We All Could Have Given Schwarzman’s Speech (but wouldn’t have)

Greetings from the home office, where it’s good to be back after a 30-hour whirlwind to Quebec City, for the North American Venture Capital Summit. Just as beautiful as it was on my last visit – 24 years ago when all I would eat in the French restaurants were bread and cheese (on the upside, I learned to say fromage and pan at a very young age).

My primary role in Quebec was to conduct a pair of keynote interviews: One with Alan Patricof of Greycroft Partners and one with David Rimer of Index Ventures. Both seemed to go well, with Patricof stressing a “back to basics” mentality, and Rimer discussing how fast technology trends can shift (Rimer also put together a slideshow that included a wonderfully-obscene faux Economist cover).

But this morning I want to briefly discuss the presentation I was not a part of. That would be the lunchtime keynote address by Steve Schwarzman of The Blackstone Group. Suffice to say, it prompted much discussion at the closing cocktails and on the plane-ride back to Boston. I’ve had an evening for reflection since live-blogging the speech, so here goes:

It was either one of the laziest keynote speeches I have ever seen, or one of the most condescending.

Schwarzman spent more than 90% of the speech giving a chronological history lesson on how the U.S. (and then the world) arrived at its current financial pickle. Beginning back with the CRA, and continuing on through FAS 157, Bear Stearns, Lehman Brothers, TARP, etc. It was as if he’d found a transcript from one of those CNBC primetime specials, and read it verbatim. The only digression was a brief anecdote about how Schwarzman had met with Gordon Brown during UN Week in New York, which came off (unintentionally, I hope) as if that meeting had been the genesis of Brown’s widely-lauded bank rescue plan.

The “lazy” interpretation is that Schwarzman spent basically no time prepping for Quebec, which is perhaps supported by fact that he zipped in and out of the conference without taking a single question (only speaker not to do Q&A). The result was a speech most anyone in the room could have given, particularly after 20 minutes with a pen, paper and access to Google.

The “condescending” interpretation is that Schwarzman assumed that the audience was mostly Canadian (probably 50/50), and somehow believed that none of them had really paid attention to the goings-on down south. Either way, bad form.

None of this, of course, masks the fact that certain media outlets have been hyperventilating over the speech. Not because of the first 90%, but because he concluded with things like:

• “This type of environment is tailor-made for making money in the private equity business.”
• “It’s a wonderful, wonderful time to invest.”
• “I’m close to a raging bull on private equity.”

He even went so far as to say that upcoming deals would be done “with very little risk” and that “you can’t lose.” That last one might really come back to haunt him, even he’s right on the general thesis of better returns from lower valuations.

There was no actual discussion of Blackstone Group, save for a successful Lehman-related real estate deal just prior to the bankruptcy. Nor anything more general about default rates, over-valued deals in 2006/2007, fundraising challenges or falling returns. Certainly no “we’re all to blame” mea culpa like we recently got from Henry Kravis. Just the tired heads PE wins/tails PE wins argument. He said it was supposed to be an “optimistic” speech, so perhaps that other stuff was excluded so as not to sully the mood.

Schwarzman also acknowledged what we’ve previously reported at peHUB: That Blackstone is entering the venture capital market with a late-stage cleantech fund. Kind of like what C Change Capital, CMEA Ventures and others are trying to do (an equity substitute for project finance). In doing so, he made an odd comment about how “venture capital is more GDP-driven” than is private equity. I’m pretty sure he got that the wrong way around, although I’d love to hear a supporting argument…

Maybe I’m just being picky because I left my bag sitting outside in the economy lot last night, and didn’t realize it until I drove home (it was still there when I returned near midnight). But I think I’m just dissappointed that a man with so many valuable insights chose not to share them.