Lex Fridman PodcastStephen Schwarzman: Going Big in Business, Investing, and AI | Lex Fridman Podcast #96
EVERY SPOKEN WORD
105 min read · 20,894 words- 0:00 – 4:17
Introduction
- LFLex Fridman
The following is a conversation with Stephen Schwarzman, CEO and co-founder of Blackstone, one of the world's leading investment firms, with over $530 billion of assets under management. He's one of the most successful business leaders in history. I recommend his recent book called What It Takes that tells stories and lessons from his personal journey. Stephen is a philanthropist and one of the wealthiest people in the world, recently signing The Giving Pledge, thereby committing to give the majority of his wealth to philanthropic causes. As an example, in 2018, he donated $350 million to MIT to help establish its new College of Computing, the mission of which promotes interdisciplinary big, bold research in artificial intelligence. For those of you who know me know that MIT is near and dear to my heart and always will be. It was and is a place where I believe big, bold, revolutionary ideas have a home, and that is what is needed in artificial intelligence research in the coming decades. Yes, there's institutional challenges, but also there's power in the passion of individual researchers, from undergrad to PhD, from young scientist to senior faculty. I believe the dream to build intelligence systems burns brighter than ever in the halls of MIT. This conversation was recorded recently but before the outbreak of the pandemic. For everyone feeling the burden of this crisis, I'm sending love your way. Stay strong. We're in this together. This is the Artificial Intelligence podcast. If you enjoy it, subscribe on YouTube, review it with five stars on Apple Podcasts, support it on Patreon, or simply connect with me on Twitter @LexFridman, spelled F-R-I-D-M-A-N. As usual, I'll do a few minutes of ads now and never any ads in the middle that can break the flow of the conversation. I hope that works for you and doesn't hurt the listening experience. Quick summary of the ads. Two sponsors: Masterclass and ExpressVPN. Please consider supporting the podcast by signing up to Masterclass at masterclass.com/lex and getting ExpressVPN at expressvpn.com/lexpod. This show is sponsored by Masterclass. Sign up at masterclass.com/lex to get a discount and support this podcast. When I first heard about Masterclass, I thought it was too good to be true. For $180 a year, you get an all-access pass to watch courses from, to list some of my favorites, Chris Hadfield on space exploration; Neil deGrasse Tyson on scientific thinking and communication; Will Wright, creator of SimCity and Sims, on game design; Carlos Santana on guitar; Garry Kasparov on chess; Daniel Negreanu on poker; and many, many more. Chris Hadfield explaining how rockets work and the experience of being launched into space alone is worth the money. By the way, you can watch it on basically any device. Once again, sign up at masterclass.com/lex to get a discount and to support this podcast. This show is sponsored by ExpressVPN. Get it at expressvpn.com/lexpod to get a discount and to support this podcast. I've been using ExpressVPN for many years. I love it. It's easy to use. Press the big power-on button and your privacy is protected. And, if you like, you can make it look like your location is anywhere else in the world. I might be in Boston now, but I can make it look like I'm in New York, London, Paris, or anywhere else in the world. This has a large number of obvious benefits. Certainly, it allows you to access international versions of streaming websites like the Japanese Netflix or the UK Hulu. ExpressVPN works on any device you can imagine. I use it on Linux, shout out to Ubuntu 20.04, Windows, Android, but it's available everywhere else too. Once again, get it at expressvpn.com/lexpod to get a discount and to support this podcast. And now here's my conversation with Stephen Schwarzman.
- 4:17 – 7:34
Going big in business
- LFLex Fridman
Let's start with a tough question. What idea do you believe, whether grounded in data or in intuition, that many people you respect disagree with you on?
- SSStephen Schwarzman
Well, th- there isn't all that much, uh, anymore since the world's so transparent. Uh, but, uh, o- one of the things I, I believe in, uh, and put it in the, the book What It Takes is, is if you're gonna do something, do, do something very consequential. Uh, do something that's quite large, uh, if you can, that's unique, uh, because if you operate in that kind of space, when you're successful, it's, it's a huge impact. Uh, the prospect of success enables you, uh, to recruit people, uh, who want to be part of that. A- And those type of large opportunities are pretty easily described. Uh, and, and so, uh, not everybody likes to operate, uh, at scale. Some people like to do small things because it, uh, i- is, is meaningful for them emotionally. Uh, and, and so occasionally you get a disagreement, uh, on that. But those are life choices, uh, ra- rather than, uh, commercial choices.
- LFLex Fridman
That's interesting. What good and bad comes with going big? See, we often in America think big is good. What's the benefit? What's the cost in terms of just bigger than business but life happiness, the pursuit of happiness?
- SSStephen Schwarzman
Well, y- you do things that make you happy. It's, it's not mandated. Uh, (laughs) and everybody's different. Uh, and, um, s- some people, um, you know, if they have talent like playing pro football. Uh, you know, other people just like throwing the ball around, uh, you know, not even being on a team. Wh- what's better? Uh, d- depends what your objectives are, depends what your talent is, uh, you know, d- depends, um, you know, wh- wh- what gives you joy.
- LFLex Fridman
So in terms of going big, is it both for impact on the world and because you personally, it gives you joy?
- SSStephen Schwarzman
Well, it, it makes it easier to succeed, actually. Uh, because if you catch something, for example, that's cyclical, that's, that's a huge, uh, opportunity, then, then you usually can find some place within that huge opportunity where you can make it work. Uh, if, if, if, if you're prosecuting a, a really small thing and, and you're wrong, uh, you don't have many places to go. Uh, so, you know, I've always found that, uh, the easy place to be, uh, and, you know, um, the ability where you can concentrate, uh, human resources, get people excited about doing, like, really impactful big things. Uh, and you can afford to pay them actually, because the bigger thing can generate much more in the way of, um, uh, of, of financial resources. So, so that brings people out of talent, uh, to help you. Uh, and, and so all together it's a virtuous circle, uh, I think.
- 7:34 – 16:00
How to recognize an opportunity
- SSStephen Schwarzman
- LFLex Fridman
How do you know an opportunity when you see one, in terms of the one you wanna go big on? Is it intuition? Is it facts? Is it, uh, back and forth deliberation with people you trust? What's the process? Is it art? Is it science?
- SSStephen Schwarzman
Well, it's pattern recognition. And how do you get to pattern recognition? First you need to understand the patterns and, and the changes that are happening. And, and that's, uh, uh, that's either, uh... It's observational on some level. You, you can call it data, uh, or, um, you can just call it listening to, uh, unusual things that people are saying that they haven't said before. And, you know, I've always, um, tried to describe this. It's like seeing a piece of white lint on a, on a black dress, but most people disregard that piece of lint. They just see the dress. I, I always see the lint, uh, and, and I'm, I'm fascinated by how did something get some place it's not supposed to be. So it doesn't even need to be a big discrepancy, but if something shouldn't be some place in, in, in a, in a, in a constellation of facts that, that, you know, sort of made sense in a traditional way, uh, I, I've learned that if you focus on why some- one discordant note, uh, is there, that's usually a key to something important. And if you can find two of those discordant notes, that's usually a straight line to some place, and that some place is not where you've been. And, uh, usually when you figure out that things are changing or have changed and you describe them, which you have to be able to do 'cause it's not, uh, some odd intuition, it's just focusing on facts. It's almost like a scientific discovery, if you will. When you describe it to other people in the real world, they tend to do absolutely nothing about it.
- LFLex Fridman
Mm-hmm.
- SSStephen Schwarzman
And, um, that's because humans are comfortable in their own reality. And, uh, if there's no particular reason at that moment to shake them out of their reality, they'll stay in it even if they're ultimately completely wrong. And I've always been stunned that when I explain where we're going, what we're doing and why, almost everyone just says, "That's interesting." (laughs)
- LFLex Fridman
Yeah.
- SSStephen Schwarzman
And they continue doing what they're doing. And, and so, um, you know, I, I think it's pretty easy to do that, uh, you know, but what you need is a huge data set. So, you know, before AI and people's focus on data, you know, I've sort of been doing this mostly my whole life. I'm not a scientist. I'm not a, let alone a computer scientist. And, you know, you, you can just hear what people are saying. And when somebody says something or you observe something that simply doesn't make sense, that's when you really go to work. The rest of it's just processing.
- LFLex Fridman
You know, on a quick tangent, pattern recognition is a term often used throughout the history of AI. That's the goal of artificial intelligence, is pattern recognition, right? But there's, I would say, various flavors of that. So usually pattern recognition refers to the process of the, um, the, well, you said dress and the lint on the dress. Pattern recognition is very good at identifying the dress, is, uh, looking at the re- the pattern that's always there, that's very common and so on. You almost refer to a pattern that's like an, what's called outlier detection in, uh, computer science, right? The, you, the rare thing, the, um, the small thing. Now, AI is not often good at that. Do you, uh, just almost philosophically, the kind of decisions you made in your life based scientifically almost on data do you think AI in the future will be able to do? Is it something that could be put down into code? Or is it still deeply human?
- SSStephen Schwarzman
Uh, it's tough for me to say since I don't have domain, uh, uh, knowledge in AI to know everything that could or might occur. Uh, I, I know, um, sort of in my own case that, that most people don't see any of that.
- LFLex Fridman
Right.
- SSStephen Schwarzman
Uh, I, I just assumed it was motivational. Uh, you know, um...... but, but it's also sort of, uh, it's hardwiring. W- what are you wired or programmed, uh, to be finding, uh, or looking for? It's, it's not what happens every day. Th- that's not interesting, frankly. I mean, that's what people mostly do. I do a bunch of that too, uh, because, you know, that's what you do in normal life. But I- I've always been completely fascinated by the stuff that doesn't fit. Or the other way of thinking about it, it's, it's determining what, what people want w- without them saying it. Uh, that, that, that's, that's a different kind of pattern. Y- you can see everything they're doing. There's a missing piece, they don't know it's missing. You think it's missing given the other facts you know about them, and you, you deliver that, and then that becomes, you know, sort of very easy, uh, to, to, to sell to them.
- LFLex Fridman
To linger on this point a little bit, you've mentioned that in your family when you were growing up, nobody raised their voice in anger or otherwise. And you said that this allows you to listen and hear some interesting things. Can you elaborate, as you have been, on that idea? What do you hear about the world if you listen?
- SSStephen Schwarzman
Well, y- you, you have to listen really intensely to understand, uh, what people are saying as well as what people are intending, because it's not necessarily the same thing. Uh, and, um, um, people mostly give themselves away, no matter how clever they think they are, um, particularly if you have the full array of inputs. In other words, if you look at their face, you look at their eyes, which are the window on the soul, it's very difficult to, to conceal what, what you're thinking. Uh, you look at facial expressions and posture. You listen to their voice, which changes. Um, y- you know, when it's, uh, when you're, you're talking about something you're comfortable with or not. Are you speaking faster? Is the amplitude of what you're saying higher? M- most people just give away what's really on their mind. Uh, you know, they're, they're not that clever. They're busy spending their time thinking about what they're in the process of saying. And, and so if you just observe that, not in a hostile way, uh, but just in an evocative way, and just let them talk for a while, they'll more or less tell you almost completely what they're thinking, even the stuff they don't want you to know. A- and once you know that, of course, it's sort of easy to play that kind of game, uh, because th- they've already told you everything you need to know. And, and so it's e- easy to get to a, a conclusion if there's meant to be one, an area of common interest, since you know almost exactly what's on their mind. Uh, and, and so that's an enormous advantage as opposed to just walking in in some place and somebody telling you something and you believing what they're saying. Um, there, there are so many different levels of communication.
- 16:00 – 25:26
Solving problems that people have
- SSStephen Schwarzman
- LFLex Fridman
So, a powerful approach to life you discuss in the book on the topic of listening and really hearing people is figuring out what the biggest problem bothering a particular individual or group is and coming up with a solution to that problem and presenting them with a solution, right? In fact, you brilliantly describe a lot of simple things that most people just don't do. (laughs) It's kind of obvious, (laughs) find the problem that's bothering somebody deeply. And as you said, uh, I think you've implied that they will usually tell you what the problem is. But can you talk about this process of seeing what the biggest problem for a person is, trying to solve it, and, um, maybe a particularly memorable example?
- SSStephen Schwarzman
Yeah, sure. You know, if, if, if, if you know you're gonna meet somebody, there are two, two types of situations: chance meetings-
- LFLex Fridman
Mm-hmm.
- SSStephen Schwarzman
... and you know y- the second is you know you're gonna meet somebody. So, let's take the easiest one, wh- which is you know you're gonna meet somebody. Uh, and, um, you, you, you start trying to make pretend you're them. It's really easy. What's on their mind? Uh, what are they thinking about in their daily life? What are the big problems they're facing? So, so if they're, you know, to make it a really easy, uh, example, um, you know, m- make pretend, you know, they're like President of the United States. Doesn't have to be this president. It could be any president. So, you sort of know what's more or less on their mind because the press keeps reporting it, and, and you see it on television. You hear it. Uh, people discuss it. So you know if you're gonna be running into somebody in that kind of position. Uh, y- you sort of know what they look like already. Uh, you know what they sound like. You, you, you know, uh, what their voice is like, and you know what they're focused on. And, and so if you're gonna meet somebody like that, what, what you sh- what you should do is take the biggest unresolved issue that they're facing and, and come up with, uh, a few interesting solutions that, that, that basically haven't been out there, uh, or that you, you haven't heard anybody else, uh, was thinking about. So just to give you an example, I was... It was sort of in the early 1990s, and I was invited to something at the White House, which was a big deal for me because I was like, you know, a person from no place, and, and, you know, I had met the president once before, uh, because, uh, it was President Bush, because his son, uh, was in my dormitory, so I had met him at Parents' Day.I mean, it's just, like-
- LFLex Fridman
(laughs)
- SSStephen Schwarzman
... the oddity of things. So, so I knew I was gonna see him, uh, because, you know, that's where the invitation came from. And, um, so, so there was something going on, and I just thought about, you know, two or three ways to approach that, uh, that issue. And, you know, at, at that point, I was, uh, separated and so I had brought a, uh, brought a date, uh, to the White House. And, uh, you know, and, and, and so, so I saw the President and we sort of went over in a corner for about 10 minutes and discussed whatever this issue was. And I, I, I later, you know, went back to my date. It was a little rude, but it was meant to be confidential conversation, and I barely knew her. Uh, and, um, you know, she said, "What were you talking about all that time?" I said, "Well, you know, uh, there's something going on in the world and I've thought about different ways of perhaps approaching that." And he was interested. Uh, an- and the answer is, of course, he was interested. Why wouldn't he be interested? There didn't seem to be an easy outcome. And, and so, you know, conversations of that type, once somebody knows you're really thinking about what's good for them, uh, and, and good for the situation, uh, it has nothing to do with, with me, I mean, it's really about being in service, uh, you know, to, to, to the situation, then, then people trust you. And they'll tell you other things because they know your motives, uh, are, are basically very pure. You- you're just trying to resolve a difficult situation or help somebody do it. So, so these types of things, um, you know, that's a planned situation, that's easy. 'Cause sometimes you just come upon somebody and they start talking and, you know, that requires, you know, like, different skills, you know. Uh, you can ask 'em, "What have you been working on lately? What are you thinking about?" Uh, you, you, you can ask 'em, you know, "Is anything been particularly difficult?" And he, and he, you know, you can ask 'em... Most people if, if they trust you, for some reason, um, they'll tell you. A- and then you have to instantly go to work on it. And, um, you know, that's, that's not as good as having some advanced planning. But, but, you know, uh, almost everything going on is, is like out there. And, and people who are involved with interesting situations, um, they're, they're playing in- in- in- in- in- in the same ecosystem. They, they just have different roles, uh, in, in the ecosystem. Uh, and, um, you know, you, you, you can do that with somebody who owns a pro football team, uh, that loses all the time. We specialize in those in New York. And, and, you know, you, you, you already have analyzed why they're losing, right? Inevitably it's because they don't have a great quarterback, they don't have a great coach, and they don't have a great general manager who knows how to hire the best talent. Tho- those are the three reasons why a team fails, right? Because there are salary caps, so every team pays the same amount of money for all their players. So it's gotta be those three positions. So if you're talking with somebody like that, inevitably, even though it's not structured, you- you- you- you'll- you'll- you'll know how their team is doing and you'll know pretty much why. And if you start asking questions about that, they're, they're typically very happy to talk about it 'cause they haven't solved that problem. In some case, they don't even know that's the problem. It's pretty easy to see it. So, you know, I- I do stuff like that which I find is, um, intuitive, uh, as a process, uh, but, you know, lead- leads to really good results.
- LFLex Fridman
Well, the funny thing is when you're smart, for smart people, it's hard to escape their own ego and, and the space of their own problems, which is what's required to think about other people's problems. It requires for you to let go o- of the fact that your, your own problems are all important and then to talk about your... I think, uh, while it seems obvious and I think quite brilliant, uh, it's, it's a difficult leap for many people, especially smart people, to empathize with, truly empathize with the problems of others.
- SSStephen Schwarzman
Well, I have a competitive advantage.
- LFLex Fridman
(laughs) I like it.
- SSStephen Schwarzman
Which, which is-
- LFLex Fridman
(laughs)
- SSStephen Schwarzman
... which is I don't think I'm so smart. Uh, so, so-
- LFLex Fridman
That's good. That's-
- SSStephen Schwarzman
So, you know, it's not a problem for me. (laughs)
- LFLex Fridman
Well, the truly smartest people I know say that exact same thing. Yeah, being humble is, uh, is really useful competitive advantage, as you said. Uh, how do you stay humble?
- SSStephen Schwarzman
Well, I, I haven't changed much, um-
- LFLex Fridman
Since...
- SSStephen Schwarzman
... since, since I was, um, in my mid-teens. You know, I was, I was raised, um, partly in the city and partly in the suburbs. And, um, and you know, whatever the values, uh, I had, uh, at that time, uh, those are still my values. Uh, I call 'em like middle class values. That's how I was raised. Um, and, um, I- I've, I've never changed. Why would I? That, that's who I am. A- and, and so the accoutrement of, of, um, you know, the rest of your life ha- has got to be put on the same, you know, like solid foundation of who you are. Because if you start losing who you really are, who are you? Uh, so I- I've never had, uh, the desire to be somebody else. I just do other things now that I- I wouldn't do as a, you know, sort of as a middle class kid from Philadelphia.I mean, my life has morphed, uh, on a certain level. But part of the strength of, of having, uh, integrity of, of personality is, is that you can remain in touch with, um, w- with, with, with everybody who's comes from that kind of background. And, and, you know, even though I do some things that aren't like that, you know, in terms of people I meet or situations I'm in, I always look at it through the same lens. Uh, and that's very psychologically, uh, comfortable, uh, and doesn't require to me to make any real adjustments in my life, and I just keep plowing ahead.
- 25:26 – 32:51
Philanthropy
- SSStephen Schwarzman
- LFLex Fridman
There's a lot of activity and progress in recent years around effective altruism. It's, I wanted to bring this topic with you 'cause it's an interesting one from your perspective. Uh, you can put it in any kind of terms, but it's philanthropy that focuses on maximizing impact. How do you see the goal of philanthropy, both from a personal motivation perspective and a societal big picture impact perspective?
- SSStephen Schwarzman
Yeah. I, I don't think about philanthropy the way you would expect me to, okay? I, I, I look at, you know, sort of, uh, solving, uh, big issues, addressing big issues, starting new organizations to do it, uh, much like we do in our business. You know, we keep growing our business not by taking the original thing and making it larger, but continually seeing new things and, and, and building those, and, and, you know, sort of marshaling financial resources, human resources, and, and, in our case, because we're in the investment business, we find something new that looks like it's gonna be terrific, and, and we do that, and it works out really well. All I do in what you would call philanthropy is, is look at other opportunities to help society, um, and I end up starting something new, marshaling people, marshaling a lot of money. And, and then at the end of that kind of creative process, so somebody typically will ask me to write a check. I, I don't wake up and say, "How can I, like, give large amounts of money away?" I, I look at issues that are important, uh, for people. Uh, in, in some cases, I, I do smaller things because it's important to a person. Uh, and, and, you know, I have, you know, sort of I can relate to that person. There's some unfairness, uh, that's happened to them. And so, uh, in situations like that, I give money anonymously and help 'em out. And, you know, that, that, that's, it's, it's like a miniature version of addressing something really big. So, you know, at MIT, um, I, I, I've done a big thing, uh, you know, helping to start this, uh, new school of computing. And, and I did that because, you know, I, I saw that, that, you know, there's sort of, like, a global race on, uh, in, in AI, quantum, and other major technologies. And I, I thought that, um, that the US could use more enhancement, uh, from a competitive, uh, perspective. And I also, because I get to China a lot and I travel around a lot, compared to a regular person, um, you know, I, I can see the need to have control of, of these types of technologies so when they're introduced, we don't create a mess like we did with the internet, uh, and, and with social media, an unintended consequence, um, you know, that's creating all kinds of issues and freedom of speech in the functioning of liberal democracies. So with, with AI, it was pretty clear that there was enormous difference of views, uh, around the world by the relatively few practitioners in the world who really knew what was going on. And, uh, by accident, I knew a bunch of these people, uh, you know, who were, like, big famous people. Uh, and I could talk to them and say, "Why do you think this is a force for bad?" And someone else, "Why do you feel this is a force for good?" And, and how do we move forward with the technology, but the sames... uh, by the same time make sure that whatever is potentially, you know, sort of on the bad side of this technology with, you know, for example, disruption of workforces and things like that, that could happ- happen much faster than the Industrial Revolution. Uh, what do we do about that? And how do we keep that under control so that the really good things about these technologies, which will be great things, not good things, uh, are allowed to happen? So, so to me, uh, you know, this was one of the great issues, uh, facing society. The number of people who were aware of it were very small. I just accidentally got sucked into it. And, and as soon as I saw it, I went, "Oh my God, this is mega-"
- LFLex Fridman
(laughs) Yeah.
- SSStephen Schwarzman
... uh, both on a competitive basis globally, uh, but, but also in terms of protecting, uh, society and benefiting society. So, so, so that's how I got involved. And at the end, you know, sort of the right thing that we figured out was, you know, sort of double MIT's, uh, computer science faculty and, and basically create the first AI-enabled, uh, university in the world, uh, and, you know, in effect be an example, uh, a beacon to the rest of the research community around the world academically and, and, and create, you know, a much more, um, robust......uh, US, uh, situation, competitive situation among universities. Uh, because if, if MIT was gonna raise a lot of money and double its faculty, well, you could bet that, you know, in a number of other universities were gonna do the same thing. At the end of it, uh, it would be great for knowledge creation, you know, great for the United States, great for the world. Uh, and so I like to do things that I think are really positive, uh, things that other people aren't acting on that I, I see for whatever the reason. First, it's just people I meet and what they say, and I can recognize when something really profound is about to happen or needs to, and I do. And at the end of the d- the end of the situation, somebody says, "Can, can you write ah- a check to help us?" And, and the answer is sure. I mean, because if I don't, the vision won't happen, but it's the vision of whatever I do that is compelling.
- LFLex Fridman
And the... Essentially, I love that idea of whether it's small at the individual level or really big, like the, the gift to MIT to launch the College of Computing, it's, it's... It starts with a vision, and it, it... You see philanthropy as, um... The biggest impact you can have is by launching something new, uh, especially on an issue that others aren't really addressing. And I, uh, and I also love the notion, and you're absolutely right, that there's other universities, uh, Stanford, CMU, I'm looking at you, that would... Essentially, you're the seed will, will, will, uh, create other... It, it'll, it'll have a ripple effect that potentially might help US be a leader or continue to be a leader in AI, this, uh, potentially very transformative, uh, research direction. Uh, just to linger on that point
- 32:51 – 37:32
Hope for the new College of Computing at MIT
- LFLex Fridman
a little bit, what is your hope long term for the impact the college here at MIT might have in the next 5, 10, even 20, or let's get crazy, 30, 50 years?
- SSStephen Schwarzman
Well, it's very difficult to predict the future when you're dealing with knowledge production and creativity. Um, you know, MIT has obviously, um, some unique aspects, uh, you know, globally, and, you know, there's four big, uh, sort of academic surveys, um... I forget whether it was QS, uh, there's the Times, uh, in London, you know, the US News and whatever, and one of these recently, MI- MIT, was ranked number one in the world.
- LFLex Fridman
Yeah.
- SSStephen Schwarzman
Right? So, so leave aside whether you're number three somewhere else, uh, i- in the great sweep of humanity, this is pretty amazing.
- LFLex Fridman
Yeah.
- SSStephen Schwarzman
Right? So, so you have a really, um, remarkable aggregation of, of human talent, uh, here. And, um, where it goes, uh, it's hard to tell. You have to be a scientist to have the right feel. Um, but, but what's, what's important is you, you have a critical mass, uh, of people. And I, I think, uh, it breaks into two buckets. Uh, one is scientific advancement, uh, and, and if the new college can, uh, help, you know, sort of either, uh, serve as a convening, uh, force within the university, um, or, or, or, or help sort of coordination and communication among people, uh, that's a good thing, um, absolute good thing. The second thing is, is in the AI ethics area, uh, which, uh, is, is, is, uh, I- in a way equally important. Because if, if the science side creates blowback, uh, so, so that science is, is, is, um, you know, um, uh, a bit crippled in terms of going forward because society's reaction to, to knowledge advancement in this field becomes really hostile, uh, th- then you've sort of lost the game, uh, in terms of scientific progress and innovation. And, and so the AI ethics piece is super important, because, you know, uh, in a, in a, in a perfect world, uh, A- A- MIT would, would serve as a global convener, uh, because what you need is, is you need the, the research universities, y- you need the companies, uh, that are driving AI and quantum, uh, work, uh, you need governments who will ultimately be regulating certain elements of this, uh, and you also need the media, uh, to be knowledgeable and trained so, so, so we don't get, um, sort of, um, overreactions to, to one situation which then goes viral, uh, and it ends up shutting down avenues that are, are perfectly fine, you know, to, to be walking down or running down that avenue. Uh, but, but if enough, uh, uh, discordant, uh, information, not even correct necessarily, uh, you know, sort of gets, um, uh, you know, sort- sort of gets pushed around society, then you can end up with a really hostile regulatory environment and other things. So you have four drivers that, that have to be, um, sort of, um...... integrated. Uh, and, and so, uh, if, if, if the new school of computing, uh, can be really helpful in that regard, uh, then that's a real service, uh, to science and, and it's a service to MIT. So, so that's, that's why I wanted to get involved, uh, for both areas.
- LFLex Fridman
And the hope is, uh, for me, for others, for everyone, for the world, is, uh, for this particular college or community to be a beacon and a connector for the re- uh...
- SSStephen Schwarzman
Yes.
- LFLex Fridman
... for, for these, for these ideas.
- SSStephen Schwarzman
Yeah, that's right. I mean, I, I, I think, uh, MIT is perfectly, uh, positioned, uh, uh, to do that.
- 37:32 – 42:24
Unintended consequences of technological innovation
- LFLex Fridman
So you've mentioned the media, social media, the internet as, uh, this complex network of communication with, uh, with flaws perhaps. Perhaps you can speak to them. But it... you know, I personally think that science and technology, uh, has its flaws, but ultimately is, uh, one, sexy, exciting. It's the way for us to explore and understand the mysteries of our world. And two, most- perhaps more importantly for some people, it's a huge way to... a really powerful way to grow the economy, to improve the quality of life for everyone. So how do we get... How do you see, uh, the media, social media, the internet as a society having, uh, a, you know, healthy discourse about science? First of all, one that's factual, and two, one that's... finds science exciting, that invests in science, that pushes it forward, especially in this science fiction, fear-filled field of artificial intelligence?
- SSStephen Schwarzman
Well, I think that's a little above my pay grade because, um, you know, trying to control social media to make it do what you want to do-
- LFLex Fridman
Sure.
- SSStephen Schwarzman
... uh, appears to be beyond almost anybody's control. And, and the technology is being used, uh, to create what I call the tyranny of the minorities, okay? A minority is defined as, you know, two or three people on a street corner. Doesn't matter what they look like.
- LFLex Fridman
Yeah.
- SSStephen Schwarzman
(laughs) Uh, doesn't matter where they came from, they're united, uh, by, uh, that, uh, one issue that they care about. And, and their job is to, um, enforce their views, uh, on the world. And, you know, uh, in the political world, people just are manufacturing, uh, truth. Uh, and they, and they throw it all over, a- and it affects all of us. Uh, and, um, you know, sometimes people are just hired to, to do that. I mean, it's amazing. Uh, and y- you think it's one person, it's really, you know, just sort of a front, you know, for a particular point of view. Uh, and this has become, uh, exceptionally disruptive, uh, for, uh, society, and it's dangerous, and it's undercutting, you know, the ability of liberal democracies to function. Uh, and I don't know how to get a grip on this. And I was really surprised, um, when we, um... you know, I was up here for the announcement, uh, last, uh, uh, spring, uh, of the College of Commu- Computing. Uh, and they had all these famous scientists, some of whom were involved with the invention-
- LFLex Fridman
Mm-hmm.
- SSStephen Schwarzman
... uh, uh, of the internet. And almost every one of 'em got up and said, "I think I made a mistake."
- LFLex Fridman
(laughs) .
- SSStephen Schwarzman
Uh, and, and as a non-scientist, I never thought I'd hear anyone say that. And, and what they said is, um, more or less, to make it simple, uh, "We thought this would be really cool, uh, inventing the internet. We could connect everyone in the world. Uh, we can move knowledge around. It was instantaneous. It's a really amazing thing." He said, "I don't know that there was anyone who ever thought about social media coming out of that, and the actual consequences for people's lives." Uh, you know, so there's always some, um, uh, some younger person... I just saw one of these yesterday. It was reported on the national news. He killed himself when people used social media, uh, to, to basically, you know, sort of ridicule him or something of that type. This is dead. Um, this is dangerous. Uh, and, um, you know, so, so I, I, I don't have a, a solution for that other than going forward, you, you can't end up with this type of outcome. Using AI to make this kind of mistake twice is unforgivable. So, so interestingly, at least in the West, uh, and, and parts of China, uh, people are quite sympathetic, uh, to, to, you know, sort of the whole concept of a- AI ethics, and what gets introduced when, and, and cooperation within your own country, within your own industry, uh, as well as globally, uh, to, to make sure that the technology is a force for good.
- 42:24 – 50:22
Education systems in China and United States
- SSStephen Schwarzman
- LFLex Fridman
On that really interesting topic, since 2007, you've had a relationship with senior lea- leadership with a lot of people in China, and an interest in understanding modern China, their culture, their world. Much like with Russia... I'm from Russia originally. Americans are told a very narrow, one-sided story about China, uh, that I'm sure misses a lot of fascinating complexity.... both positive and negative. What lessons about Chinese culture, its ideas as a nation, its future, do you think Americans should know about, deliberate on, think about?
- SSStephen Schwarzman
Well, uh, it's, i- it's sort of a wide question that you're-
- LFLex Fridman
Sure.
- SSStephen Schwarzman
... you're asking about. Uh, you know, China's a pretty unusual place. Uh, first, it's, it's huge. Uh, you know, you got ... It's physically huge. It's got 1,000,000,003 people-
- LFLex Fridman
(laughs)
- SSStephen Schwarzman
... and the, the character of the people isn't as well understood, uh, in the United States. Um, uh, Chinese, um, people are amazingly energetic. Um, if, if you're one of 1,000,000,003 people, one of the things you've gotta be focused on is how do you make your way, uh, you know, through a crowd, uh, uh, of, of, of a billion, 2.99999 other people? (laughs) Uh-
- LFLex Fridman
Another word for that is competitive.
- SSStephen Schwarzman
Yes. They, they are individually highly energetic, highly focused, always looking for some opportunity, uh, for themselves, um, because they need to, uh, because there, there's an enormous amount of just literally people around. And, and so, y- you know, what I've found, uh, is, uh, they'll, they'll try and find a way to win, uh, for themselves. Uh, and their country is complicated because it, it basically doesn't have the same kind of functional laws, uh, that we do, uh, in, in United States, in the West. And, and, um, uh, the country is controlled really, um, through a, a web of relationships you have with other people, uh, and the relationships that those other people have with other people. So, it's an incredibly dynamic, uh, uh, culture, where if, if somebody knocks somebody up on the top who's three levels above you and is in effect protecting you, then, then, you know, you're, you're like a, you know, sort of a floating molecule there-
- LFLex Fridman
Yeah.
- SSStephen Schwarzman
... uh, you know, without tethering, uh, except the one or two layers above you, but that's gonna get affected. So, it's a very dynamic system, and getting people to change, uh, is not that easy, because if there aren't really functioning laws, it's only the relationships that everybody has. And, and so when you decide to make a major change, and you sign up for it, uh, something is changing in your life. Uh, there won't necessarily be all the same people on your team, uh, and that's a very high-risk enterprise. So, when you're dealing with, with China, it's important to know almost what everybody's relationship is with somebody.
- LFLex Fridman
Mm-hmm.
- SSStephen Schwarzman
Uh, so when you suggest doing something differently, you, you, you line up these forces. In the West, I- it's usually, you talk to a person, and they figure out what's good for them. Uh, it's a lot easier. And, and in that sense, in a funny way, it's easier to make change, uh, in the West, just the opposite of what people think. Um, but, but once the Chinese system adjusts to something that's new, everybody's on the team.
- LFLex Fridman
Mm-hmm.
- SSStephen Schwarzman
It's hard to change 'em, but once they're changed, they are incredibly focused in a way that is hard for the West, uh, to do, in a more individualistic, uh, culture. Uh, so, so there are all kinds of fascinating things. Um, I, you know, um, I ... Uh, one thing that might interest, uh, you know, the people who are listening, who are more technologically based than some other group, um, I, I was with one of the top people in, uh, the government, um, a few weeks ago, and he was telling me that, that, uh, every school child in, um, uh, in China is, is going to be, uh, uh, taught computer science. Now, imagine 100% of these children. This is such a large number of human beings. Now, that doesn't mean that every one of 'em w- will be good at computer science, but if it's sort of like in the West, if it's like math or English, you know, everybody's gonna take it.
- LFLex Fridman
Yes.
- SSStephen Schwarzman
Not everybody's great at English. They don't write books. They don't write poetry. And not everybody's good at math. You know, somebody like myself, I sort of evolved to the third grade, and I'm still doing flash cards. Uh, you know, I didn't make it further in math. Um, but imagine, everybody in their society is gonna be involved with computer science.
- LFLex Fridman
I ... Just to even pause on that, I ... (laughs) I think that computer science involves, at the basic beginner level, programming, and the idea that everybody in the society would have some ability to program a computer is incredible. Uh, for me, it's incredibly exciting. And, um, I think that should give United States pause and, uh, consider what ... Uh, talking about sort of philanthropy and launching things, there's nothing like launching, sort of investing in young, y- the youth, the education system, because that's where everything launches.
- SSStephen Schwarzman
Yes. Well, we've got a complicated system because we have over 3,000 school districts around the country. Uh, China doesn't worry about that as a concept. They make a decision at the very top of the-... the government that that's what they want to have happen, and that is what will happen. And, uh, we're really handicapped, uh, by this distributed, you know, power, uh, in the education area, although some people involved with that area will think it's, uh, it's great. Uh, but, you know, you, you would know better than I do, uh, what percent of American children have computer science, uh, uh, exposure. M- m- my guess, k- no knowledge, uh, would be 5% or less. Uh, and if we're gonna be going into a world w- where the other major economic, uh, power, uh, sort of like ourselves is, i- has got like 100%, and we got five, and, and the whole computer science area, uh, is the future, um, then, then we're purposely, or accidentally actually, handicapping ourselves. And our system doesn't allow us, uh, to adjust quickly, uh, to that. So, you know, uh, issues like this, uh, I, I, I find fascinating. Uh, and, you know, if you're lucky enough to go to other countries, uh, whi- which I do, um, and you learn what they're thinking, then it informs what, what we oughta be doing in, in, uh, in the United States.
- 50:22 – 59:53
American AI Initiative
- LFLex Fridman
So the current administration, Donald Trump has released the... an executive order on artificial intelligence, not sure if you're familiar with it, in 2019. Uh, l- looking several years ahead, uh, how does America sort of... we've mentioned in terms of, uh, the big impact we hope, uh, y- your in- investment at MIT will have a ripple effect. But from a federal perspective, from a government perspective, uh, how does America establish, with respect to China, leadership in the world at the top for research and development in AI?
- SSStephen Schwarzman
Yeah. I, I, I think, um, that you have to get the federal government in the game, uh, in a big way, uh, in that, um, this leap forward, uh, technologically, uh, which is gonna happen with or without us, uh, you know, really should be with us. Uh, and, and it's an opportunity, in effect, uh, for another moonshot, uh, kind of mobilization, uh, by, uh, the United States. Uh, I think, uh, the appetite, uh, actually is there, uh, to do that. Uh, at the moment, uh, what's getting in the way i- is the kind of poisonous, uh, politics we have. Um, but, but if you go below, uh, the lack of, uh, cooperation, which is, is almost de- the defining element of American democracy right now in the Congress, if you talk to individual members, they get it, and they would like to do something. Another part of the issue is we're running huge deficits. We're running trillion-dollar-plus deficits. So how much money do you need for this, um, initiative? Uh, where does it come from? Who's prepared to stand up for it? Uh, because if it, if it involves taking away resources from another area, uh, our political system is, is not real flexible, uh, to do that. Uh, if you're creating, um, th- this kind of initiative, um, which we need, where does the money come from? Uh, and, and trying to get money when you've got trillion-dollar deficits, in, in a way could be easy. What's the difference of a trillion and a trillion a little more? Uh, but, but, you know, it's, it's hard with the mechanisms o- of Congress. But what, what's m- what's really important is, uh, th- this is not an issue, uh, that is unknown, and it's viewed as a very important issue. Uh, and there's almost no one in the Congress when you sit down and explain what's going on who doesn't say, "We, we've gotta do something."
- LFLex Fridman
Let me ask the impossible question. So if... uh, you didn't endorse Donald Trump, but after he was elected, you have given him advice, um... eh, whi- which seems to me a great thing to do, no matter who the president is, to contribute, positively contribute, to this nation by giving advice, and yet you received a lot of criticism for this. So on the previous topic o- of science and technology in government, how do we have a healthy discourse, uh, a- give advice, get excited, uh, conversation with the government about science and technology without it becoming politicized?
- SSStephen Schwarzman
Well, it's very interesting. Um, so, uh, wh- when I was young, uh, before there was a moonshot, uh, we had a president, uh, named John F. Kennedy, uh, from Massachusetts here. And hi- in his inaugural address as president, uh, he asked, "Not what your country can do for you," uh, "but what you can do for your country." You know, we, we had a generation of people my age basically, people who grew up, uh, with that credo. Uh, and, uh, you know, sometimes you don't need to innovate. Uh, you can go back to basic principles. And that's good basic principle.... a what, what can, what can we do? Um, you know, Americans have GDP per capita of around $60,000. Uh, you know, not every... it's not equally distributed, but it's big. Uh, and, you know, um, people have, I think, uh, an obligation, uh, to help their country. And I do that, and apparently, I take some griefer peop- from some people, you know, who, who, who, who, um, project on me things I don't even vaguely believe. Uh, but, but I'm like quite simple. Uh, you know, I tried to help the previous president, uh, President Obama. He was a good guy, uh, and he was a different party. And I tried to help President Bush, and he's a different party, and you know, uh, I, I, I, I, I sort of don't care that much, uh, about what the parties are. I care about... even though I'm a big donor for the Republicans, but it's, it's, uh, what motivates me is what are the problems we're facing? Can I help people get to, you know, sort of a good outcome that, that'll stand any test? Uh, but w- we live in a world now where, you know, sort of the filters, uh, and, and the, and the hostility is, is so unbelievable. Uh, you know, in the 1960s, when I went to school, uh, in university, I went to Yale, we had like, like so much stuff going on. Uh, we had a war called the Vietnam War. We had, you know, sort of Black Power starting. And, and, uh, you know, we had a sexual revolution with the birth control pill. Uh, and, um, you know, um, there was one other major thing going on, and th- right, the drug revolution.
- LFLex Fridman
Mm.
- SSStephen Schwarzman
There hasn't been a generation that had more stuff going on in a four-year period than my, uh, era. Yet there wasn't this kind of instant hostility if you believed something different. W- everybody lived together and, and you know, respected, uh, the other person. And, and I think that, you know, this type of change needs to happen, and it's gotta happen, uh, from the leadership of o- of our major institutions. And I, I don't think that, that leaders can be bullied, uh, by people who are against, you know, sort of the classical version of free speech and letting open expression and-
- LFLex Fridman
Yes.
- SSStephen Schwarzman
... inquiry. That's what universities are for. Uh, among other things, uh, Socratic methods, and um, so, so I, I have, um, uh, in, in, in the midst of this like onslaught, uh, of oddness, uh, I, I, I, I believe in still the basic principles, and we're gonna have to find a way to get back to that. And that, that doesn't start w- with the people, uh, you know, sort of in the middle to the bottom who are using, you know, these kinds of screens to, to shout people down and, and create an uncooperative environment. It's gotta be done, uh, at the top with core principles that are articulated, uh, and uh, ironically, um, if people don't sign on to these kind of core cr- principles where people are equal and, and you know, speech can be heard, and you know, you don't have these enormous shout-down biases subtly or, or out loud, then they don't belong at those institutions. They're, they're violating the core principles, and, and, um, you know, that's how you end up making change. Uh, and but you have to have courageous people, uh, who are willing to lay that out for the benefit of not just their institutions, but for society, uh, as a whole. So I, I, I, I believe that will happen, um, but it needs the commitment, uh, of, of, of senior people to make it happen.
- LFLex Fridman
Courage, and I think for such great leaders, great universities, there's a huge hunger for it. So I, I'm too very optimistic that, that it will come.
- 59:53 – 1:04:26
Starting a business is a rough ride
- LFLex Fridman
I'm now personally taking a step into building a startup, first time, hoping to change the world, of course. Uh, there are thousands, maybe more, maybe millions of other first-time entrepreneurs like me. What advice... You've gone through this process, you've talked about the suffering, the emotional turmoil it all might entail. What advice do you have for those people taking that step?
- SSStephen Schwarzman
I, I, I'd say it's a rough ride. Uh, and y- you have to be psychologically prepared for things going wrong with frequency. You have to be prepared, uh, to be put in situations where you're being asked to solve problems you didn't even know those problems existed. You know, for example, renting space. It's, it's not really a problem unless you've never done it. You have no idea what a lease looks like, right? Y- y- you don't even know the relevant rent, and you know, y- in a market. So everything is new, everything has to be learned. What, what you realize is that...It's good to have other people with you who've had some experience in areas where you don't know what you're doing. Unfortunately, uh, an entrepreneur starting doesn't know much of anything, so everything is, is something new.
- LFLex Fridman
Yeah.
- SSStephen Schwarzman
Uh, and, um, uh, I think it's important not to be alone, uh, because it's sort of overwhelming, uh, and you need somebody to talk to, uh, other than, uh, a spouse or a loved one, uh, because even they get bored with your problems.
- LFLex Fridman
(laughs) .
- SSStephen Schwarzman
Uh, and, and so, you know, getting a group... You know, if you look at Alibaba, um, you know, uh, Jack Ma was telling me they went, they, they basically were, like, at financial death's door at least twice. Uh, and, you know, the fact that there... it wasn't just Jack. I mean, people think it is 'cause of, you know, he became the, you know, the sort of public face and the driver. Uh, but, but, uh, a group of people, uh, who can give advice, share situations to talk about, uh, that's really important.
- LFLex Fridman
And that's not just referring to the small details like renting space.
- SSStephen Schwarzman
No.
- LFLex Fridman
It's also the psychological-
- SSStephen Schwarzman
Yes.
- LFLex Fridman
... burden.
- SSStephen Schwarzman
Yeah. And, you know, because most entrepreneurs at some point question what they're doing 'cause it's not going so well, or they're screwing it up and they don't know how to unscrew it up, uh, because we're all learning. Uh, and it's hard to be learning, you know, when there are, like, 25 variables going on. If you, you know, if you're missing four big ones, you can really make a mess. Uh, and, and so the ability to, to in effect have either an outsider, uh, who's really smart that you can rely on for certain type of things, uh, or other people who are working with you on a daily basis. Um, it's... Uh, most people who haven't had experience, uh, believe in the myth of the one person, one great person, you know, makes outcomes, uh, creates outcomes that are positive. For most of us, it's not like that. If you look back over a lot of the big successful tech, uh, companies, it, it's not typically one person. It... You know, it's... A- and you will know these stories better than I do, uh, 'cause it's your world, not mine. But even I know that almost every one of them had two people. I mean, if you look at Goo- Google, you know, that, that's what they had, and, and, and that was the same with Microsoft at the beginning. And, you know, um, it was the same at Apple. It... You know, people have different skills, and, and they need to play off of, uh, other people. So, so, um, you know, the, the advice th- that, that I would give you is make sure you understand that so you don't head off in some direction as a lone wolf, uh, a- and find that either you can invent all the solutions, um, o- or you make bad decisions on certain types of things. This is a team sport. Entrepreneur means you're alone, in effect. And that's the myth, uh, but it's mostly a myth.
- 1:04:26 – 1:10:10
Love and family
- LFLex Fridman
Yeah, I think... And you talk about this in your book, and I could talk to you about it forever, the, the harshly self-critical aspect to your personality, and, uh, to mine as well in the face of failure. It's a powerful tool, but it's also a burden. Uh, that's, that's very interesting, uh, very interesting to, uh, walk that line. But let me ask, on the... in terms of people around you, in terms of friends, in, in the bigger picture of your own life, where do you put the value of love, family, friendship in the big picture journey of your life?
- SSStephen Schwarzman
Well, ultimately, all journeys are alone. Um, it's great to have support. Um, and, you know, um, w- when you, you, you, you go forward and say y- your job is to make something work, and that's your number one priority, um, a- and you're gonna work at it to make it work, you know, it's like superhuman effort. People don't c- um, become successful as part-time workers. It doesn't work that way. Uh, and if you're prepared to make that 100 to 120%, uh, effort, you're gonna n- you're gonna need support, and, and you're gonna have to have people involved with your life who understand that that's really part of your life. Uh, sometimes you, you're involved with somebody, and, you know, they don't really understand that, and that's a source of, you know, sort of conflict and difficulty. But if you, if you're involved with the right people, uh, you know, whether it's a sort of dating relationship or, um, you know, sort of a, you know, spousal relationship, um, you know, you, you have to involve them, uh, in your life, uh, but not burden them with, with every, you know, sort of minor triumph or mistake. They, they actually get bored with it after a while. And, and so you have to set up different types of ecosystems. You, you have your home life, you have your love life, uh, you have children, and, and that's like the enduring part of what you do. And then on the other side, you, you've got the, you know, sort of unpredictable nature, uh, of, um, of, of, of this type of work. What, what I say to people at my firm who are younger, usually, um...Well, everybody's younger. But, (laughs) but, um, you know, people who are of an age where, where, where, you know, they've, they're just having their first child, uh, or maybe they have two children, that it's important, um, to, to make sure they go away, uh, with their spouse, uh, uh, at least once every two months, to just some lovely place where there are no children, no issues. Uh, sometimes once a month if, if they're, you know, sort of energetic and clever. Uh, and that, um-
- LFLex Fridman
Escape the craziness of it all? Once in a while?
- SSStephen Schwarzman
Yeah. And, and, and reaffirm, uh, your, your values as a couple. Uh, and you have to have fun. If you don't have fun with the person you're with, uh, and all you're doing is dealing with issues, then, then that gets pretty old. And, and so you have to protect the fun element o- of your life together. And the way to do that isn't by hanging around the house and, and dealing with, you know, sort of more problems. It... You have to get away and, and reinforce and reinvigorate, uh, your relationship. And whenever I tell one of our younger people about that, they sort of look at me and they're... it's like the scales are falling off of their eyes (laughs) and they're saying, "Geez, you know, I hadn't thought about that. You know, I'm so enmeshed in all these things. But that's a great idea." And that's something as an entrepreneur you, you also have to do. Uh, you, you just can't let relationships slip because you're half overwhelmed.
- LFLex Fridman
Beautifully put, and I think there's no better place to end it. Steve, thank you so much. I really appreciate it. It was an honor to talk to you.
- SSStephen Schwarzman
My pleasure.
- LFLex Fridman
Thanks for listening to this conversation with Stephen Schwarzman, and thank you to our sponsors, ExpressVPN and MasterClass. Please consider supporting the podcast by signing up to MasterClass at masterclass.com/lex, and getting ExpressVPN at expressvpn.com/lexpod. If you enjoy this podcast, subscribe on YouTube, review it with five stars on Apple Podcasts, support it on Patreon, or simply connect with me on Twitter @LexFridman. And now, let me leave you with some words from Stephen Schwarzman's book, What It Takes. "It's as hard to start and run a small business as it is to start a big one. You will suffer the same toll financially and psychologically as you bludgeon it into existence. It's hard to raise the money and to find the right people. So if you're going to dedicate your life to a business, which is the only way it will ever work, you should choose one with the potential to be huge." Thank you for listening, and hope to see you next time.
Episode duration: 1:10:15
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