Who Is David Rubenstein?

The Making of a Private Equity Titan

If you work in private equity, you already know the name. David Rubenstein co-founded the Carlyle Group, a firm that manages hundreds of billions of dollars for limited partners around the world. He sits on dozens of boards and chairs both the Kennedy Center for the Performing Arts and the Smithsonian Institution. He plans to give away roughly three billion dollars during his lifetime and reads a hundred books a year. His Freakonomics interview remains essential listening for anyone curious about the mechanics of wealth creation. 1

The Carlyle Group started with a handful of partners and grew into a global alternative asset manager. When Rubenstein launched the firm, only about 250 private equity firms existed worldwide. Today that number exceeds 6,500, and Carlyle stands among the largest. 2 The firm owns stakes in well over a hundred companies and employs close to a million people across its portfolio. Rubenstein's path from modest circumstances to billionaire status reflects a particular brand of persistence and intellectual hunger.

Private Equity Explained

Private equity involves investing capital in privately held companies. Firms spend three to five years improving operations, incentivizing managers and driving efficiency. They then sell or otherwise liquefy the investment. Annualized net returns after fees can reach fifteen percent or more. Rubenstein argues that private equity provides a genuine social service. The bulk of investors are public pension funds, meaning retirement savings depend on these returns.

The geography of the industry remains concentrated. Roughly 83 percent of all private equity dollars invested globally still flow into Western Europe and the United States. The ten largest private equity firms and the ten best-known venture firms are all American. This concentration reflects deep capital markets, mature legal frameworks and a culture that rewards risk-taking.

Great at Buyouts, Less So at Venture

Rubenstein admits he lacks the skill set for venture capital. He passed on Facebook when Mark Zuckerberg was still in college. He had a chance to be an early investor in Amazon and turned it down. He told his future son-in-law that the classmate's startup would go nowhere. That ten-million-dollar opportunity would be worth roughly thirty billion today. The lesson is blunt: different asset classes demand different instincts.

The statistics reinforce the contrast. In private equity, roughly 90 percent of buyouts make money. In venture capital, roughly 90 percent of deals do not. Buyouts offer more control, predictable cash flows and operational levers. Venture investing demands tolerance for failure and an eye for exponential outliers. Rubenstein understood his edge lay in the former.

The CEO, the Price and the Business

When evaluating a deal, Rubenstein ranks three factors. The chief executive officer (CEO) matters most. The price paid ranks second. The inherent quality of the business ranks third. A terrible business that no leader can turn around is a mistake. A great business with a great CEO already in place leaves little value to add. The sweet spot is a decent business with room for improvement and a driven leader who can execute.

Rubenstein learned this hierarchy through experience across Carlyle's portfolio. A reasonably good company with a terrible CEO gets a pass. The same company with a great CEO gets a check. CEOs make a dramatic difference. They set the tone, the pace and the ambition of the entire organization. The purchase price determines the margin of safety. The business quality sets the ceiling.

What Makes a Good CEO

A great CEO is maniacal. Founders who eat, sleep and breathe the company succeed more often than those who treat it as a job. They need a mindset of walking through walls. When people say something cannot be done, the best leaders ignore conventional wisdom. Persistence ranks above almost everything else. People will always tell you no. If you accept no for an answer, you may be likable but you will not be successful.

Hard work matters enormously. So does the ability to lead, inspire and get people to walk through walls alongside you. Getting a company off the ground is far harder than running a mature one. In the first two or three years, resources are scarce, supporters are few and the odds are brutal. Roughly 99.9 percent of companies started in the United States fail. The ones that survive year one or two are rare exceptions.

Running Versus Starting

Running a mature company differs from launching one. Mature companies have supporters willing to help, partners willing to collaborate and investors willing to write checks. Startups have none of that. The first years are a grind against entropy. Founders must convince customers, employees and backers that something unproven deserves their trust. This is why Rubenstein respects founders so deeply, even when he passes on their ventures.

He also notes that being a CEO is harder today than in decades past. Scrutiny has intensified dramatically. Activist investors with one or two percent of stock can force leadership changes. Social media watches every move. The rewards can be greater, yet the penalties are steeper. In the 1950s, CEOs kept their jobs until retirement. Today, the tenure is shorter and the pressure is relentless.

Patriotic Philanthropy

Rubenstein calls his giving "patriotic philanthropy." He came from modest circumstances. His parents had no money and no higher education. He feels he owes the country because he could not have replicated his success elsewhere. He paid for the restoration of the Washington Monument. He purchased a 1297 copy of the Magna Carta and placed it on display at the National Archives. He owns one of the 26 remaining copies of the United States Constitution. 3

His view on wealth and happiness is nuanced. Some of the saddest people he knows are the wealthiest. Some of the happiest are the poorest. Thomas Jefferson wrote that life is about the pursuit of happiness, yet he never explained how to achieve it. Rubenstein considers himself happy and believes he was happy before he became wealthy. He still gets his hair cut at the neighborhood barber for fifteen dollars plus a five-dollar tip. He interviews heavy hitters on Bloomberg, including Warren Buffett, Tim Cook, Jamie Dimon and Bill Gates. His motivation is simple: keep the gray matter active and never slow down.

• 1David Rubenstein's full Freakonomics interview
• 2The Carlyle Group overview on Wikipedia
• 3David Rubenstein's Giving Pledge commitment