David Rubenstein: From $5M to Carlyle's $500B

David Rubenstein has a theory about entrepreneurship, and it comes with a deadline. Somewhere between the ages of twenty-eight and thirty-seven, he says, most people who are ever going to start a company will have done it. Miss that window, and the odds drop close to zero. He crossed the line himself in 1987, at thirty-seven, founding what would become Carlyle Group with $5 million raised from four investors. Today Carlyle manages $500 billion (00:00). Carlyle is a private equity firm, meaning it buys companies, tries to make them more valuable, and sells them later, often years down the line, for a profit.

Rubenstein arrived at that founding moment by way of a detour through the White House. At twenty-seven he was deputy domestic policy advisor to President Jimmy Carter, a job he says he was not qualified for or experienced enough for at the time (01:10). His parents, blue-collar workers in Baltimore who never finished high school, watched their son meet the president and could barely process it. Four years later, when Carter lost his re-election bid, Rubenstein was out of a job at thirty-one, and the same Washington that had once called him a rising star stopped returning his calls. He struggled to find a law firm willing to hire a junior aide from a defeated administration (03:28). He practiced law for a couple of years, decided he was not very good at it, and then did the thing his own rule says people almost never do after thirty-seven: he started a company, by his own account, with the clock nearly out.

That company grew by inventing a version of private equity that did not exist yet. Instead of running a single buyout fund every four years, the standard model at the time, Rubenstein built parallel funds, covering buyouts, growth investing, real estate, and debt, and then took the structure overseas, adding funds in Europe and Asia (09:06). None of it happened quickly. Before Carlyle had enough money for a real fund, Rubenstein and his partners worked deal by deal, financing one opportunity at a time and starting over if it worked out. The first proper fund raised $100 million. The second raised $1 billion (09:42). By the time Carlyle sold a 5 percent stake to the California public pension fund CalPERS in 2009, the firm was valued at about $2 billion. A few years later, a 7.5 percent stake sold to the Abu Dhabi sovereign investment arm Mubadala at a $20 billion valuation, shortly before Carlyle went public (19:35). Companies Carlyle controls today employ about 1.5 million people (07:38).

The Weather Never Clears

What is striking about Rubenstein's account is not the growth curve, it is the way he describes his own state of mind throughout it. Asked whether there was ever a year, ten years in, when he let himself believe the firm would make it, he says no.

If you're an entrepreneur, you always think something bad's gonna happen. [00:17] , David Rubenstein

Asked if that feeling has faded now that Carlyle manages half a trillion dollars, he says it has not, and answers simply that he still feels it every day (20:23). He returns often to a single statistic: 99.9 percent of companies started in the United States are no longer in business five years later (00:34). He cites it less as a warning to others than as a description of the fear he still carries.

He connects that fear to something else he has watched in every founder he has met, an outsized self-confidence that looks almost unreasonable from the outside. He offers Jeff Bezos, founder of Amazon, as his best example, and the story doubles as the most expensive miscalculation of Rubenstein's career. In the early 1990s, one of Rubenstein's companies owned a database listing every book in print. A young entrepreneur trying to sell books over the internet wanted to license it, and offered, instead of cash, 20 to 25 percent of the company he was building. Rubenstein's team turned him down, telling Bezos they wanted cash, not a piece of an illiquid startup (14:48). They eventually took a small equity stake instead, then sold it at the IPO. That stock, Rubenstein estimates, would be worth about $14 billion today (15:33). He tells the story less as a confession than as an illustration: even people who spend careers evaluating founders get the read wrong constantly, and the clearest signal, in his experience, is the founder's own unreasonable certainty.

That certainty, Rubenstein is careful to note, only carries a founder so far. Carlyle's early recruiting depended less on his own charisma, he insists, than on borrowed institutional weight. In 1988, Frank Carlucci, the outgoing US secretary of defense under Ronald Reagan, needed a base that was not a law firm, since non-lawyers could not join one in those days. Rubenstein's young firm took him in, and Carlucci opened doors Rubenstein could not have opened alone. Four years later he recruited former secretary of state Jim Baker the same way, and later still a former British prime minister and a former US president joined as advisors (16:32). Rubenstein says his own last name would not have opened doors in the Middle East the way arriving alongside Jim Baker did (17:46).

A Blue-Collar Billionaire's Habits

None of that fortune has changed Rubenstein's own habits much, at least by his telling. He still gets a haircut for $15 at a barber in his neighborhood, and he still wears suits he has owned for a decade, joking that the real trick of frugality is simply still fitting into them (27:06). He traces the instinct to his father, a postal clerk in Baltimore who came home from World War II, took the only job available, kept it for life, and refused on principle to ever wear a tie. Rubenstein has, by his own account, overcorrected in the other direction, buying more suits and ties than he needs and then wearing each one for years. He also signed the Giving Pledge, a commitment among wealthy individuals to give away most of their fortunes, and says he intends to give away the bulk of what remains (23:02).

Some of that giving has gone toward buying pieces of American history and putting them where people can see them. Rubenstein bought the only privately held copy of the Magna Carta almost by accident, he says, after being told it was about to leave the country, and placed it on permanent display at the National Archives (30:41). He went on to acquire an original Emancipation Proclamation, a copy of the Declaration of Independence, and a copy of the Thirteenth Amendment, and has funded restorations of the Washington Monument, the Jefferson Memorial, and the Lincoln Memorial. The idea behind all of it, he says, is that people are more likely to learn history if they can see the actual documents and buildings rather than just read about them.

History doubles as Rubenstein's stated defense against his own aging. He reads constantly, partly because he hosts interview programs built around books, and partly for a more self-interested reason.

It's my anti-Alzheimer's device. [36:34] , David Rubenstein

The logic, as he explains it, is that interviewing forces active engagement, listening to an answer while composing the next question, in a way that passive reading alone would not (36:34). He admits he is not good at the other commonly recommended defenses against cognitive decline, learning a musical instrument or a new language, so reading and interviewing are the substitute he has settled on.

That same historical habit shapes how he talks about the present, including a federal debt he puts at $40 trillion, which he believes the country will likely resolve by letting the dollar lose value rather than by paying the debt down (35:41). It also shapes how he discusses assassinated presidents, a subject he returns to with the same close attention he gives his own firm's founding. He notes that Thomas Jefferson privately doubted the United States would survive even twenty years (33:37), and argues that John F. Kennedy would likely have survived Dallas had the Secret Service kept the motorcade route out of the newspapers and left the bubble top on the presidential car (43:11). The thread running through both observations is the same one running through Rubenstein's account of his own career: nothing that survives, a country or a company, does so by accident, and nothing that survives ever stops requiring the person in charge to worry that it might not.