The largest Alternative Asset or Private Equity group in the US is the Blackstone Group led by Stephen Schwarzman. You can watch some of his interviews on You Tube and given his success over the past 40 years, lessons are easily learned. His company typically invests in companies or real estate under the method: (1) buy a company with $ 3 of debt to $ 1 of equity; (2) improve the company and accelerate the growth rate of the company (3) sell some or all of the new company. Repeat. For the past number of years his company has a internal rate of return (IRR) of 20 to 30% after fees. The task is try to buy at low prices and allow the rise the normal cycle of economy to greatly help your investment.

Mr. Schwarzman credits a number of elements for success:

1. In all businesses the objective is to fill the bus with the right people, have the wrong people get off the bus and ensure the people are in the right spots. To do this Blackstone strives to have those they rate 9 of 10 and 10 of 10, the company will spend more money and mentoring on them because if you can raise their productivity, the firm greatly benefits. If a person is rate a 7 of 10, the person will have less opportunity and there is a reason why there is a revolving door in the lobby.
2. The hiring is down through interviews to see how people handle stress. The business is stressful, it changes, to be on a cutting edge people will need to have a high learning curve, and be inventive. The stress factor helps answer the question when they are under stress will they be honest? The person also needs the ability to work with teams, have communication skills and fit into the culture of the firm.
3. Part of the culture is to get everything perfect, make no mistakes. All deals are examined from multiple points to ensure the risk factors are agreed and can be lived with. If the risk factors change, how does the firm react.
4. If you are interviewing people over 40, their reputations are set. You will not change them.
5. People all over the world do not like change, but change happens. It is up to the firm to ensure that people are comfortable with the changes.
6. Similar to most people, they like some form of control over their lives even though they like working for the firm. One method to do this is start new business where they can use their abilities and the firm benefits.
7. People needed to be treated so they tell the truth about deals which come before them as well as day to day business. To do this, the senior people must live and breathe the core values.
8. There is a difference between founding and CEO and one of them is people listen to the CEO way more than you think and amplify what you say and how you say it. People respond to you. Say your words carefully.
9. Human beings are your most important asset, to accomplish you goals you may have to strategize the goal while keeping confidence levels high.

Linking to dividend paying stocks, one of the lessons of Blackstone is how they do risk minimization and the expectation of the people in the firm. Fortunately Blackstone has been very profitable so compensation is good. Now why do wealthy people continue to stay and work? If they like solving problems, like new things, learn find the work inventive, interesting and fascinating with some fun along the way – people will stay a long time. In all your investments you can ask how is risk minimization done there and who has input on the decisions.

There are more questions than answers, till the next time – to raising questions.