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Masters in Business LIVE: Carlyle Group CEO Harvey Schwartz · Masters in Business

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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. This is Masters in
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Speaker 1: Business with Barry Ritholts on Bloomberg Radio.
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Speaker 2: I'm Barry Ridtolts. You're listening to Masters in Business on
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Speaker 2: Bloomberg Radio. We have a bonus Masters in Business for you.
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Speaker 2: Live from future Proof Citywide, Miami. I sit down with
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Speaker 2: Harvey Schwartz, the CEO of the Carlisle Group. He has
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Speaker 2: a really fascinating and somewhat unconventional path to Wall Street.
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Speaker 2: We talk about he's just a news Jersey kid who
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Speaker 2: didn't know what he wanted to do and had a
0:45
Speaker 2: hard time figuring out his life goals. And you know,
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Speaker 2: thanks to people who took an interest in him and
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Speaker 2: a couple of good breaks, plus a whole lot of
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Speaker 2: smarts and hard work, he ended up really creating a
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Speaker 2: career from ELF, not only at firms like Goldman Sachs,
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Speaker 2: but eventually getting tapped to become CEO at Carlisle. I
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Speaker 2: find Harvey to be an absolutely fascinating guy. He is
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Speaker 2: a no holds barred, blunt speaker, truth teller, really really
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Speaker 2: interesting person. I thought this conversation was great. You can
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Speaker 2: tell I'm having a lot of fun with no further
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Speaker 2: ado our special bonus Masters in Business Live with Harvey Schwartz,
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Speaker 2: CEO of the Carlisle Group. I am just so thrilled
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Speaker 2: to introduce you all to somebody that not only are
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Speaker 2: you gonna know more about in the coming years, but
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Speaker 2: it's been my pleasure to get to know over the
1:45
Speaker 2: past couple of months. Harvey Schwartz is CEO of Carlile.
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Speaker 2: He comes to finance in a rather unusual way, and
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Speaker 2: I'm gonna let Harvey tell's story. Let's start right there.
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Speaker 2: You have a really unconventional Well before we go there,
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Speaker 2: Carlisle Private Equity, private credit, been doing this for a
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Speaker 2: long time. Chairman is David Rubinstein. Tell us a little
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Speaker 2: bit about Carlisle First, what do you guys do? How
2:15
Speaker 2: much do you manage? Just give us the thirty second version.
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Speaker 3: Sure. Well, first of all, Barry, thanks for doing this.
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Speaker 3: Great to see you again, everyone, Fantastic to be here.
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Speaker 3: This is such an amazing venue. So Carlisle today is
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Speaker 3: about four to fifty billion of assets spread across private equity,
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Speaker 3: real estate, infrastructure, credit, insurance and secondaries and co invest.
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Speaker 3: For all of you in the audience, there are a
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Speaker 3: number of solutions you can show your clients see tech
2:44
Speaker 3: which is the best of credit cap them. I'm sure
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Speaker 3: we'll get into some of this which is our secondary's
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Speaker 3: co in best business, and towards the end of the
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Speaker 3: year we'll be launching our private equity solution. But I
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Speaker 3: would say, you know, for me, been Carlo for two
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Speaker 3: years has been an incredible privilege. The firm was founded
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Speaker 3: in nineteen eighty seven by David Bill and Dan who
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Speaker 3: really have created a culture which is extraordinary in terms
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Speaker 3: of the people. We're twenty three hundred people today. Zach Foreman,
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Speaker 3: I don't know if Zach Forman is in the crowd anywhere. Zach,
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Speaker 3: can you stand up? Zach leads our effort down here,
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Speaker 3: so everybody should go to Zach afterwards, and then we
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Speaker 3: have a boot. So hey, that's I'm done with my
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Speaker 3: advertising for the day. But I feel like I've accomplished.
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Speaker 2: So let's talk a little bit about your background. You know,
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Speaker 2: when I look out at the world of finance and
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Speaker 2: see who are CEOs of companies that are two hundred billion,
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Speaker 2: half a trillion, a trillion plus, I don't want to
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Speaker 2: say they're all alike, because they're not. But there's a
3:48
Speaker 2: certain background that you tend to see a certain type
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Speaker 2: of college and business school and career path. You're just
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Speaker 2: a guy from Jersey. How did you sort of full
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Speaker 2: ask bawards into finance?
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Speaker 3: Well, I mean there are other successful people from New Jersey.
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Speaker 2: Barry John Stewart.
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Speaker 3: Yeah, no, Bruce Springsteen. Now there's a couple. But you
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Speaker 3: know what Barry's getting at, is it a little bit unconventional.
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Speaker 3: I mean, everybody has the complexity of their life story.
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Speaker 3: But for me, uh, I did. Grew up in New Jersey,
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Speaker 3: I too, uh parents who were quite educated, but tragically
4:25
Speaker 3: they suffered from severe mental illness. My mother suffered from
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Speaker 3: what we would call today by polar disorder, and my
4:31
Speaker 3: father suffered really quite tragic schizophrenia which sort of over
4:35
Speaker 3: time really just completely consumed him. And this is, you know,
4:39
Speaker 3: many decades ago, and so treatment wasn't as good, an
4:45
Speaker 3: understanding wasn't as good. The stigma of mental health related
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Speaker 3: issues and severe mental health is still an extraordinary problem
4:52
Speaker 3: everywhere in the world, certainly in our country, but back
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Speaker 3: then it was even much worse. And so my mother
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Speaker 3: passed when I was fourteen. I don't want you all
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Speaker 3: to feel like you have to go to therapy with
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Speaker 3: me and Barry. By the way, but my mother passed
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Speaker 3: when I was fourteen, and then it was me and
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Speaker 3: my father, and it wasn't a particularly healthy environment, and
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Speaker 3: so I basically ended up doing really, really badly in
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Speaker 3: high school. I didn't I barely graduated by the time
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Speaker 3: I was a senior. I think it was like right
5:24
Speaker 3: around Christmas. When I was a senior in high school
5:25
Speaker 3: in New Jersey, I'd missed twenty seven days of school, which,
5:28
Speaker 3: by the way, if you actually do the math, is
5:29
Speaker 3: super hard to do. And so there was a good
5:34
Speaker 3: chance I wasn't going to graduate. I didn't apply to
5:35
Speaker 3: any colleges, but I got super fortunate. And you know,
5:41
Speaker 3: Chris was really generous when she introduced me. She referred
5:44
Speaker 3: to as a mentor, and I think you do have
5:45
Speaker 3: mentors for hopefully everyone here as mentors in your life.
5:49
Speaker 3: I had people that were more like angels that really
5:51
Speaker 3: like intervened for whatever reason they did to help me
5:55
Speaker 3: at certain crazy pivotal times in my life. And one
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Speaker 3: was a woman named Linda. I had plot. She encouraged
6:00
Speaker 3: me to apply to Rutgers. I wasn't going to college.
6:04
Speaker 3: I applied, I didn't get in Linda, who's like not
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Speaker 3: an influential person.
6:08
Speaker 2: Let me, let me stop you. There wasn't there a
6:10
Speaker 2: brief sojourn to California post high school.
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Speaker 3: Yeah, well that was like one of the early earlier angels.
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Speaker 3: So when I never really talked this much about this publicly,
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Speaker 3: So I apologize if anybody finds it not interesting. But
6:23
Speaker 3: when I when I realized I had missed so many
6:26
Speaker 3: days of school, there was a chance I wasn't going
6:28
Speaker 3: to graduate. Certainly, my grades were not doing well. My
6:32
Speaker 3: father and I were deteriorating pretty quickly. And when I
6:35
Speaker 3: turned eighteen in March of that year, it was my
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Speaker 3: birthday last week, by the way, In March of that year,
6:41
Speaker 3: I signed myself out of high school and I had
6:44
Speaker 3: called some friends in California. I asked if they were
6:46
Speaker 3: let me come live with them, and so I moved
6:48
Speaker 3: to California. I actually graduated high school out there. Those
6:50
Speaker 3: were like there were a lot of angels, but that
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Speaker 3: family was an extraordinary angel. They took me in, but
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Speaker 3: I didn't apply to any colleges and then and then
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Speaker 3: eventually Linda came up long and encouraged me to apply
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Speaker 3: to Rutgers.
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Speaker 2: That was the next time that that was back in
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Speaker 2: New Jersey.
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Speaker 3: Yeah, so I come back and by the way, full.
7:07
Speaker 2: Disclosure, I mac on New Jersey. I grew up in Teaneck,
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Speaker 2: New Jersey. So I feel like I'm allowed to make
7:14
Speaker 2: fun of the Styeah.
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Speaker 3: No, of course, and yet another successful person from New
7:18
Speaker 3: Jersey right here live the so now it was. It
7:23
Speaker 3: was a complicated, confusing time I had to come back.
7:26
Speaker 3: I lived with my father. That wasn't great. I was working,
7:29
Speaker 3: as for those year old enough, a health instructor at
7:35
Speaker 3: a squash club in Chatham, New Jersey for the New
7:38
Speaker 3: Jersey and there was a thing called Nautilus. I was
7:42
Speaker 3: the person that trained people in the gym, which is
7:43
Speaker 3: a sort of hard feed to imagine looking at me today.
7:46
Speaker 3: But I had hair, thinner, better, more fit and but anyway,
7:51
Speaker 3: uh Lynda and her husband used to come through and
7:55
Speaker 3: I just got to know them, and she said she
7:58
Speaker 3: was a Rutgers graduate, but she wasn't an influential person
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Speaker 3: like you berry, and she encouraged me to apply. I
8:05
Speaker 3: didn't get in because of my track record in high school.
8:09
Speaker 3: And she was so incensed by this that she called
8:12
Speaker 3: the university and basically convinced them to interview me and
8:18
Speaker 3: write an essay about why I was such a screw
8:20
Speaker 3: up in high school and Rutgers, which is an incredible institution,
8:24
Speaker 3: changed their selection allowed me to go to school. And
8:29
Speaker 3: that's why you know, Linda's an angel and the more
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Speaker 3: family's an angel, and these people like really intervened in
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Speaker 3: my life, I think in ways that are kind of
8:36
Speaker 3: hard to conceive. And Rutgers today, I think the stats
8:39
Speaker 3: are well over half the students still get financial aid,
8:43
Speaker 3: sort of one in three or first ever go to
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Speaker 3: college and their family. It's an amazing institution and for
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Speaker 3: someone like me gave me all the opportunity in the world.
8:54
Speaker 3: That's great.
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Speaker 2: By the way, don't take the lesson that if your
8:57
Speaker 2: kid doesn't get into Princeton all up and yell at
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Speaker 2: the emissions department. That's not the lesson we want you
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Speaker 2: to take from this. So sore, you're now coming out
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Speaker 2: of Rutgers. You don't have the traditional Ivy League business
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Speaker 2: school background. How do you find your way into the
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Speaker 2: world of finance?
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Speaker 3: Very clumsily. I didn't know Rutgers, certainly back then, much
9:22
Speaker 3: better now. I didn't know there were JP Morgan's in
9:24
Speaker 3: the World or Morgan Stanley's or Goldman Sachs I had.
9:30
Speaker 3: I didn't even know where Wall Street was. I'd never
9:32
Speaker 3: been to Wall Street. First time I went, I was
9:34
Speaker 3: surprised it was such a little street. I just make
9:36
Speaker 3: sure a much bigger street. So it's pretty naive, about
9:38
Speaker 3: as naive as you could get. And then through a friend,
9:43
Speaker 3: I took a job at a firm called JB. Hanour
9:46
Speaker 3: For those of you're old enough, it was a municipal
9:48
Speaker 3: bond firm back in the day. This is nineteen eighty seven,
9:51
Speaker 3: and just show a hand. So how many people know
9:54
Speaker 3: what it means to work on a draw? Yeah? So
9:58
Speaker 3: I worked on a draw, which means you got paid
10:01
Speaker 3: one thousand dollars a month, but effectively it was alone
10:04
Speaker 3: and you owed it back, and you cold called, and
10:07
Speaker 3: you tried to build your book of business. And I
10:11
Speaker 3: proved to be uniquely bad at this. Yeah, uniquely bad
10:15
Speaker 3: at this. Yeah, maybe a little bit was timing. My
10:18
Speaker 3: first day coming out of the training program was the
10:22
Speaker 3: day the stock market fell. Yeah, October nineteenth, down five
10:27
Speaker 3: hundred eight points. There I was like naively cold calling people.
10:30
Speaker 3: By the way, back then there were like real phones.
10:32
Speaker 3: You had to actually push buttons and stuff, and I
10:34
Speaker 3: had this little cushion thing you would keep your head
10:36
Speaker 3: like this, and you were mostly crippled by the end
10:39
Speaker 3: of the day. But so, yeah, it was a bad
10:42
Speaker 3: time to try, and I didn't do very well at it.
10:45
Speaker 3: I had no money. I owed everybody in the world money.
10:48
Speaker 3: I had borrowed a lot of money to go to school, friends,
10:52
Speaker 3: anyone I could find, And you know, it was pretty stressful.
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Speaker 2: So how do you make your way from cold calling
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Speaker 2: into either asset management or firm white management. You've run
11:07
Speaker 2: your way through a lot of different departments. How do
11:10
Speaker 2: you go from just being a smiler and dialer to
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Speaker 2: somebody larger in charge.
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Speaker 3: Well, I got really fortunate. I was. I was at
11:21
Speaker 3: a tough point. My daughter was one year old, and
11:26
Speaker 3: I was kind of really running out of money. At
11:29
Speaker 3: one point, I thought, jeez, I might have to file
11:32
Speaker 3: for personal bankruptcy. But I didn't really know what that meant,
11:34
Speaker 3: but I knew it was a thing you did when
11:35
Speaker 3: you ran out of money. And again, a friend to
11:40
Speaker 3: me a huge favor and got me a position in
11:43
Speaker 3: the what they referred to as the back office at
11:45
Speaker 3: City Bank. In nineteen eighty nine, and that was really
11:49
Speaker 3: the first time I'd say I was on a track
11:55
Speaker 3: that would begin to look more conventional, although obviously starting
11:59
Speaker 3: in these I was hard as a temp I eventually
12:02
Speaker 3: became a full time employee, and then I went into
12:04
Speaker 3: the credit training program at City Bank. But I will
12:08
Speaker 3: say right around that period I asked someone I worked
12:13
Speaker 3: with them at City Bank, and I was so impressed
12:17
Speaker 3: with how intelligent they were. And this will give you
12:19
Speaker 3: a sense of how clumsy I was still And we
12:22
Speaker 3: went out one night and I said something the effect
12:24
Speaker 3: of Jees, you're so smart. I would have thought you
12:28
Speaker 3: would have accomplished more by now in your life, which
12:32
Speaker 3: is a horrible, cringeworthy thing to say to someone. But
12:36
Speaker 3: he was so gracious taught me a lot in that
12:38
Speaker 3: moment because he was gracious about it, didn't get offended.
12:41
Speaker 3: And he said, you know, Harvey, you'll learn in your
12:44
Speaker 3: life careers are fifty percent luck, fifty percent skill. And
12:49
Speaker 3: that always stuck with me, buried because I don't know
12:51
Speaker 3: that it's fifty percent luck. But for me, I got
12:53
Speaker 3: to say, like, there are days it feels mostly ninety
12:55
Speaker 3: ten or ninety nine to one that it's luck. And
12:58
Speaker 3: I think along the way people, every time you're given responsibility,
13:04
Speaker 3: somebody's making a leap of faith giving you that responsibility.
13:07
Speaker 3: And along the way people did, whether it was at
13:09
Speaker 3: City Bank. Then I went to Goldman Sachs. I had
13:12
Speaker 3: some incredibly uh, some incredible experiences of Goman Sacks. I
13:19
Speaker 3: moved around quite a bit after leaving Goman Sacks in
13:23
Speaker 3: twenty eighteen. Ultimately, Carlisle called Carlisle calling, is luck? Right?
13:28
Speaker 3: It's just a random thing that I end up sitting
13:30
Speaker 3: here with you, and so I think that it's really.
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Speaker 2: Hard to I'm going to pull out the yellow card
13:34
Speaker 2: and call on that, because lots of luck up to
13:39
Speaker 2: this point. But you're a Goldman for a while, and
13:41
Speaker 2: you're developing a reputation, you're improving what's already a very
13:47
Speaker 2: well oiled machine. When Carlile called you, it wasn't let's
13:51
Speaker 2: randomly call somebody and see if we can find a
13:54
Speaker 2: new CEO. They knew who you were.
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Speaker 3: Yeah, that's true. I don't want to overweight the luck.
14:03
Speaker 2: Thing.
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Speaker 3: People would say to me when I say that, Well,
14:05
Speaker 3: you can make your own look, and that's true to
14:07
Speaker 3: some extent. You can influence your luck through hard work.
14:09
Speaker 3: But okay, everybody in this room just by being here.
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Speaker 3: You everyone here, there's prerequisites, right, you're all smart. Everybody's
14:19
Speaker 3: hard working, because that's like prerequisites, that's just table stake stuff.
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Speaker 3: I do think luck and randomness play a lot in life.
14:27
Speaker 3: You know, I'm sixty one. I was born in nineteen
14:30
Speaker 3: sixty four. In my life, that's a really good time
14:34
Speaker 3: to be born. Like, I don't think you can not
14:36
Speaker 3: acknowledge some of these things. And so, but I will
14:40
Speaker 3: say my early experiences, if anything, I would say I
14:48
Speaker 3: was so insecure because I didn't get into college and
14:52
Speaker 3: I barely got out of high school. I think it
14:55
Speaker 3: just motivated fear, scared, insecure, and I think all that
15:03
Speaker 3: kind of compounded into feeling like, wow, I am alongside
15:06
Speaker 3: all these people who went to these extraordinary schools, and
15:09
Speaker 3: the only way I could compete, I kind of felt
15:11
Speaker 3: was to just work a lot. I always felt like
15:15
Speaker 3: that was my thing, and to this day, that's kind
15:20
Speaker 3: of what I think, although obviously I've had a set
15:22
Speaker 3: of experiences now which give me more confidence.
15:24
Speaker 2: So Rutgers to City to Goldman. The next question is
15:29
Speaker 2: what draws you to the private side of the markets.
15:32
Speaker 2: You could have done public fixed income, you could have
15:35
Speaker 2: done equities for the rest of the career. You made
15:37
Speaker 2: a hard pivot to private markets. Tell us about why
15:42
Speaker 2: and what that experience has been like.
15:45
Speaker 3: Well, after leaving Goldman, I was in a really unique
15:47
Speaker 3: position in my life because I was so fortunate that
15:49
Speaker 3: I didn't have to work right away, but because as
15:53
Speaker 3: you said, I had a nice resume, people knew with me,
15:55
Speaker 3: I got a lot of opportunities. None of them were
15:58
Speaker 3: compelling until Carlisle came. And Carlile was compelling for very
16:02
Speaker 3: very simple reasons. One, I knew the firm. They had
16:05
Speaker 3: been my client when I was at Golmen Sachs. We
16:08
Speaker 3: committed a lot of capital to all those big firms,
16:12
Speaker 3: So I knew the firm. I spent a lot of
16:13
Speaker 3: time with the founders. They're incredible people, David, Bill and Dan,
16:17
Speaker 3: both as professionals and as also just generous human beings
16:21
Speaker 3: and leaders. And then I knew the industry and the
16:27
Speaker 3: secular trends and cyclical trends in this industry in private
16:32
Speaker 3: capital are extraordinary, and they've been this way for well
16:36
Speaker 3: over twenty years. And so I knew the industry I
16:40
Speaker 3: knew Carlisle's rolling it and it was really too much
16:44
Speaker 3: to pass up.
16:45
Speaker 2: So I know David a little bit. I don't know
16:48
Speaker 2: the other co founders, and he is legitimately one of
16:52
Speaker 2: the most amazing people I ever met my entire life.
16:56
Speaker 2: And I've done, you know, five hundred and fifty of these.
17:00
Speaker 2: But let's bring this back to the private equity side.
17:02
Speaker 3: So that would be your favorite, this would be your second.
17:06
Speaker 2: I didn't say my favorite. I just remember leaving that
17:09
Speaker 2: conversation and saying, Jesus Christ, this guy every space he's in.
17:15
Speaker 2: He moves the needle in Congress, in markets, in philanthropy
17:21
Speaker 2: and sports, like he doesn't touch something and not leave
17:25
Speaker 2: it better than how he found it. Yeah, it's really
17:27
Speaker 2: it's inspirational, and I don't want to be I don't
17:29
Speaker 2: want to make this about David.
17:31
Speaker 3: It's about you.
17:31
Speaker 2: But you get to work with him.
17:33
Speaker 3: Yeah, every day.
17:35
Speaker 2: So you mentioned the private market side. We have interest
17:40
Speaker 2: rates that crash to zero in the early two thousands,
17:43
Speaker 2: then following the financial crisis, we get ZIRP for almost
17:48
Speaker 2: fifteen years. How does that environment lead to Carlisle, which
17:54
Speaker 2: hasn't always been almost half a trillion dollars. It started
17:58
Speaker 2: out at a much more modest size. How does the
18:02
Speaker 2: past twenty year market environment lead to Carlisle really becoming
18:07
Speaker 2: the eight hundred pound gorilla in the room.
18:10
Speaker 3: Yeah, so I think you mentioned some really key factors
18:15
Speaker 3: which I think are contributing. It's always going to be
18:18
Speaker 3: the case that whatever the market environment is, wherever interest
18:21
Speaker 3: rates are, it's going to be the case that that's
18:24
Speaker 3: a contributing factor to how markets evolve. I don't think
18:28
Speaker 3: that's the key driver. If you go back to two thousand,
18:31
Speaker 3: I'll get these numbers slightly wrong. I think there was
18:33
Speaker 3: something like sixty two hundred public companies. Now that number
18:36
Speaker 3: is closer to three thousand. This trend of public companies
18:43
Speaker 3: shrinking and private companies staying private for longer, this has
18:46
Speaker 3: been in place for decades. If you think about the
18:49
Speaker 3: evolution of capital broadly, and you go back to the
18:53
Speaker 3: fact that Carlisle was founded by David Bill and Dan
18:56
Speaker 3: They were literally driving past the Carlisle Hotel and decided
18:59
Speaker 3: to name at Carlisle in nineteen eighty seven. There really
19:03
Speaker 3: was the birth of private equity, which they were part of.
19:07
Speaker 3: And you had venture capital, so you had buyouts, and
19:10
Speaker 3: you had seed opportunities. What systematically has happened over the
19:15
Speaker 3: thirty plus year period and certainly from two thousand when
19:18
Speaker 3: you now have companies staying private, is the capital available
19:23
Speaker 3: has just continued to grow. So, whether it's direct lending,
19:27
Speaker 3: asset based finance, integration with insurance, the opportunity set and
19:32
Speaker 3: the capital providers have just continued to expand, whether it's
19:35
Speaker 3: pension funds now all of you participating in wealth. It's
19:39
Speaker 3: the capital that is creating the opportunity for companies to
19:42
Speaker 3: stay private. It's not as though companies woke up one
19:44
Speaker 3: day and said, geez, I wish there was private capital.
19:46
Speaker 3: I'd like to stay private. And so this evolution of
19:49
Speaker 3: the capital markets, I think is just part of a
19:51
Speaker 3: broader evolution. We didn't have ETFs back in the of
19:55
Speaker 3: such significance. If you went all the way back to
19:58
Speaker 3: nineteen eighty seven, I can remember two thousand, I think
20:01
Speaker 3: it costs you five cents or so to trade a
20:02
Speaker 3: share a stock. So this is all part of the
20:05
Speaker 3: evolution of the capital markets, and the trend to staying
20:09
Speaker 3: private is substantial. Now. Having said that, we took at
20:13
Speaker 3: Carlisle in the past six months, we took three companies public.
20:16
Speaker 3: We took Standard a Republic in the United States, which
20:18
Speaker 3: is an aerospace defense MRO, and that was the third
20:22
Speaker 3: largest IPO of the year. We did the largest private
20:25
Speaker 3: equity held IPO in India a few weeks ago, Hexaware,
20:31
Speaker 3: and then we did the largest ever privately held company
20:35
Speaker 3: IPO in Japan last year with Goaku. So the public
20:38
Speaker 3: markets are still a fantastic opportunity to provide capital, but
20:42
Speaker 3: the option to stay private for longer exists. But the
20:45
Speaker 3: capital that's coming in is creating the opportunity. Obviously, then
20:49
Speaker 3: you get this flywhee effect.
20:51
Speaker 2: And to put some numbers on at the famous Wilshire
20:53
Speaker 2: five thousand is about thirty four hundred stocks, right, Yeah,
20:57
Speaker 2: So let's talk about the different areas of opportunity. You
21:01
Speaker 2: guys are active in growth equity and private credit and
21:05
Speaker 2: private debt, of which there is a slight difference, and
21:08
Speaker 2: of course private equity. Tell us about the big growth
21:12
Speaker 2: areas that Carlisle sees as an opportunity, and tell the
21:16
Speaker 2: advisor sitting in the audience what the sort of outlook
21:21
Speaker 2: is for this space relative to what we've been seeing
21:24
Speaker 2: in certainly in public credit, and if you want to
21:28
Speaker 2: talk about public markets, you can. That's the cherry on top.
21:31
Speaker 3: Yeah. So I think again for everybody here, for the
21:34
Speaker 3: wealth advisors here, I don't do what you do. And
21:38
Speaker 3: as I said earlier, I was kind of uniquely bad
21:41
Speaker 3: at it back in nineteen eighty seven, and not that
21:43
Speaker 3: that was the same thing. But if you can't sell
21:46
Speaker 3: tax free municipal bonds at twelve percent tax free, you're
21:48
Speaker 3: pretty uniquely bad at something.
21:50
Speaker 2: Let me let me interrupt you. I have this vision
21:52
Speaker 2: of you cold calling people. Hey, it's Harvey Schwartz. Market's
21:56
Speaker 2: down twenty two percent today, great entry point. Can I
21:59
Speaker 2: buy you some stuff?
22:00
Speaker 3: Yeah, you did what you had to do. I think
22:03
Speaker 3: the most the most dials I ever made was five
22:05
Speaker 3: hundred and eight uh in a day with not a
22:09
Speaker 3: lot of yield. But I would say that just like
22:15
Speaker 3: certain stocks are not great for every client on the
22:17
Speaker 3: well side, and certain other forms of investment are not
22:21
Speaker 3: great for your your wealth clients, I think you have
22:24
Speaker 3: to first make a determination about whether or not this
22:26
Speaker 3: is appropriate for your client and where does it fit
22:28
Speaker 3: into your toolkit. I think that there is a really
22:33
Speaker 3: unique role, whether it's in asset based finance, which is
22:37
Speaker 3: a very fast growing section of the marketplace. We did
22:42
Speaker 3: the largest transaction last year discover Card, which is an
22:46
Speaker 3: asset based finance transaction. Whether it's that part of the market,
22:50
Speaker 3: or how insurance companies are coming into the marketplace, or
22:53
Speaker 3: whether your clients have an interest in getting access to
22:56
Speaker 3: Japan where we raised the fund last year, or if
23:01
Speaker 3: your interest, for example, is shifting to defense. One of
23:05
Speaker 3: the first transactions Carver did Carlo Ever did in nineteen
23:08
Speaker 3: ninety was in the defense sector. We've been doing this
23:11
Speaker 3: for over thirty years. You wouldn't have necessarily said five
23:15
Speaker 3: years ago this would be the topic around the world
23:18
Speaker 3: given what's happening geopolitically, Europe now committing to spend a
23:22
Speaker 3: trillion dollars. What does this mean the US has to
23:25
Speaker 3: replace their supplies, our supplies. And so I do think
23:30
Speaker 3: that the capital demand is so high. And while we
23:34
Speaker 3: tend to focus a lot on wealth in the United States,
23:38
Speaker 3: because I do think the United States has been the
23:40
Speaker 3: leader in terms of private market adoption, I can tell
23:43
Speaker 3: you everyone in the world I go wealth is focused
23:47
Speaker 3: on this space. Half of all the assets in the
23:49
Speaker 3: world are controlled by wealth, the other half by institutions.
23:53
Speaker 3: Institutions have been participating in private capital for as long
23:55
Speaker 3: as we can remember, and so this shift feels quite now.
24:00
Speaker 3: I just think as an industry we have to be really,
24:02
Speaker 3: really thoughtful about making sure that your clients in the
24:06
Speaker 3: end they that we all on our side and are
24:09
Speaker 3: part of the industry. What we say we do, we
24:12
Speaker 3: delivered to you. So you delivered to your clients. Because
24:14
Speaker 3: I do think this is we're in the early days
24:16
Speaker 3: of a transformative capital shift.
24:18
Speaker 2: So let's talk a little bit about private credit, which
24:21
Speaker 2: has been one of the key growth drivers of Carlisle
24:25
Speaker 2: as well as the whole private side. What are you
24:27
Speaker 2: seeing there, what's the future look like in terms of
24:31
Speaker 2: the business, and I'm not asking you for a rate forecast.
24:34
Speaker 2: How do you see that business developing? And what can
24:38
Speaker 2: our clients do to participate?
24:40
Speaker 3: So I would say, well, first of all, the Carlisle
24:45
Speaker 3: Carlisle Insurance credit platform is the largest part of the
24:47
Speaker 3: business today, which most people are surprised by because of
24:50
Speaker 3: the history and private equity. That's the largest portion of
24:53
Speaker 3: our business almost two hundred billion in assets. We're the
24:56
Speaker 3: largest COLO Manager super proud of the team. They just
25:01
Speaker 3: were awarded COLO Manager of the year, it's about fifty
25:03
Speaker 3: billion of assets. So we've been in this business for
25:06
Speaker 3: quite a long time. I would say that first, I
25:11
Speaker 3: think we should dismiss what I think are some misunderstandings
25:13
Speaker 3: about private credit. There's a lot of discussion about the
25:17
Speaker 3: growth of private credit being potentially systemically risky. I actually
25:23
Speaker 3: think the distribution of capital across private credit banks and
25:26
Speaker 3: other providers of capital actually is systemically reducing, not increasing.
25:31
Speaker 3: But I think that debate is kind of that discussion
25:33
Speaker 3: has kind of been tested. Right. We went through Silicon
25:37
Speaker 3: Valley Bank. We went through nearly five hundred basis points
25:39
Speaker 3: of raised in interest rates and increases by the FED,
25:43
Speaker 3: and private credit has been quite durable. I think when
25:46
Speaker 3: you have a lot of capital going into a space,
25:47
Speaker 3: you have to ask yourself, are the people who are
25:50
Speaker 3: storing that capital making the marginal capital commitment thoughtfully or
25:55
Speaker 3: is there too much capital? But I think that's about
25:57
Speaker 3: a performance question, not as systemically risky question. And so
26:02
Speaker 3: I think that again, if you think about the trajectory
26:06
Speaker 3: of how capital evolves, it really evolves over decades. Barry. Now,
26:11
Speaker 3: there's a lot of excitement in alternatives, and particularly for
26:16
Speaker 3: the largest firms like ourselves because it's a growth area.
26:20
Speaker 3: Having a global footprint allows you those opportunities. But our
26:24
Speaker 3: team is seeing opportunities all around the world to deploy credit,
26:27
Speaker 3: and actually, even before this sort of potential stimulus resurgence
26:32
Speaker 3: in Europe, we were already seeing I would say, at
26:35
Speaker 3: the margin, more opportunities to deploy credit in Europe than
26:38
Speaker 3: in the US. Now at Carlisle you can all avail
26:40
Speaker 3: yourself of c Tech, which is basically the best of
26:44
Speaker 3: credit at Carlisle across a spectrum. And again Zach can
26:49
Speaker 3: give you all the details after the show. But I'm
26:52
Speaker 3: a customer. I on Sea Tech and I keep adding
26:55
Speaker 3: to it, and so I think the opportunities are extensive.
27:02
Speaker 3: I do think for again, generically for the audience, I
27:06
Speaker 3: think picking vintages is not necessarily the smartest thing, just
27:09
Speaker 3: like I don't think actually picking heis and lows in
27:12
Speaker 3: the stock market is the easiest thing to do. And
27:13
Speaker 3: I think if you're going to be a participant, you
27:15
Speaker 3: want to be a participant over time.
27:17
Speaker 2: So I'm glad you brought up the FED raising interest
27:21
Speaker 2: rates five hundred basis points in a year really being
27:25
Speaker 2: a disruption. You have a unique perch to look out
27:29
Speaker 2: over public equity, private equity, public credit, private credit. I
27:35
Speaker 2: got to ask, it seems like everybody misinterpreted what the
27:40
Speaker 2: Fed was doing, how they were going to do. There
27:42
Speaker 2: was just an endless parade of forecasts. One of them
27:45
Speaker 2: was one hundred percent chance of recession in twenty twenty three.
27:51
Speaker 2: Why do you think so many people got what the
27:53
Speaker 2: Fed did wrong? And how much or how little do
27:57
Speaker 2: you care about short term shifts in federal reserve rates?
28:02
Speaker 3: Okay, so a lot in that question, So let me
28:05
Speaker 3: unpack it a bit. So first, for those who don't know,
28:10
Speaker 3: there's some incredible content that comes out of Carlisle based
28:14
Speaker 3: on our unique portfolio. So up until recently we just
28:18
Speaker 3: sold a couple of companies. We had close to a
28:20
Speaker 3: million employees in our portfolio companies around the world, and
28:23
Speaker 3: we roll up all that data. So it gives us
28:25
Speaker 3: a very very unique perch into looking at what is
28:28
Speaker 3: happening in the economy. And this is across all industries globally.
28:32
Speaker 3: So I'm going to come back to that in a second.
28:33
Speaker 3: But as a result, we're able to put out some
28:35
Speaker 3: amazing content. You know, you mentioned, David, for those of
28:38
Speaker 3: you arenor on it. David puts out something called from
28:40
Speaker 3: David's Desk. He wrote this amazing document recently about pandas.
28:45
Speaker 3: I know that seems a little far field, but all
28:47
Speaker 3: your clients would love it. It's extraordinary. Did you know
28:50
Speaker 3: that are panda's like the side when it's born is
28:52
Speaker 3: the size of a stick of butter? If you read
28:54
Speaker 3: David's piece on pandas. By the way, he's sponsored all
28:56
Speaker 3: the pandas to your point that have come in from
28:58
Speaker 3: China over the past I think decade. He pays for
29:00
Speaker 3: the he pays the fees for the pandas to come
29:03
Speaker 3: to America. Jason Thomas is our lead economist and strategist.
29:08
Speaker 3: Jason puts out Carlisle Compass and I'm going to come
29:11
Speaker 3: back to Jason in a second. And then we have
29:14
Speaker 3: Admiral stap Ridez who does all the geopolitical work and
29:17
Speaker 3: has a leadership series that he puts out, and he's
29:20
Speaker 3: a partner at the firm. Why do I mention Jason?
29:23
Speaker 3: Jason rolls up all these KPIs. And if you've been
29:25
Speaker 3: reading Jason's material since I showed up at Carlisle two
29:28
Speaker 3: years ago, he was one of the few, if not
29:30
Speaker 3: the only one barrier that was saying, the FED is
29:32
Speaker 3: going to keep rates where they are, and he has
29:35
Speaker 3: nailed it. Now, he's nailed it because he's brilliant. I'm
29:38
Speaker 3: honored that he's my partner. But he also has all
29:40
Speaker 3: this data, and so when we roll up the data,
29:44
Speaker 3: we get the look inside what's happening in terms of
29:48
Speaker 3: portfolio company behavior, what's happening with input prices. So we
29:52
Speaker 3: could see months in advance, if there was like a
29:55
Speaker 3: one dollar input item when it was the supply chain problem,
29:59
Speaker 3: if that went to two dollars in many cases it did. Right,
30:02
Speaker 3: so we all see headline inflation when it was seven
30:05
Speaker 3: eight nine percent, but there were input prices that were
30:07
Speaker 3: going up fifty sixty eighty percent, and then we could
30:09
Speaker 3: see that come off. So now to cut to your question,
30:14
Speaker 3: coming into the beginning of this year, all the signals
30:17
Speaker 3: were quite positive. We had EBITDAH growth across all the
30:21
Speaker 3: portfolio companies in the US. It was up something like
30:24
Speaker 3: fifteen percent. Last year. Our portfolio values went up by
30:28
Speaker 3: billions because the global economy and the economy in the
30:32
Speaker 3: US was so strong, and we were still saying rates
30:36
Speaker 3: wouldn't come down. Now the market's caught up to that, okay.
30:39
Speaker 3: I would say, now it's a question of with the
30:42
Speaker 3: new administration, how do the policies ultimately take effect. I
30:46
Speaker 3: think it's more difficult to say at this exact stage
30:49
Speaker 3: what FED behavior will mean. I also would say, like
30:52
Speaker 3: for example, in the January February data, what we're seeing
30:54
Speaker 3: is what you'd expect we would see. We saw, for example,
30:57
Speaker 3: a lot of immediate purchasing in advance of potential tariffs.
31:02
Speaker 3: If you look at the Purchasing Managers index, I think
31:04
Speaker 3: the component of inventories was up four percent. That's all
31:09
Speaker 3: managers doing, all businesses doing what you think they would do.
31:12
Speaker 3: They're basically saying, hey, prices are going to go in
31:14
Speaker 3: the future, I'm going to buy now, which of course
31:15
Speaker 3: brings price acceleration into the present. But right now we're
31:21
Speaker 3: not seeing any marginal demand destruction. The data still looks
31:26
Speaker 3: quite positive, and so we would believe that rates should
31:29
Speaker 3: stay stable higher. But we really have to see ultimately
31:32
Speaker 3: how the combination of tax policy, deregulation, tariffs, how all
31:38
Speaker 3: this comes together. And I would say we're just at
31:42
Speaker 3: an environment now with much more increased uncertainty and I
31:46
Speaker 3: think when we came in the new administration, I think
31:48
Speaker 3: there was this real sense of, hey, we have certainty.
31:51
Speaker 3: We got through an election with certainty. Then we had okay,
31:55
Speaker 3: we're going to get tax policy, deregulation, very pro business agenda.
31:58
Speaker 3: And now it's sort of the conversation been consumed by
32:02
Speaker 3: Tariff's uncertainty and obviously a lot of geopolitical uncertainty still.
32:05
Speaker 3: And so I just think uncertainty is dominating the dialogue
32:07
Speaker 3: right now, but we're not seeing it in the portfolio companies.
32:10
Speaker 2: Makes a lot of sense. Last question, on the private side,
32:15
Speaker 2: the expectations are that private equity, private credit as an
32:19
Speaker 2: asset class. End of the decade, you can choose your
32:24
Speaker 2: preferred estimate two point seventy five trillion, three trillion. I've
32:28
Speaker 2: even seen above that. How do you see the space
32:32
Speaker 2: that the waters that you guys ply in, How do
32:35
Speaker 2: you see the growth continuing? Are we getting close to
32:39
Speaker 2: topping out or is this still early innings?
32:43
Speaker 3: No? Well, I think for the industry again, and we're
32:45
Speaker 3: talking about an industry that's been around for forty years,
32:50
Speaker 3: so in the scheme of economic history and business development,
32:53
Speaker 3: it's quite short. And of course private credit. That's a
32:58
Speaker 3: fifteen a teen, twenty year phenomenon. Even a shorter period.
33:03
Speaker 3: Asset based finance becoming a big part of the industry
33:06
Speaker 3: is an even more a newer phenomenon. I think a
33:11
Speaker 3: lot of it will depend on really what does happen
33:15
Speaker 3: with wealth. That is the pool of capital that's now
33:18
Speaker 3: coming in, and I think it will continue to drive opportunities.
33:22
Speaker 3: It will be super efficient the more capital is available
33:26
Speaker 3: to the market, and companies will continue to take advantage
33:29
Speaker 3: of it. So again, companies don't decide to stay private
33:32
Speaker 3: because they just love being private. They decide to stay
33:34
Speaker 3: private because they may like being private, but also because
33:37
Speaker 3: it's the most efficient way for them to grow and
33:38
Speaker 3: the most efficient way for them to source capital. This audience,
33:42
Speaker 3: if any of these numbers come true, I've seen numbers
33:45
Speaker 3: as big as ten trillion over the next ten years
33:47
Speaker 3: ten percent. If any of those numbers are even remotely accurate,
33:51
Speaker 3: the space will continue to grow. Now you're going to
33:53
Speaker 3: need scale, sourcing, opportunity, reputation. We have to deliver on
33:57
Speaker 3: what we say we're going to do. Technology we haven't
34:00
Speaker 3: even talked about. We could do a whole session on
34:02
Speaker 3: that technology. You have to be able to deploy technology
34:05
Speaker 3: in very unique ways, especially with AI. So I think
34:08
Speaker 3: this is going to continue to grow. It won't always
34:11
Speaker 3: be perfect, but I do think again this audience at
34:14
Speaker 3: the margin will shape the nature of private capital for
34:17
Speaker 3: the next decade.
34:18
Speaker 2: That was my conversation with Harvey Schwartz, CEO of the
34:22
Speaker 2: Carlisle Group. We're going to bring him into the studio
34:26
Speaker 2: for a full treatment for the full masters and business
34:29
Speaker 2: conversation where we're not fighting the sun and the winds.
34:33
Speaker 2: It was really fun chatting with him. I learned a
34:36
Speaker 2: lot about him and about Carlisle. There are a whole
34:40
Speaker 2: bunch more questions I'm really excited to ask him. Special
34:43
Speaker 2: thanks to Matt Middleton of Advisor Circle for helping put
34:48
Speaker 2: this together. It really was a blast. If you enjoy
34:52
Speaker 2: this conversation, well, be sure and check out any of
34:54
Speaker 2: the previous five hundred or so we've done over the
34:57
Speaker 2: past ten years. You can find those that Bloomberg, iTunes, Spotify, YouTube,
35:02
Speaker 2: wherever you get your favorite podcasts. Be sure and check
35:06
Speaker 2: out my new book, How Not to Invest The ideas,
35:10
Speaker 2: numbers and behaviors that destroy wealth and how to avoid them.
35:14
Speaker 2: I'm Barry Radhaults. You're listening to Masters of business on
35:18
Speaker 2: Bloomberg Radio.