Private Equity - What's the Best Critique of Leverage?

2min Snip

00:00

Play full episode

Summary

Transcript

Episode notes

In private equity firms, you tend to get people who are fairly hard working and smart. So if they were going to be working for one very wealthy person, and that wealthyper wasn't going to give them a piece of the profits, they might say, i can take my skills and go elsewhere. You tend to have partnerships because you want a share of the wealth. That's how you attract very talented people. But there's always risk in leverage. When economy slows down, the leverage typically works against you.

Baltimore native David Rubenstein is a founding figure in private equity, a prolific philanthropist, and author. From leveraged buyouts to his patriotic philanthropy to his leadership roles within institutions like the Smithsonian, Kennedy Center, and the National Gallery of Art, David has spent much of his life evaluating what makes institutions—and people—succeed.

He joined Tyler to discuss what makes someone good at private equity, why 20 percent performance fees have withstood the test of time, why he passed on a young Mark Zuckerberg, why SPACs probably won’t transform the IPO process, gambling on cryptocurrency, whether the Brooklyn Nets are overrated, what Wall Street and Washington get wrong about each other, why he wasn’t a good lawyer, why the rise of China is the greatest threat to American prosperity, how he would invest in Baltimore, his advice to aging philanthropists, the four standards he uses to evaluate requests for money, why we still need art museums, the unusual habit he and Tyler share, why even now he wants more money, why he’s not worried about an imbalance of ideologies on college campuses, how he prepares to interview someone, what appealed to him about owning the Magna Carta, the change he’d make to the US Constitution, why you shouldn’t obsess about finding a mentor, and more.

Read a full transcript enhanced with helpful links, or watch the full video.

Recorded September 30th, 2021 Other ways to connect

Follow us on Twitter and Instagram
Follow Tyler on Twitter
Follow David on Twitter
Email us: cowenconvos@mercatus.gmu.edu
Subscribe at our newsletter page to have the latest Conversations with Tyler news sent straight to your inbox.