Masters in Business LIVE: Carlyle Group CEO Harvey Schwartz

hard time figuring out his life goals. And you know, thanks to people who took an interest in him and a couple of good breaks, plus a whole lot of smarts and hard work, he ended up really creating a career from ELF, not only at firms like Goldman Sachs, but eventually getting tapped to become CEO at Carlisle. I find Harvey to be an absolutely fascinating guy. He is a no holds barred, blunt speaker, truth teller, really really

interesting person. I thought this conversation was great. You can tell I'm having a lot of fun with no further ado our special bonus Masters in Business Live with Harvey Schwartz, CEO of the Carlisle Group. I am just so thrilled to introduce you all to somebody that not only are you gonna know more about in the coming years, but it's been my pleasure to get to know over the past couple of months. Harvey Schwartz is CEO of Carlile. He comes to finance in a rather unusual way, and

I'm gonna let Harvey tell's story. Let's start right there. You have a really unconventional Well before we go there, Carlisle Private Equity, private credit, been doing this for a long time. Chairman is David Rubinstein. Tell us a little bit about Carlisle First, what do you guys do? How much do you manage? Just give us the thirty second version.

which is the best of credit cap them. I'm sure we'll get into some of this which is our secondary's co in best business, and towards the end of the year we'll be launching our private equity solution. But I would say, you know, for me, been Carlo for two years has been an incredible privilege. The firm was founded in nineteen eighty seven by David Bill and Dan who really have created a culture which is extraordinary in terms of the people. We're twenty three hundred people today. Zach Foreman,

I don't know if Zach Forman is in the crowd anywhere. Zach, can you stand up? Zach leads our effort down here, so everybody should go to Zach afterwards, and then we have a boot. So hey, that's I'm done with my advertising for the day. But I feel like I've accomplished.

time really just completely consumed him. And this is, you know, many decades ago, and so treatment wasn't as good, an understanding wasn't as good. The stigma of mental health related issues and severe mental health is still an extraordinary problem everywhere in the world, certainly in our country, but back then it was even much worse. And so my mother passed when I was fourteen. I don't want you all to feel like you have to go to therapy with

me and Barry. By the way, but my mother passed when I was fourteen, and then it was me and my father, and it wasn't a particularly healthy environment, and so I basically ended up doing really, really badly in high school. I didn't I barely graduated by the time I was a senior. I think it was like right around Christmas. When I was a senior in high school in New Jersey, I'd missed twenty seven days of school, which, by the way, if you actually do the math, is

super hard to do. And so there was a good chance I wasn't going to graduate. I didn't apply to any colleges, but I got super fortunate. And you know, Chris was really generous when she introduced me. She referred to as a mentor, and I think you do have mentors for hopefully everyone here as mentors in your life. I had people that were more like angels that really like intervened for whatever reason they did to help me at certain crazy pivotal times in my life. And one

was a woman named Linda. I had plot. She encouraged me to apply to Rutgers. I wasn't going to college. I applied, I didn't get in Linda, who's like not an influential person.

father and I were deteriorating pretty quickly. And when I turned eighteen in March of that year, it was my birthday last week, by the way, In March of that year, I signed myself out of high school and I had called some friends in California. I asked if they were let me come live with them, and so I moved to California. I actually graduated high school out there. Those were like there were a lot of angels, but that

family was an extraordinary angel. They took me in, but I didn't apply to any colleges and then and then eventually Linda came up long and encouraged me to apply to Rutgers.

But I had hair, thinner, better, more fit and but anyway, uh Lynda and her husband used to come through and I just got to know them, and she said she was a Rutgers graduate, but she wasn't an influential person like you berry, and she encouraged me to apply. I didn't get in because of my track record in high school.

And she was so incensed by this that she called the university and basically convinced them to interview me and write an essay about why I was such a screw up in high school and Rutgers, which is an incredible institution, changed their selection allowed me to go to school. And that's why you know, Linda's an angel and the more family's an angel, and these people like really intervened in my life, I think in ways that are kind of

hard to conceive. And Rutgers today, I think the stats are well over half the students still get financial aid, sort of one in three or first ever go to college and their family. It's an amazing institution and for someone like me gave me all the opportunity in the world. That's great.

I took a job at a firm called JB. Hanour For those of you're old enough, it was a municipal bond firm back in the day. This is nineteen eighty seven, and just show a hand. So how many people know what it means to work on a draw? Yeah? So I worked on a draw, which means you got paid one thousand dollars a month, but effectively it was alone and you owed it back, and you cold called, and you tried to build your book of business. And I proved to be uniquely bad at this. Yeah, uniquely bad

at this. Yeah, maybe a little bit was timing. My first day coming out of the training program was the day the stock market fell. Yeah, October nineteenth, down five hundred eight points. There I was like naively cold calling people. By the way, back then there were like real phones. You had to actually push buttons and stuff, and I had this little cushion thing you would keep your head like this, and you were mostly crippled by the end

of the day. But so, yeah, it was a bad time to try, and I didn't do very well at it. I had no money. I owed everybody in the world money. I had borrowed a lot of money to go to school, friends, anyone I could find, And you know, it was pretty stressful.

City Bank. In nineteen eighty nine, and that was really the first time I'd say I was on a track that would begin to look more conventional, although obviously starting in these I was hard as a temp I eventually became a full time employee, and then I went into the credit training program at City Bank. But I will say right around that period I asked someone I worked with them at City Bank, and I was so impressed

with how intelligent they were. And this will give you a sense of how clumsy I was still And we went out one night and I said something the effect of Jees, you're so smart. I would have thought you would have accomplished more by now in your life, which is a horrible, cringeworthy thing to say to someone. But he was so gracious taught me a lot in that moment because he was gracious about it, didn't get offended. And he said, you know, Harvey, you'll learn in your

life careers are fifty percent luck, fifty percent skill. And that always stuck with me, buried because I don't know that it's fifty percent luck. But for me, I got to say, like, there are days it feels mostly ninety ten or ninety nine to one that it's luck. And I think along the way people, every time you're given responsibility, somebody's making a leap of faith giving you that responsibility. And along the way people did, whether it was at City Bank. Then I went to Goldman Sachs. I had

some incredibly uh, some incredible experiences of Goman Sacks. I moved around quite a bit after leaving Goman Sacks in twenty eighteen. Ultimately, Carlisle called Carlisle calling, is luck? Right? It's just a random thing that I end up sitting here with you, and so I think that it's really.

sixty four. In my life, that's a really good time to be born. Like, I don't think you can not acknowledge some of these things. And so, but I will say my early experiences, if anything, I would say I was so insecure because I didn't get into college and

I barely got out of high school. I think it just motivated fear, scared, insecure, and I think all that kind of compounded into feeling like, wow, I am alongside all these people who went to these extraordinary schools, and the only way I could compete, I kind of felt was to just work a lot. I always felt like that was my thing, and to this day, that's kind of what I think, although obviously I've had a set of experiences now which give me more confidence.

So I knew the firm. I spent a lot of time with the founders. They're incredible people, David, Bill and Dan, both as professionals and as also just generous human beings and leaders. And then I knew the industry and the secular trends and cyclical trends in this industry in private capital are extraordinary, and they've been this way for well over twenty years. And so I knew the industry I knew Carlisle's rolling it and it was really too much to pass up.

is closer to three thousand. This trend of public companies shrinking and private companies staying private for longer, this has been in place for decades. If you think about the evolution of capital broadly, and you go back to the fact that Carlisle was founded by David Bill and Dan They were literally driving past the Carlisle Hotel and decided to name at Carlisle in nineteen eighty seven. There really was the birth of private equity, which they were part of.

And you had venture capital, so you had buyouts, and you had seed opportunities. What systematically has happened over the thirty plus year period and certainly from two thousand when you now have companies staying private, is the capital available has just continued to grow. So, whether it's direct lending, asset based finance, integration with insurance, the opportunity set and the capital providers have just continued to expand, whether it's

pension funds now all of you participating in wealth. It's the capital that is creating the opportunity for companies to stay private. It's not as though companies woke up one day and said, geez, I wish there was private capital. I'd like to stay private. And so this evolution of the capital markets, I think is just part of a broader evolution. We didn't have ETFs back in the of

such significance. If you went all the way back to nineteen eighty seven, I can remember two thousand, I think it costs you five cents or so to trade a share a stock. So this is all part of the evolution of the capital markets, and the trend to staying private is substantial. Now. Having said that, we took at Carlisle in the past six months, we took three companies public. We took Standard a Republic in the United States, which is an aerospace defense MRO, and that was the third

largest IPO of the year. We did the largest private equity held IPO in India a few weeks ago, Hexaware, and then we did the largest ever privately held company IPO in Japan last year with Goaku. So the public markets are still a fantastic opportunity to provide capital, but the option to stay private for longer exists. But the capital that's coming in is creating the opportunity. Obviously, then you get this flywhee effect.

of course private equity. Tell us about the big growth areas that Carlisle sees as an opportunity, and tell the advisor sitting in the audience what the sort of outlook is for this space relative to what we've been seeing in certainly in public credit, and if you want to talk about public markets, you can. That's the cherry on top.

into your toolkit. I think that there is a really unique role, whether it's in asset based finance, which is a very fast growing section of the marketplace. We did the largest transaction last year discover Card, which is an asset based finance transaction. Whether it's that part of the market, or how insurance companies are coming into the marketplace, or whether your clients have an interest in getting access to Japan where we raised the fund last year, or if

your interest, for example, is shifting to defense. One of the first transactions Carver did Carlo Ever did in nineteen ninety was in the defense sector. We've been doing this for over thirty years. You wouldn't have necessarily said five years ago this would be the topic around the world given what's happening geopolitically, Europe now committing to spend a trillion dollars. What does this mean the US has to replace their supplies, our supplies. And so I do think

that the capital demand is so high. And while we tend to focus a lot on wealth in the United States, because I do think the United States has been the leader in terms of private market adoption, I can tell you everyone in the world I go wealth is focused on this space. Half of all the assets in the world are controlled by wealth, the other half by institutions. Institutions have been participating in private capital for as long as we can remember, and so this shift feels quite now.

I just think as an industry we have to be really, really thoughtful about making sure that your clients in the end they that we all on our side and are part of the industry. What we say we do, we delivered to you. So you delivered to your clients. Because I do think this is we're in the early days of a transformative capital shift.

quite a long time. I would say that first, I think we should dismiss what I think are some misunderstandings about private credit. There's a lot of discussion about the growth of private credit being potentially systemically risky. I actually think the distribution of capital across private credit banks and other providers of capital actually is systemically reducing, not increasing. But I think that debate is kind of that discussion has kind of been tested. Right. We went through Silicon

Valley Bank. We went through nearly five hundred basis points of raised in interest rates and increases by the FED, and private credit has been quite durable. I think when you have a lot of capital going into a space, you have to ask yourself, are the people who are storing that capital making the marginal capital commitment thoughtfully or is there too much capital? But I think that's about

a performance question, not as systemically risky question. And so I think that again, if you think about the trajectory of how capital evolves, it really evolves over decades. Barry. Now, there's a lot of excitement in alternatives, and particularly for the largest firms like ourselves because it's a growth area.

Having a global footprint allows you those opportunities. But our team is seeing opportunities all around the world to deploy credit, and actually, even before this sort of potential stimulus resurgence in Europe, we were already seeing I would say, at the margin, more opportunities to deploy credit in Europe than in the US. Now at Carlisle you can all avail yourself of c Tech, which is basically the best of credit at Carlisle across a spectrum. And again Zach can

give you all the details after the show. But I'm a customer. I on Sea Tech and I keep adding to it, and so I think the opportunities are extensive. I do think for again, generically for the audience, I think picking vintages is not necessarily the smartest thing, just like I don't think actually picking heis and lows in the stock market is the easiest thing to do. And I think if you're going to be a participant, you want to be a participant over time.

Fed did wrong? And how much or how little do you care about short term shifts in federal reserve rates?

So I'm going to come back to that in a second. But as a result, we're able to put out some amazing content. You know, you mentioned, David, for those of you arenor on it. David puts out something called from David's Desk. He wrote this amazing document recently about pandas. I know that seems a little far field, but all your clients would love it. It's extraordinary. Did you know that are panda's like the side when it's born is the size of a stick of butter? If you read

David's piece on pandas. By the way, he's sponsored all the pandas to your point that have come in from China over the past I think decade. He pays for the he pays the fees for the pandas to come to America. Jason Thomas is our lead economist and strategist. Jason puts out Carlisle Compass and I'm going to come back to Jason in a second. And then we have Admiral stap Ridez who does all the geopolitical work and has a leadership series that he puts out, and he's

a partner at the firm. Why do I mention Jason? Jason rolls up all these KPIs. And if you've been reading Jason's material since I showed up at Carlisle two years ago, he was one of the few, if not the only one barrier that was saying, the FED is going to keep rates where they are, and he has nailed it. Now, he's nailed it because he's brilliant. I'm honored that he's my partner. But he also has all this data, and so when we roll up the data, we get the look inside what's happening in terms of

portfolio company behavior, what's happening with input prices. So we could see months in advance, if there was like a one dollar input item when it was the supply chain problem, if that went to two dollars in many cases it did. Right, so we all see headline inflation when it was seven eight nine percent, but there were input prices that were going up fifty sixty eighty percent, and then we could

see that come off. So now to cut to your question, coming into the beginning of this year, all the signals were quite positive. We had EBITDAH growth across all the portfolio companies in the US. It was up something like fifteen percent. Last year. Our portfolio values went up by billions because the global economy and the economy in the US was so strong, and we were still saying rates wouldn't come down. Now the market's caught up to that, okay. I would say, now it's a question of with the

new administration, how do the policies ultimately take effect. I think it's more difficult to say at this exact stage what FED behavior will mean. I also would say, like for example, in the January February data, what we're seeing is what you'd expect we would see. We saw, for example, a lot of immediate purchasing in advance of potential tariffs. If you look at the Purchasing Managers index, I think

the component of inventories was up four percent. That's all managers doing, all businesses doing what you think they would do. They're basically saying, hey, prices are going to go in the future, I'm going to buy now, which of course brings price acceleration into the present. But right now we're not seeing any marginal demand destruction. The data still looks quite positive, and so we would believe that rates should

stay stable higher. But we really have to see ultimately how the combination of tax policy, deregulation, tariffs, how all this comes together. And I would say we're just at an environment now with much more increased uncertainty and I think when we came in the new administration, I think there was this real sense of, hey, we have certainty. We got through an election with certainty. Then we had okay, we're going to get tax policy, deregulation, very pro business agenda.

And now it's sort of the conversation been consumed by Tariff's uncertainty and obviously a lot of geopolitical uncertainty still. And so I just think uncertainty is dominating the dialogue right now, but we're not seeing it in the portfolio companies.

with wealth. That is the pool of capital that's now coming in, and I think it will continue to drive opportunities. It will be super efficient the more capital is available to the market, and companies will continue to take advantage of it. So again, companies don't decide to stay private because they just love being private. They decide to stay private because they may like being private, but also because it's the most efficient way for them to grow and

the most efficient way for them to source capital. This audience, if any of these numbers come true, I've seen numbers as big as ten trillion over the next ten years ten percent. If any of those numbers are even remotely accurate, the space will continue to grow. Now you're going to need scale, sourcing, opportunity, reputation. We have to deliver on what we say we're going to do. Technology we haven't even talked about. We could do a whole session on

that technology. You have to be able to deploy technology in very unique ways, especially with AI. So I think this is going to continue to grow. It won't always be perfect, but I do think again this audience at the margin will shape the nature of private capital for the next decade.

this together. It really was a blast. If you enjoy this conversation, well, be sure and check out any of the previous five hundred or so we've done over the past ten years. You can find those that Bloomberg, iTunes, Spotify, YouTube, wherever you get your favorite podcasts. Be sure and check out my new book, How Not to Invest The ideas, numbers and behaviors that destroy wealth and how to avoid them. I'm Barry Radhaults. You're listening to Masters of business on Bloomberg Radio.