As co-founder of The Carlyle Group, David Rubenstein built one of the most influential and innovative private equity shops in the world, pioneering the PE revolution that has come to reshape American business over the last quarter century.
Throughout it all, he’s remained a devout student of history—reading nearly 100 books a year—and of practical leadership, hiring and firing hundreds of high-level executives over the years. The result is a deep stockpile of knowledge about what works—and what doesn’t—when it comes to the craft of getting complex things accomplished.
“I’ve always been interested in how people became leaders,” he said as we talked over Zoom recently. “I have this theory that if you’re not a good leader early on, maybe you can be a leader later on because I was trying to rationalize why I wasn’t a leader when I was young and now, maybe I’m more of a leader than I was then.”
This passion led him to write two books—based on a long-running interview series he’d done for The Library of Congress and later, Bloomberg Television. In The American Story: Conversations with Master Historians, which came out last year, Rubenstein talked with a shelf full of the most famous biographers alive, including David McCullough, Ron Chernow, Walter Isaacson, Doris Kearns Goodwin, Taylor Branch and Robert Caro, examining the lives of essential Americans like Ben Franklin, John Adams, Martin Luther King, Jr., Lyndon Johnson and many more.
On September 1, he’ll publish How to Lead: Wisdom from the World’s Greatest CEOs, Founders, and Game Changers, a series of meaty sit-downs with everyone from Jeff Bezos, Bill Gates and Tim Cook to Oprah Winfrey, Phil Knight and Coach K, all exploring the same essential questions: How did you do it? How do you work? How much was luck? How much was skill?
We decided to turn the tables on Rubenstein, who will keynote our first annual summit for PE portco CEOs in December, and ask him those same, first-principle questions: What makes a good leader? A bad one? And finally, above all else: How do you lead? What follows was edited for length and clarity.
You’ve written two books in a row on leadership. What did you learn about it? Is it a craft? Is it a calling? What is it?
I think that you learn these skills. You may have certain skills that might be good. You might be a good talker or something. But you learn how to be a leader.
Leaders have a willingness to be a leader. You have to have integrity. You have to have, in my view, humility. Obviously, there are always exceptions, like President Trump, but you have to have some humility. You have to have the ability to persuade people.
You have to have the ability to fail and learn how to fail. Most of the people that you write about [for Chief Executive] are people that have failed somewhere. They’ve been persistent to get where they are. They figured out how to make themselves an expert in one way.
Once you’re an expert in one thing, other things flow to you and then people say, “Well, you’re good at A. I’ll see if you’re good at B. If you’re good at B, I’ll see if you’re good at C,” and you get more and more power that way. You’d be surprised how power rises relatively quickly and word spreads that this person is really good at something. People start giving him or her responsibility.
Are there practices—not traits or personalities, but practices—that the great leaders you’ve studied share?
[Former U.S. Secretary of State] Jim Baker has a phrase that his father drilled into him that I think is pretty good. “Prior preparation prevents poor performance.” Jim Baker, I always noticed when he was with us [at The Carlyle Group] was always prepared, always made sure he knew what he was talking about—and he did that in government. Good CEOs prepare. They know what they’re talking about. Good CEOs and good leaders are intellectually curious.
One thing that Oprah said: She’s not such a great interviewer, but she’s a great listener. The FBI, when they come to do a background check on somebody with me, they have their ten questions. If after the third question I say, “This person’s an axe murderer,” they go on to the fourth question. They don’t actually say, “Well, tell me more about why he’s an axe murderer.” They just don’t listen.
Listening, intellectual curiosity, preparation—and hard work. Nobody really wants to admit it, but the truth is nobody became rich, nobody became famous, nobody became successful 9-to-5, five days a week. You have to really be working nights or weekends and you just have to make yourself so dedicated to what you’re building and doing that you really are, for a long time, blocking other things out.
The key to everything is loving what you do. If you don’t love it, you won’t get very far. As I say in the book, nobody won a Nobel Prize hating what they do.
In your conversation with Oprah, she thought that her power came from the fact that deep inside herself, she knows herself to be no different than her audience.
It’s my observation that the greatest leaders are people that are humble because they recognize they had a lot of luck and if one thing had gone another way, they could be the average Joe again. Leaders that brag about how great they are recognize that they’re not that great and they feel they have to brag about it because otherwise, nobody will tell them how great they are. You can think of somebody like that.
In Oprah’s case, I think she’s always pinching herself saying, “Hey, I was basically born with nothing.” I mean, she had an outhouse, no electricity, abandoned by her mother, basically ignored by her father for a long time, and then she winds up in this incredible position.
One of my favorite takeaways from How to Lead was from former PepsiCo CEO Indra Nooyi. She sends notes to the parents of her direct reports.
Yes, Indra Nooyi developed a habit of writing little kind-of report cards to the parents of her senior employees.
She would write a letter to the parent saying, “Your son is doing a very good job or your daughter’s done a wonderful job. Here’s what they have done well.” There’s nothing that’s going to endear a parent to a CEO more than getting a letter that’s favorable, but also, she found, endeared the employee as well because if your employee is hearing from his mother that the CEO is great, you might think that the CEO is really good.
So, if my boss was sending letters to my mother saying, “Hey, David’s great,” what am I going to do? Say, “I don’t like the CEO?” I’m going to like them even more, of course. It was a good technique.
You’ve hired a lot of CEOs at your portfolio companies over the years. What did you learn about what made a great CEO and what didn’t make a great CEO?
The ones that are good at running buyout portfolio companies are ones that recognize that the goal is not to build the next Microsoft. It’s to basically make the company better over a three- to five-year period of time. Hopefully, it will be better after that as well, but at some point, the investors want to get an exit and therefore, they have to recognize you have to have some short-term goals as well.
Also, they have to recognize who the owners are. If you’re the CEO of a portfolio company and you think it’s your company, you’re not going to survive that long. In my industry, there are good-time CEOs and bad-time CEOs. Good-time CEOs are when the momentum is going this way, they’re doing pretty well. When it goes that way, they’re not able to adapt. Some people are really good at making cost cuts and doing things when it’s going down.
In terms of managers and CEOs, there are two CEOs who I would say of the last 25 years as pure managers were widely recognized as being among the best at the time, maybe some have a different view now. Jack Welch and the person who was in our firm for a long time, Lou Gerstner.
They really had command of the facts. They knew what the figures were. Lou Gerstner always said, “If you’re going to be a good CEO, you have to know your facts and figures of the companies you’re overseeing. You have to really make sure you know the numbers. If you don’t know the numbers, you really can’t be effective,” and he was very good at that.
So much of what we preach at Chief Executive is really about managing for the long-term, building something great. But in PE, yes and no, right?
It’s my view, obviously biased, that the advent of PE in the United States over the last 25 years or so has actually made companies more efficient. Companies that are public or are not private equity-related just because people recognize the techniques of adding value, cutting cost, being more efficient, all those kinds of things, I think that’s helped our companies and I think that’s why the United States has been relatively thinking a better-run country.
Think about the 1950s. The way these companies were run, they were run relatively poorly compared to the way they’re run now. They weren’t really growth engines. The boards were all white male. There was no diversity. There was no concern about social issues. It’s a much different environment than it was.
But what private equity has done is to say, “Yes, we care about the long-term, but the long-term is three to five years.” Now, could the long-term be 20 years? Well, show me a CEO that cares about something over a 20-year horizon. I suspect you’ll see a CEO who’s not going to be there that long.
Clearly, there are CEOs like Warren Buffett that have long horizons, but they have to make annual numbers. At some point, if you say, “I am going to build something over the next 20 years that’s going to be great. The next 10 years are going to be no good,” I don’t think you can survive.
Now, one person that did that that did survive because he was an owner was Jeff Bezos. Jeff Bezos had the last laugh because he was building market share when nobody really understood what he was quite doing.
You’ve looked at all kinds of leaders: civic, military, business. What can those different disciplines learn from each other?
There are some common things, [especially] making sure you’re explaining what you’re doing in a way that the people who are following you can understand and want to pursue what you’re doing with you, to make sure that they have a sense that their lives are going to be better if they follow you. You don’t want people to say, “Hey, I’m going to follow you, but I know I’m going to die in combat by following you.”
You want people to think that if they follow you in business or culture that they’re going to do well and they’re going to have a happier life and a more successful life. So, you want to have people to think that you really know more than they know about where you’re going and where they should be going.
What have you learned about leaders in crisis periods? What’s your advice from what you’ve learned about leadership in these moments?
When I wrote the book initially, I had like 12 leadership traits that were my observation and I added a 13th at the end, which was rising to the occasion, which is to say you might have all the other skills, but do you rise to the occasion of a crisis and really become much more of a leader when you’re in a crisis situation? That’s when leaders are really tested and clearly, in the Covid crisis, leaders have been tested.
What you find in terms of most leaders in times of crisis is they get a lot of solace out of the people closest to them. They spend more time with them. CEOs are now spending time at home with their kids and their spouses and even if they’re not married or they don’t have kids, they usually have somebody that plays the role in effect of a spouse or a child, or some close familial relationship, so that they get a real comfort in talking to them, letting their hair down with them.
I think it’s very difficult to run a company during the day and at night have nobody around, particularly in a crisis. You’re completely isolated and I think the sense of loneliness is one that would overwhelm people.
At the end of the day, the book is called How to Lead. So, how do you lead? What’s the essence of it?
You lead by wanting to lead, by preparing to lead by having made a mistake, by persisting, but also, by having a vision of where you want to go to take people certain places. You have a drive. You can’t be a leader with no drive and no vision. You can’t take somebody somewhere if you have no vision of where you’re going.