty well over the years and this is coach K's last year as a coach, so many of us are cheering him on. I've enjoyed being associated with Duke, but to be very serious about universities and so forth. Those of us who have university educations, I think, are proud of doing it. My parents didn't have a university education or a high school education, and I am pleased that I was able to get scholarships to go to Duke and University of Chicago Law School, so I've been very indebted to them and try to repay the way I can, my debt to them. And I think all people probably feel some obligation to the place that got them educated because probably without that education, none of us would have succeeded to where we are. So, in your own case, are you involved with your alma maters very much? 

Willy Walker: I am actually. I just gave a pretty nice gift to Harvard to promote diversity and inclusion at the business school. Dean Noria wrote a note to alums a year ago saying that the MBA program had on average 50 people of color in the MBA program over the last 30 years, and I found that number to be surprisingly low. And so, I made a donation to HBS to improve that number and to their great credit over the last year, they've made great strides in not only attracting more minorities to HBS, but also promoting professors, as well as case studies that have protagonists who are minorities. 

David Rubenstein: In addition to being proud of a university that one went to and grateful. I do think that the American higher education system is the envy of the world, and to the extent that our country wants to continue to be a leading country in the world. I think supporting higher education is very important. So, I think organizations and universities like Harvard or Stanford, Duke, Chicago, Hopkins, all the ones that people know about plus many others I don't have time to mention, are really national assets. And I think even if you didn't go to a school, you might find something of interest there. And I encourage people to really get involved with their alma mater or other schools or schools their children went to because I think these are organizations that really are worth supporting. 

Willy Walker: When I look at your resume, David, the breadth of your interests and organizations outside of Carlyle (and obviously you spend a ton of time still at Carlyle) to those of us from outside find overwhelming. Harvard Business School Professor Howard Stevenson studied successful people and draws the analogy to a juggler in two respects, one that you have to put equal energy into all the balls to keep them in the air. But the most important ball is the one that is falling. And so, my question to you is, how do you find the time and energy to be able to put energy into all those balls? And then how do you make sure that none of them fall to the floor? 

David Rubenstein: Well, first, I'm not a good juggler, so I hope none of them will fall on the floor. But it might be the case some days. Usually what I try to do is I find organizations that I really think are doing good jobs that I feel indebted to, and I want to stay involved. I’m not doing it because it's going to look good on my resume but because I really want to be involved with them because I either owe them something or I feel they're doing a good thing for our country. 

Secondly, I don't play golf, and that saves a lot of hours and a lot of frustration. So that's another big plus. And then generally, I love doing this. So, it's not work for me, but there's always a challenge at any given institution that you may be involved with. With University of Chicago, Duke, Kennedy Center. All of them always have some challenge or some problem, and you just put the attention into the one that you have that particular day. But in the end, you know, it's not like one person is solving all these problems but a group of people, so I'm just helping out a little bit. But in the end, I enjoy it and it's pleasurable for me. It's not something that I regard as drudgery or anything like that.

Willy Walker: Given the number of big board’s you've been on, when you arrive on a new board, do you bring to that board meeting a framework, if you will? Or do you come in and stop and say, University of Chicago is going to be different from Harvard? And I need to step back and allow the University of Chicago board to continue to act as it does? 

David Rubenstein: Whenever you get on a board, you generally are the new person in town and so you want to listen for a while and learn. When you become the chairman of the board generally, you are pretty experienced in what that organization does and typically that occurs after you have been involved for a while. But I always think a chair should lead and should you make some changes? Nothing is perfect. So, if you're going to be a leader, you should try to make some changes. When I became chairman of the board at Duke, I thought there were some things I wanted to do differently at Duke, and I was able to persuade some people that some things should be done that way. I couldn't get everything I wanted, but I think a leader should really lead and being a chairman is a privilege and if you're going to just preside and I think it's not worth doing it, so I try to always find something I want to do that's significant and try to get that done.

Willy Walker: So, when you were chairman of the board at Duke, they won their last national championship and you saw the value of athletics in both applications, alumni engagement and fundraising at Duke. Should we expect Harvard to be in the final four? 

David Rubenstein: Well, Coach K is retiring, and I don't know whether Harvard will recruit him to be the coach. I've suggested the University of Chicago might recruit him, he's from Chicago. I don't think Harvard is probably not going to be in the Final Four anytime soon, though they do have a very good Duke graduate, Tommy Amaker, as their coach. But as we all know, Ivy League basketball is really good, much better than it was. But it's difficult to compete against the schools that are like Duke or Kentucky and so forth in that particular sport. So, I don't think we'll see that anytime soon, but you never know. Princeton's been in their final four in my lifetime. And so, you never know. I think Penn was in the final four in my lifetime as well. So, you never know what an Ivy League school could do. But I do think that athletics, now that you raise it, is an important subject that deserves some attention. I do think that many schools have really good athletic programs, and they're really good for the students and they're good for the alumni. Sometimes things get overboard. The state of college sports now is obviously going through some flux because now college athletes can get compensated. So, it's a different world than it used to be. 

In terms of the Duke Championship, the national championship. Yes, it was when I was board chair, and I like to attribute it to the fact that I was sending in hand signals to Coach K, and he was reading those hand signals and that’s the plays he was using. And so, no that's not actually the case, but it's a great deal of fun to go to a national championship game and be with a school that wins. So, Duke has won five national championships under Coach K, and hopefully he'll win one more this year. 

Willy Walker: I'm assuming when you were chairman of the board at Duke, you got great seats to Duke basketball games and as chairman of the board of the Kennedy Center, you got great seats to any event at the Kennedy Center, you're going to the Super Bowl this weekend?

David Rubenstein: I am not. I have been to Super Bowls before, and I've concluded that watching them on television is a lot easier on the body and a lot easier to deal with. So, I don't have a team that I'm particularly rooting for. So, I can't say that I'm enamored with going this year, but I know a lot of people are going and a lot of my friends will be there. But, you know, it isn't something I'm going to be doing. I did see Bob Kraft not too long ago in Florida at something, and he's going, I guess all the owners go even though they don't have a team in the Championship. And, you know, I wish I was an owner that had a team in the Championship, but that's never going to happen, probably. 

Willy Walker: I was just going to ask you, you know, we do have a team here in Denver that's for sale right now. Can we think that David Rubenstein might be a bidder on the Denver Broncos? 

David Rubenstein: I think it would be good for somebody who lives in Colorado. While I have a home in Colorado, in Beaver Creek, I don't live in Denver. I know a number of people who are interested in this, and I'll let them speak for themselves. But as we all know, the price of a sports team now has gone much, much higher than ever before. So, football teams are worth $2 to $4 billion, or maybe even more in some cases. And so, it's very difficult to get any one person to put up that amount of money. So obviously, some people can do so, but I think you're probably going to see coalitions of people coming together to buy the Denver Broncos. 

Willy Walker: In your book How to Lead: Wisdom from the World's Greatest CEOs, Founders, and Game Changers, you outlined common themes from your exceptional interviews with leaders and you start with lesson number one, which is luck. And you comment that finding your two co-founders of the Carlyle Group, William “Bill” Conway Jr., and Daniel A. D'Aniello was very lucky, was it?

David Rubenstein: Well, of course, it was because I didn't know either of them before. I'll give you an example. I was trying to start Carlyle; I didn't have any investment experience. I was a lawyer. I'd worked in the Carter White House, but that isn't what you'd really need to start an investment firm in Washington. So, I was starting to recruit people in Washington, and I went to recruit a woman who had just become the treasurer of Gannett, Gracia Martore. And I figured this would be great. We would have a woman who was not only a really competent investment professional, but lives in the area, well respected and so forth. And she said, “Let me see if I got this right: You want to start an investment firm in Washington, with people that have never worked together, that have never done a buyout, you have no money raised yet and you want me to give up my career, which is now going pretty well at Gannett where I've just become the treasurer. Is that right?” I said yes. She said, “I don't think that's a good idea, but thanks for coming by.” And as I was leaving, she said, “Oh, by the way, there's somebody who is the CFO of MCI, a telecommunications company in Washington at the time. And I think he might be leaving. Give him a call.” Well, I did. His name was Bill Conway, and he became one of the founders of Carlyle. And I think over the last 30 years or so developed a reputation as one of the best buyout professionals in the United States. So, it was a matter of luck I had. Had I not gone to see her, or had she not thought of Bill at the last minute, history would have been different. 

Willy Walker: So, you go on to highlight that kind of skill number two that you picked up in these was a desire to succeed. And then the pursuit of something new and unique. Founding Carlyle on Pennsylvania Avenue rather than Madison Avenue was clearly new. But what made the growth plan and the strategy for Carlyle unique?

David Rubenstein: Starting an investment firm in the buyout area in Washington was unique because most of those firms were then in New York or maybe Los Angeles, and some were in Chicago. Secondly, we did bring in some former government people not so much to lobby the government, but had visibility, so nobody ever heard of David Rubenstein in the early years. And so, if I called an investor, they probably wouldn't necessarily return my call. But if I said I'm holding a dinner and Jim Baker is going to speak at it? A lot of people might show up, and then I could have Jim Baker talk about the world, I might talk a little bit about Carlyle. So, it helps me get a captive audience. 

But what we really did that changed the face of the private equity world (without patting ourselves on the back too much) is this: private equity was a mom-and-pop business in the 1970s and 80s. The biggest firms were tiny people. I think when KKR did the RJR deal in 1989 they only had about six investment professionals. These were small firms that accessed a lot of capital, their small firms. What we did was two things: one, we decided we would do more than buyouts. In other words, we had a buyout fund, but then we'd say we will have other disciplines. We'll have real estate, growth capital, credit and so forth. So, we decided to build an institutional firm, which is to say, have more than one fund, and therefore we can take advantage of our brand name. Take advantage of our back office to service all the different funds. And then next, we tried to globalize it. So, I would go recruit people for a European fund and Asian Fund or Japan Fund, a Latin American fund and so forth. And so, we both institutionalize it by having multiple funds and then we globalize it. Now others have done it, and in some cases I've done it more successfully than probably we have. But that's the model that other firms have followed a bit, and some of them have done it quite well, obviously. But that's what enabled us to grow, was the idea that we were going to continuously have funds in the market, build an ongoing fundraising team, and then also have a good track record, but also have many, many different people and different funds and then be a global organization.

Willy Walker: You highlight hard work and focus as two characteristics that you clearly define. And then you mentioned failure. In the book, you say that Jimmy Carter losing the presidential campaign was the failure that you pointed out as far as a failure in your life, I wouldn't quite talk about a presidential campaign failing as being a big personal failure. So, can you give us a real example of a failure that you dealt with?

David Rubenstein: At Carlyle during the Great Recession, we had a highly leveraged investment fund that was rolling over and buying Ginnie Mae and Fannie Mae securities. And in those days, you could basically get leverage for like 95-96% and you just put a little bit of equity. But because the return was pretty predictable, it was an attractive investment, and nobody ever thought Fannie Mae or Ginnie Mae's would default. But at the time of the Great Recession, there was some question for a while about whether the United States government would actually support these types of institutions, bonds and also some of the banks that had lent money on these kinds of securities were pulling back. And so therefore, you weren't able to borrow as much as before. And we and others found that we basically had our lines call and we couldn't service the debt any longer and ultimately it imploded. So, about a billion dollars was a lost of investor capital, and we'd never lost anything like that before. But obviously, it was a traumatic experience. And so, we had to fight back and get our reputation back. It was something that we've been able to do. We never lost a lawsuit relating to it, but we basically rebuilt our credit business and are now quite successful. But at that time, it was quite a struggle. 

Willy Walker: You go on to outline persistence and persuasion. Can you give us an example of David Rubenstein, the persuader? 

David Rubenstein: Well, I think persuasion is the key to life in many respects, because in life you have to persuade people to do what you want if you're going to get somewhere. You can persuade your partner, your spouse, your children, your employees, your investors that they should do what you want. You have to learn how to persuade, and you can do it by talking effectively, you can do it by writing effectively, or you can do it by leading by example and having others follow you. So, in building my firm, I had to persuade people that it was a good organization to join. Persuading Jim Baker or George Bush to join the firm that was small was not easy at the time. Persuading a lot of very talented people to come to Washington, D.C. to do investments rather than New York was not easy from time to time and getting investors to buy into and investing in a global firm was not so easy because people tended to want to invest in firms that only did buyouts, or only did venture capital or private credit or so forth. So, I've tried to be persuasive, and sometimes it worked. Sometimes it didn't. 

Willy Walker: Anybody that you've tried to persuade to come into The Giving Pledge who has said “no”? 

David Rubenstein: Many people, I'm not going to identify them, but many people would say, look, I'm going to be quite philanthropic, but I don't want the publicity associated with this. At the time that Bill Gates, Warren Buffett, and Melinda Gates developed the idea, there were 40 of us who signed at the beginning. There were three in the Washington, D.C., area. Roger Sant and Steve Case were the other two. But you know, I did talk with some people, and I thought they were very good candidates, but for a number of reasons, they just said they didn't really want to get publicity. They didn't need the publicity. They were going to give the money away anyway so why did they need to join? But I think The Giving Pledge has served it reasonably well. I think it's designed, in my view, at least, to persuade other people to do more than they would otherwise be doing. You don't have to give away half of your net worth in my view, which is what The Giving Pledge requires. But you can do other things to persuade people to kind of do more philanthropically. And that's what I've tried to do. 

Willy Walker: The next is to “keep learning”. You are obsessive about reading; you read newspapers and magazines and try to read a book a week. You're also really good with email, because you respond to emails quickly whenever I email you. Any trick other than taking long airplane flights where you're alone to be able to dive in that you have been able to put in your life, that allows you to put down the iPhone, if you will, and be able to read the printed word. 

David Rubenstein: It's increasingly difficult as we know, to focus any more in life. Now, I wonder whether William Shakespeare could have written his plays or Beethoven could have composed his symphonies if they had to respond to emails, Twitter, and Instagram messages all the time. It's because in every instant, we're responding to something. The idea of getting away for eight hours at a time and having nobody bother you and just thinking is relatively uncommon these days. So, I wouldn't say I've mastered that, but when I'm on long plane rides, which I used to do a lot of. I try to just focus or read a lot and catch up. I'm not perfect at it, but I try to do that.

When I started practicing law in 1973, the head of the firm came in and he said, “respond to your telephone calls every day as a courtesy.” He also said, “Don't take the path of least resistance because if you do so, you can make an ethical shortcut and the result is you could ruin your reputation. All you carry around in life is your reputation. It takes five minutes to destroy it, a lifetime to build it”. So, I try very hard to kind of do things that aren't going to ruin my reputation. When you're in the philanthropy world and the world that I've been involved with a while, you got to be very careful these days because if you put your name on a building, you put your name on a scholarship, you put your name on a program, and you do something that's embarrassing or illegal or immoral all of a sudden, people say, let's take his name off. So, I'm trying very hard to not do anything that's going to embarrass anybody that I'm involved with. 

Willy Walker: Your favorite book that you've recently read?

David Rubenstein: I read an excellent book just recently, it was The Man Who Ran Washington: The Life and Times of James A. Baker III I guess it was by Peter Baker and his wife, and they did a wonderful job of describing the man that I knew pretty well. So, I thought that was an excellent book. Last night at the New York Historical Society, I interviewed Ian Toll about his trilogy on the Pacific War. And it was sort of a spectacular book about what happened in the Pacific World War Two, a campaign. So those are two that are on my mind right now. 

Willy Walker: I wish I'd known that you were meeting with Ian. He's an old, old friend. He went to St. George's School and Georgetown University, and we are long friends. 

Just as you think about the Jim Baker book. I view Jim Baker and Jim Johnson as the two quintessential inside-outside players in Washington, on the Republican side and on the Democratic side over the last 20 to 30 years. You knew both men very well. Any defining characteristics of those two people, David, that you would highlight as what made them both so successful as sort of being the inside-outside people of Washington?

David Rubenstein: Well, Jim Baker, for those who really don't know, was Treasury Secretary, Secretary of State and Chief of Staff and the gold standard in many of those positions, and for 12 years, he had an enormous amount of power, was in our firm for about 15 years, and I got to work with him quite closely and greatly admired him. I think his father used to tell him, “prior preparation prevents poor performance” and he took that as a mantra. Jim Baker was always prepared, if you asked him to make a call, to go to a meeting, he was always prepared. He knew what he wanted to get out of a meeting. 

I'd say that Jim Johnson, for those who don't know, was CEO of Fannie Mae for a long time, I guess chairman as well. And also, the chairman of the Kennedy Center before I was. And also, at one point chairman of Brookings before I became co-chairman. So, I've known him over the years, sadly he passed away not long ago, but he was a person that knew how to get along with people. He knew how to read people. He knew how to persuade people to do the kind of things he wanted. And during this period of time, both Jim Johnson and Jim Baker would both say that they looked up to another person who was the ultimate Democratic and Republican insider, and that man was Bob Strauss, who you may have known was in the Carter administration, also chairman of the Democratic National Committee and one of the most impressive people I've ever met. 

Willy Walker: Yeah. So, in your Washington Economic Club interview with Jeff Bezos, which to this day is still one of the great, great interviews ever.  Anyone who hasn't watched it, I would strongly encourage you to go back. Not only because Bezos is such an interesting figure, but because David's questions to him are incredible. But in that, Bezos said, David, “I've seen small things get big.” When did Carlyle get big?

David Rubenstein: Well, when we first started in 1987, we were intending to be very small. In fact, when I took the first lease out for about 5,000 square feet, the person in the real estate world, I don't know if it was your firm, but somebody said you have an option for additional space. And I said, I don't want the option, take it out. They said it comes for free. I said, I don't want to be tempted to ever get more than 5,000 square feet, so I took it out later and it cost me money to get more space. I don't think we ever thought we would grow that big. And ultimately it came about I suspect after about six, seven, eight years, we had a pretty good track record. Then I came up with this idea of building a multiple disciplined firm, then a global firm, and I kind of went on the road to help recruit people to do it and raise money for it. But probably it was about six, seven, eight, nine years into the firm before I realized we could actually make something much bigger than a tiny little firm. 

Willy Walker: I do believe that my father was working with Covington & Burling on their lease in your building at that exact time, so your memory, I think, is correct. So overall assets under management at Carlyle rose to over $300 billion at the end of 2021 and the firm raised $51 billion in 2021. Given that you've seen small things get big talk for a moment about that type of scale. You must look at that thinking about how hard it was for you to raise that first $5 million fund. When Carlyle goes and raises $51 billion in a year and sort of sit there and all about the machine you've created. 

David Rubenstein: While there are many people that are involved in that, of course, but I would say initially you have to start with a few investors and I was raising the money, but ultimately I built a team of people that would help, and we did it all over the world. So, I would spend a lot of my time running around the world asking people for money. And in the end, I was probably going to Asia four or five times a year and the Middle East three or four times a year and Europe, maybe five times a year. Latin America, maybe twice a year. So, raising money became something I was well known for because not that many other founders of these private equity firms wanted to take on the role of fundraising. They are on the totem pole of skills in the private equity world. The most important skill was thought to be the investing skill, and I didn't think I had that. So, I took one of the other skills which was maybe considered by some at the lower part of the totem pole, which was to fundraise and ask people for money, which is not something I've ever done before. And asking people for money, as you know, is not always the easiest thing in the world. But ultimately, I figured out that I should learn how to do that, and it worked out okay. But in the end, I would say the experience has been great for me because I've now been all over the world. I have as many friends, probably outside than I have inside the United States, and I would say that it's been an experience you no doubt experience Willy, as well because you have investors from all over the world. And no doubt you take a lot of pride in having taken this relatively modest firm that you or your family started and now made into a firm that now has a market cap of $5 billion if I recall. 

Willy Walker: The SEC recently proposed a series of rule changes David that call for more information and disclosures by private equity firms, including one of them of next day disclosure of significant events. Fair to say that SEC Commissioner Gary Gensler doesn't understand the meaning of private? 

David Rubenstein: Well, these are publicly traded companies, in some cases, I think you have to recognize he's a smart man, comes from my hometown of Baltimore, and I did an interview on one of my shows. I think he's a very impressive person. I think that what is private anymore? When you are getting investors to give you money and very often, while it might be called private equity, you very often are in the public domain in some respects. So, I think I'm not surprised that people want more disclosure. There's a general view that sunlight is the best disinfectant, and so getting more information out is probably not a harmful thing. Sometimes the cost-benefit analysis may not be quite what you want, but I don't have any particular knowledge of exactly what he proposed. But I would say that it's unlikely that we're probably going to go back to an era where people aren't getting more information. 

Willy Walker: I want to shift for a moment to a discussion you had with our mutual friend Mary Erdoes, who runs asset management at J.P. Morgan. And in that interview, David, you gave three rules of money management, and the #1 was “Don't lose what you have.” #2 “Diversify. Don't put all your eggs in one basket.” and #3, “Have realistic expectations about rates of return.” 

So, on #1, as it relates to “don't lose what you have”, you need to explain this to me because I looked at Carlyle's proxy and saw that in 2020, you reinvested $162 million into Carlyle funds. And if I were to think about your rule, you probably should have taken that $162 million and put it in the T-bills because you're putting it at risk. So, where do you get to the level of saying, don't lose what you have? And at the same time, turning around and reinvesting to create more wealth? 

David Rubenstein: Well, Carlyle has done quite well for me over the years, I've invested in the Carlyle Fund. And so, I don't regard it as a chance to lose money. Obviously, not every deal works out perfectly, but I don't regard it as really responding to my first rule. What I was really trying to say in that, very often people make money in “area A” where they might be a genius in widgets, or they might be a genius in making cars or whatever it might be. And they think because they're a genius in that area, they're going to take the same kind of risks they took in building their wealth investing which requires a different skill set. So, I would say to people, don't lose what you have by taking undue risk where you're not really familiar with what you're doing. Now that's not to say you shouldn't take some risks. But generally, if you have $100 million and you want to put a few million dollars in cryptocurrencies or something that seems exotic or maybe something that's risky, I don't think that's the end of the Earth. But as a general rule of thumb, I don't think it's a good idea. If you have $100 million you made in making electric automobiles that you should think you're a genius and that all of a sudden you're going to go invest in cryptocurrencies or something else and put all your money into it. So, my point is, you know, is diversify, which is the second rule, and diversification is one of the principles of investing. Nobody is so smart to know that anything is going to work perfectly all the time and so diversifying is very, very important to me in my view, and I think that's one of the most important principles you can apply in investing. 

Willy Walker: When did Carlyle get to a size David where you didn't have to continuously reinvest in the firm? In other words, when could you start to look outside of the firm to put your money? 

David Rubenstein: I would say that I always had the view that investing in the firm was a great investment. So, remember when you work in one of these private equity firms and maybe it's in your organization as well, you tend to be able to invest for free, which is to say you don't pay a fee or carried interest, and therefore you have a better advantage than other people and that's one of the advantages of working on these firms. So, I always wanted to invest in the Carlyle funds because I tended to be on the investment committees or I knew the people, I'd hire the people so I didn't think it was undue risk and I would have perfect inside information that's legal about what was going on in the deal. And so, I didn't regard it as a risk.

Your question is really related to another phenomenon. When you build a firm like Carlyle, how long do you have before you can say to everybody else in the world, the firm is not dependent on us to put money into the fund. It's not dependent on us to show we care about the firm so much that we're taking all of our liquid net worth and putting it back into the firm. I would say that it's been a number of years since the firm really needed our money, but the founders still invest heavily in the funds because we do think that the funds are good investments. 

Willy Walker: Your rule #3 of having realistic expectations about rates of return. Give us your insight as it relates to the outlook for 2022, if you will, equity returns and debt returns or more succinctly, what do you think the overall markets are going to do and where do you think we get to on interest rates? 

David Rubenstein: On realistic returns, what I meant to say there and what I hoped I was conveying is that if you go into private equity, you should probably have realistic expectations. Probably today, somewhere in the mid-teen, net teen returns are probably realistic, maybe slightly better in some specialized funds, maybe slightly lower in some other funds. If you're going to go into a mutual fund, you should probably have lower expectations of what you're going to get out of an equity mutual fund. So, it depends on the area. If you're going to go into core real estate, you know you might have three or four percent, five percent rates of return in core real estate. So, you have to be realistic. You shouldn't go into core real estate expecting 15 percent rates of return or into venture capital, expecting a hundred percent rates of return because you'll be disappointed.

In terms of your question about the overall markets, nobody really can predict where the markets are going. I think today we are not looking at a recession in the near future, I think the economy is in reasonably good shape. I would say that the unemployment rate is pretty good at four percent. Now that's a little bit misleading because unemployment rates count who's looking for a job in the last 30 days? And as we know, sometimes people drop out of the workforce. We have fewer people in the workforce today than we did 10 or 15 years ago. But still, it's a low unemployment rate. Inflation is a bit of a problem. When I worked in the White House, we had double digit inflation, we're not going there. But I think inflation because of the supply chain interruption due to Covid, it probably will take a while before it settles down to three or four percent. It might take as much as a year for that to happen. The Fed will obviously help us along the way by increasing interest rates a bit. Generally, I am thinking that when people invest in the stock market or historically over 100 years or so, they tend to get returns of four to six percent, seven percent in the debt markets. You know, two to four percent, something like that depends on a lot of other factors and how great inflation is. 

But generally, my advice to people who are not professional investors is this: if you are not a professional investor but you enjoy investing, take some part of your money, and enjoy it. Just like if you enjoy playing golf, spend some time playing golf. If you enjoy investing, reading reports, analyzing companies, watching the stock market, take some money and have that pleasure, but make sure you're not putting too much in. As a general rule of thumb, I think it's better to either go into the stock market indexes or ETFs or give your money to a pretty good professional money manager. That's for the average person. Now, if you're a young person who's trying to learn the game of investing and you want to be a professional investor ultimately, but you're young. I think other skill sets are required and you develop those skill sets. But actually, getting good mentoring, getting a good education and learning how to read, learning how to focus. Those are all important skill sets.

Willy Walker: I think it was in that interview with Mary where she made the comment, David, that if you have your money managed by a professional, the average return is six percent and those who manage it on their own is three percent. I don't know what data set that was coming from and to some degree, that might have been a somewhat self-serving comment as it relates to J.P. Morgan Asset Management, but I'm sure Mary was quoting something that was widely studied.
I was just going to say, you interviewed Ray Dalio recently for his book and in it, obviously, you give the background of Ray and his incredible hedge fund and his investing track record, and I'm assuming he's going to be a part of your upcoming book on investing or at least your interview and talk with him. But he just came out recently. This week I read in Bloomberg, David, that Ray Dalio says, “that we're headed towards Civil War.” And in the light of your outlook as it relates to the economy, which I would echo and think very similarly to as it relates to the data points I'm getting, I read something like that by Ray Dalio and I take a breath. I say, here's a really insightful investor who's built a massive, massive asset management company who's also gone and just wrote a book on studying the history of countries and what it takes to be sustainable, and he comes out with a comment saying, “We're headed toward civil war in the United States.” How do you process something like that? What do you think about a comment like that? 

David Rubenstein: Let me put it in context of what he was saying. He's saying that there are cycles throughout history and in cycles, throughout history, you should recognize what part of the cycle we’re in and act accordingly. So historically, you have countries that build up a big economy and their currency becomes the reserve currency of the world. So, it used to be the pound. Now it's a dollar. And then after a while, because you have the reserve currency, you go into a second cycle, which you tend to borrow a lot more money than maybe you should and devalue your currency a bit. And ultimately, that produces economic dislocation in the country, and it produces civil strife, if not civil war. And then you often have as a third cycle, you have new countries coming along that challenge the existing leader. And his point of his book is that China is now coming along and challenging the United States. He didn't say, we’re about to have a civil war anytime soon. But he was saying that because we have a growing income and equality and we have too much debt. Ultimately, you're going to have people upset with where we are in the economy, and you might get some social dislocation far greater than we see today. 

Willy Walker: As you think about that economic outlook that you have and you make personal investing decisions, how much of those personal investing decisions are intuition? How much is research and how much are knowing the either CEO or fund manager that you're putting money with? 

David Rubenstein: Well, the best investors like Warren Buffett have an instinct or a gut, and they don't tend to use 500-page memos to justify what they're doing. In the private equity world, you probably get 50-100-page memos for investment committees before we go ahead and make a decision. And clearly, Warren Buffett is doing pretty well without those kinds of memos. So, if you were really, really talented, you have a great knack for certain kinds of investments. You don't need long memos. But for the average person, the average investment committee, I think some detailed analysis is quite helpful. But you can never predict the future perfectly. In the end, all we're doing in investing is predicting the future and who can really predict the future perfectly? So, you do the best you can to kind of figure out what the likely outcomes are going to be and what the future is likely to be. But in the end, world events over come your expectations, economy doesn't do what you're think, and you have to adjust.

Willy Walker: As you think back on the hundreds, thousands of investments you've made at Carlyle, how much does leadership matter? How much does the CEO you're investing in versus being in the right space, from a macro or from a company standpoint? 

David Rubenstein: Well, in the venture capital world, I think you have two issues usually. Is the CEO entrepreneur really talented enough to bring this to a conclusion? And is the idea so wonderful that it can really scale? I think that CEO Entrepreneur is much more important, probably in making certain that a venture capital thing will get off the ground and be successful. In the buyout world, about 50 percent or more of the cases the buyout CEO at the beginning is replaced, and that shows you that people think the buyout CEO is important. But it also shows you that companies can do quite well by replacing a CEO. When you replace the founder of a venture operation, it may not do quite as well. Obviously, some have done well, but generally, if Mark Zuckerberg had been replaced early on, it's not clear that that company would have taken off or if Steve Jobs had been replaced very early it might not have taken off. With the case of buyouts, CEOs are very important. They can make a big difference, and I really like to follow companies where I know the CEO because I know when the CEO I think is really talented is there. It's probably going to do quite well. 

Willy Walker: In the Wall Street Journal every Saturday, David, there's a column that’s called Your Personal Board of Directors, and they interview CEOs about who the four people that they turn to, or their own personal board of directors are. Who's on David Rubenstein’s personal board of directors? 

David Rubenstein: Well, you mean for investments or for other matters? 

Willy Walker: Just the four people that you turn to are either friendship, advice, counsel, what have you? 

David Rubenstein: Well, I have had two business partners for 30 plus years, Bill Conway, and Dan D'Aniello, I certainly would turn to them. The person to help me raise the money – the initial $5 million is the person you may know, Ed Mathias, who was at T. Rowe Price, joined Carlyle and has been around the investment world for even longer than I have been around, and I would respect his judgment on many things. I have my own family office now called Declaration and that's being run by somebody who was at Michael Dell’s family office for quite some time, Brian Frank, and I would trust his judgment on many things as well. There are many different people I turn to and listen to. Increasingly, like many people, as you get older, you tend to listen to your children as they've now gone from being a child to being a professional, and my children are all in the private equity world. So, I listen to them for their advice because they probably know more about what’s going on private equity at this point than I do. 

Willy Walker: You dedicate your book, How to Lead, to your parents, Betty and Bob and I remember distinctly an interview that you and I did a decade ago in Washington, where they came down to actually watch the discussion, which was a real honor for me. And quite honestly, since it was such a pedestrian conference, I was shocked that they would come. And most parents would love to play a role in their children's lives, but few do. What did you do to have it that your parents played an active role in your life throughout your life? 

David Rubenstein: Well, my situation was different than maybe yours or some others that are watching. My parents did not graduate from college or high school. My father dropped out of high school to go into the Marines. In World War Two came back. He met my mother. She dropped out of high school to get married, and I was their only child born about 12 months or 13 months after they were married. So, they didn't have the kind of professional capabilities that some parents have today or that I can give to my children. But they gave me what Warren Buffett has said is the most important thing parents can give, which is unconditional love. I was their only child, so they obviously focused their energies on me. And so, I tried to repay them by doing a good job and becoming a productive citizen. I'm very pleased that they lived to see a lot of what I've done. From watching my interviews, I like to ask people if their parents saw their success, and many people are proud to say their parents did. And those people whose parents died earlier are very sad that their parents had not lived to see them become successful. In my own case, my children have grown up in a different environment where I've been reasonably wealthy by normal human standards, and they've had certain privileges. But they all got MBAs. They're all interested in investing, earning their own keep. So, I would say that clearly they have had some advantages, but they've done reasonably well so far. In the end, whether they can build Carlyle or not, we will see.

Willy Walker: So, in your book, you segment the leaders that you interview into several buckets. There are the visionaries like Bill Gates and Jeff Bezos, the Builders like Phil Knight and Jamie Dimon, the Transformers Eric Schmidt and Tim Cook, the Commanders are Presidents Bush and Clinton, the Decision Makers Nancy Pelosi, and Adam Silver, and the Masters Jack Nicklaus and Yo-Yo Ma. After you interviewed all those amazing leaders, what cohort seemed to be the happiest or most content with their lives, David?

David Rubenstein: The people who are the happiest are the people who have families that they are really close to. Spouses or partners, children. Jack Nicklaus has an incredible family, very dedicated to him and his wife, Barbara and their grandchildren, and Jack gets more pleasure out of being with his family than anything else, so I think that's one of the things that I think many of these leaders really enjoy the most is actually having a family that they can share their successes and their failures with. So, I think that's an important factor in life. And generally, while people who do not have children and don't have partners or spouses can do quite well in life and they seem to be happy in many cases. I do think there's a real pleasure in having a family that you can be proud of. 

Willy Walker: You've interviewed hundreds and hundreds of the world's most influential and powerful people, and you say that your favorite interview ever was probably the first time you interviewed Bill Gates and Jeff Bezos in a private setting. What was it about that discussion or interview that was so unique? 

David Rubenstein: Well, it was hard for me to believe, but that the Microsoft CEO conference, they asked me to interview Bill Gates and Jeff Bezos together, and they had never been on a panel together. And so, it wasn't filmed, unfortunately. It was quite something. I remember asking them a lot of humorous questions, and they played along with some of my jokes. I would ask Bill Gates, “Are you upset that Jeff Bezos might become richer than you?” “Or is it something you're happy about or not?” Or, I would say to Jeff Bezos and Bill Gates, “What's in the water here in this part of the world that seems like the two richest guys in the world are living on the same street?” Is there something I should know? Should I buy a house there?” And they kind of played along with jokes like that. 

Willy Walker: Yeah. And so, David, as you have done so much, the thought of legacy comes up. What's the legacy you want to leave? You've done all that anyone's ever done in the finance and business world. You've been one of the most actively engaged philanthropic, both as a giver and giver of time. And I would say in many respects, while your money has been widely appreciated and impactful, it is the time that you invest in these organizations that is so incredibly valuable because that's where you really get the leverage of all that you bring to those positions. But as you think about your legacy, what do you hope the legacy of David Rubenstein is? 

David Rubenstein: Well, based on this interview, I hope the legacy is I can persuade you to be my eulogist because you're going to do a better job than anybody else I'm going to find. 

But look, everybody wants to feel that their time on the face of the Earth was useful and that they did something productive with the life that they have, whatever it might be, 50 or 60 or 70, 80 years, whatever it might be, you've done something useful and you want your children, if you have them, or your parents if you have them, to feel you were a productive citizen. So, I suspect my legacy will be something that is a modest part of what I actually do. But five percent of my philanthropy is what I call patriotic philanthropy, fixing up monuments and memorials or buying historic documents and giving them to various institutions. But it's five percent of my philanthropy, but 95 percent of the attention is because no one else is doing what I'm doing. So, I suspect the obituary will say, “patriotic philanthropist, founder or co-founder of Carlyle died today. Hopefully, they'll say at an age of 100 or something like that” but who knows if I'll make it that long. 

Willy Walker: Any thoughts about taking up golf as you get older? 

David Rubenstein: Miniature golf, I'm really good at that, it's less time consuming. Look, the last time I went to play golf, I went to a driving range at the Breakers, and I figured, OK, maybe I should take it up late in life. And so, I get to the driving range and I'm hitting the ball and never going where it's supposed to be. And then a limousine comes up and a nurse gets out and she gets out the wheelchair and she takes a guy out who's about 25 years older than me, puts him in the wheelchair. He's got an oxygen mask and that she wheels him up next to me and props him up, gives him his club, and he starts hitting the ball a lot further than my balls are going, so I figure I'm going to quit. If a guy who needs oxygen, can barely walk, he can hit the ball a lot better than me. This is not a sport for me, so I gave it up. 

Willy Walker: Well, I hope you don't give up on all the things that you do to make our world so great. And I'm just deeply thankful to you for taking the time today to spend an hour with me and talk about all the things that you spend your time on and all the impact that you have on the world around us. I look forward to seeing you when I'm back in Washington next and just a deep thank you for taking the time, David. 

David Rubenstein: Thank you and congratulations on your own success, which is quite considerable. You built a great business and I really admire what you've done. So, thanks very much. 

Willy Walker: Thanks, David. See you soon. Bye-bye. 

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