His discussion covered a broad range of topics: the mating habits of panda bears, the historical importance of the Magna Carta, Paul Volcker’s monetary policies in the early 1980s, Japanese demographics, and many subjects in between. Oh, and he discussed his views on the private equity market, too!
Rubenstein began his professional life as a lawyer, and his career took many twists and turns before he found his calling in private equity. Prior to establishing The Carlyle Group in 1987, Rubenstein went from practicing law to serving in the White House under Jimmy Carter and then back to practicing law.
Despite his immense success with The Carlyle Group, he emphasized that his career was filled with more mistakes than achievements. But he did outline the skills and attributes that he feels ultimately lead to success: intelligence — not brilliance, because brilliant people can lead companies astray; hard work; strong focus; the ability to develop expertise in essential areas so that your skill set becomes essential to your organization; written and oral persuasiveness; and strong ethical leadership.
Turning to the economy, Rubenstein predicted that the United States will continue to plod along at 1% inflation and roughly 2% growth. The primary reason, he said, is demographics, specifically the aging and retiring baby boomers. He expects job growth will remain slow but stable. Nevertheless, the United States remains the best place in the world to do business, according to Rubenstein, because of its established rule of law.
Although Rubenstein continues to believe that private equity will remain an attractive asset class, the returns going forward will be nothing like those the industry has experienced historically. During the 1960s and 1970s, for example, private equity funds regularly returned upwards of 30% and 40% per year. In contrast, he expects private equity returns to be roughly 15% in the years ahead.
Beyond the United States, Rubenstein is pleasantly surprised that governments around the world seem to be embracing private equity and see it as an avenue to help their entrepreneurs learn valuable business skills. Such countries as China, India, and Israel are seeing huge investment in private equity. This ramping investment is flowing into sophisticated pharmaceuticals and genetic technologies that may help realize the promise of customized drugs, a goal Rubenstein thinks is within reach. It’s also flowing into a wide range of innovative technologies, many of which hold transformative potential.
Despite Rubenstein’s success and immense wealth, his most salient point was that we all have an obligation to give back. “When you look back 10 or 20 years from now, you will want to say that I’m proud that I did X, Y, Z,” he said. “Make sure you feel your time on Earth is well spent.”
Life is more rewarding and enriching if you do so. In fact, Rubenstein said his mother never once called to congratulate him on his various financial successes. But when she learned that he had given away large sums to worthy causes, she called to say she was proud of him.
It’s what Rubenstein calls “The Mother Test,” and he urged all of us to make choices that will make our own mothers proud.
This article originally appeared on the 69th CFA Institute Annual Conference blog.
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All posts are the opinion of the author. As such, they should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute or the author’s employer.
Photo courtesy of W. Scott Mitchell