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David Rubenstein: the dollar will go down in value
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Key Moments
The US dollar is projected to decline in value due to the massive federal debt, necessitating devaluation to manage repayment, which will impact future generations.
Key Insights
David Rubenstein started Carlyle with $5 million in 1987 and now manages $500 billion, demonstrating exceptional growth in the private equity sector.
Rubenstein missed out on a $14 billion opportunity by declining 20% of Amazon's stock when he first met Jeff Bezos.
The average entrepreneur starts their first company between ages 28 and 37; by age 37, if not started, it's unlikely to ever happen.
Rubenstein emphasizes the importance of self-confidence in entrepreneurs, noting that even successful figures like Bill Gates and Mark Zuckerberg likely didn't initially envision the scale of their companies.
Rubenstein has acquired significant historical documents, including the Magna Carta and the Emancipation Proclamation, to promote American history education.
The US currently has $40 trillion in federal debt, which Rubenstein believes will necessitate devaluation of the dollar for repayment, impacting future generations.
From $5 Million to $500 Billion: The Genesis of Carlyle
David Rubenstein recounts the founding of The Carlyle Group, which began in 1987 with $5 million in capital from four investors. At 37, Rubenstein felt compelled to start the firm, driven by the entrepreneurial window he believed was closing. He still experiences the constant anxiety of an entrepreneur, acknowledging that 99.9% of US companies fail within five years. This fear, however, fuels a relentless drive. Rubenstein famously turned down an offer of 20% of Amazon's stock from Jeff Bezos, a decision he later regretted, estimating its value at $14 billion. This highlights the unpredictable nature of early-stage investments and the immense potential that can be missed. The pressure to provide was significant, especially as he was married and embarking on this venture. The precariousness of starting a company, where one might not know if they can pay rent the next month, is a shared experience with other entrepreneurs like Sam Parr. Rubenstein's early career in government, as a deputy domestic policy advisor to President Carter at age 27, provided invaluable experience in understanding policy and navigating complex systems, even if he felt underqualified initially. This early exposure to power and policy-making likely shaped his later financial acumen.
The entrepreneur's mindset: constant anxiety and staggering self-confidence
Rubenstein continues to operate with the mindset of an entrepreneur, constantly anticipating potential problems. He notes that 99.9% of companies started in the US do not survive five years, a statistic that underscores the inherent risks. Despite building a massive firm, he confesses to never feeling entirely comfortable or safe. This perpetual worry, he suggests, is characteristic of entrepreneurs who build successful companies, requiring staggering self-confidence to navigate the inherent uncertainties. He contrasts himself with some other entrepreneurs, admitting he didn't possess the same level of self-belief as figures like Bill Gates or Jeff Bezos but compensated by recruiting individuals who possessed greater expertise and confidence than he did.
Recruiting power players to build credibility
A key strategy for Carlyle's growth was the recruitment of high-profile individuals who lent credibility and opened doors. After Ronald Reagan's presidency ended, Rubenstein hired Frank Carlucci, former Secretary of Defense, who subsequently joined numerous corporate boards. Later, Jim Baker, former Secretary of State, Treasury, and White House Chief of Staff, became a partner. This was followed by the recruitment of Dick Darman, former head of OMB, George H.W. Bush, and former UK Prime Minister John Major. Rubenstein humorously noted that while his own name might not carry as much weight in the Middle East, associating with figures like Jim Baker significantly enhanced their fundraising efforts. These individuals provided access and validation that a startup firm desperately needed, especially when dealing with complex sectors like aerospace and defense.
The long road to financial stability and the value of humility
Rubenstein admits he only recently began to feel financially stable, perhaps 'yesterday.' He recounts the early days of Carlyle when they operated on a deal-by-deal basis without a large fund, making payroll a constant concern. He recalls a particularly dire situation where they spent all their cash trying to acquire a company out of bankruptcy, only to lose the bid, leaving them with no funds to meet payroll. Despite this, they eventually secured the company and achieved a successful outcome. The firm's valuation grew significantly over time, reaching $2 billion when CalPERS bought a stake around 2009, and later $20 billion with an investment from Mubadala. Rubenstein, despite his immense success, views himself as being from a blue-collar background in Baltimore, emphasizing that neither of his parents graduated high school. He maintains a down-to-earth persona, still getting his hair cut for $15 and wearing suits he's owned for a decade, a stark contrast to the stereotypical lavish lifestyle of the ultra-wealthy.
Ambition, opportunity, and the elusive nature of prediction
Rubenstein shared his perspective on ambition, noting that grand expectations in the beginning can sometimes be self-deceptive. He referenced figures like Bill Gates and Mark Zuckerberg, suggesting they likely didn't foresee the monumental scale of their eventual companies. He also recounted the story of meeting Jeff Bezos early on, where his firm declined to invest in what seemed like a niche online bookstore. The offer for 20-25% of the company was too illiquid for their taste. They eventually rented a bibliography of books from his firm, and Bezos's own self-confidence and drive were evident, even as Rubenstein admits he couldn't judge Bezos's computer skills at the time. Ultimately, they acquired some stock but sold it too early, missing out on billions. This illustrates the difficulty in predicting who will become a 'big shot' or a 'man of the people,' as demonstrated by the trajectory of figures like Glenn Youngkin, whom Rubenstein hired out of business school and who later became governor.
Preserving history through document acquisition and restoration
Rubenstein has made a significant effort to collect and display historical American documents, including the Magna Carta, the Emancipation Proclamation, and early copies of the Declaration of Independence. His motivation is to educate the public about American history, believing that original documents and restored historical sites like the Washington Monument can inspire greater interest. He describes the competitive nature of acquiring these artifacts, noting how art buyers are increasingly entering the market for historical documents, driving up prices. The Declaration of Independence, in particular, has seen a surge in interest due to the upcoming semiquincentennial. Rubenstein also highlighted the Founders' foresight in creating a self-amending document and noted that they likely didn't anticipate the reverence and financial value attached to these documents centuries later. He referenced Thomas Jefferson's initial doubts about the nation's long-term survival, contrasting it with its current global superpower status.
The looming threat of federal debt and dollar devaluation
A major concern for Rubenstein is the staggering $40 trillion in US federal debt. He believes that the nation's ability to repay this debt is virtually non-existent without resorting to devaluation. Consequently, he predicts that the dollar will 'go down in value almost certainly.' This looming devaluation raises questions about the future economic landscape for younger generations. He articulates this worry as a fundamental parental concern: will the world be better or more difficult for his children than it was for him? This extends to ensuring they receive the appropriate education and are equipped to handle a more complicated world. His extensive reading and interviews, which he pursues as an 'anti-Alzheimer's device,' are part of his effort to stay sharp and understand the complexities of the world his children will inherit.
Mentioned in This Episode
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Common Questions
David Rubenstein worked in the White House as the deputy domestic policy adviser for President Carter and also practiced law before starting his investment firm.
Topics
Mentioned in this video
Co-founded by David Rubenstein, it has grown to manage $500 billion. Rubenstein discusses its founding, early challenges, and growth.
Mentioned as a private equity firm that, like Carlyle, faced significant challenges in raising its first fund.
Abu Dhabi's investment arm, which valued The Carlyle Group at $20 billion when it purchased a stake.
A senior officer from Marriott was hired by Rubenstein as one of the early employees of The Carlyle Group.
Found and resurfaced Rubenstein's early success database, making it available for free download.
A long-distance telephone company from which Rubenstein hired its former CFO, Bill Conway.
Mentioned as a major private equity firm that, like Carlyle, faced significant challenges in raising its first fund.
Founded by Ray Dalio, mentioned in comparison to early ambitions of other entrepreneurs.
Made a strategic error by not owning the operating system for their PC, allowing Microsoft to profit significantly.
One of the historic documents collected and displayed by David Rubenstein.
Freed slaves, it is among the historic documents collected by David Rubenstein.
Rubenstein purchased a rare copy in the United States and put it on permanent display at the National Archives.
Rubenstein owns rare copies and discusses its historical context and preservation.
Rubenstein has been involved in fixing up historic buildings, including this one, to promote interest in American history.
Rubenstein has been involved in fixing up historic buildings, including this one, to promote interest in American history.
Rubenstein hosted friends from high school there for a reunion.
Rubenstein has been involved in fixing up historic buildings, including this one, to promote interest in American history.
Author of 'American Scoundrel' about Roy Cohn and previously of a Pulitzer Prize-winning book on Robert Oppenheimer.
Mentioned as an example of an entrepreneur who started young, with Rubenstein recalling an opportunity to invest in Facebook when it was a Harvard dating site.
Hired as CFO of MCI, became a co-CEO and partner with Rubenstein at The Carlyle Group for over 30 years.
Starred in the movie 'Broadcast News', which filmed in the initial office space of The Carlyle Group.
Former Secretary of Defense who joined The Carlyle Group as an advisor, helping to open doors for the firm.
Mentioned as an example of a young entrepreneur who built a massive company. Also referenced in a story about not having a radio in his car to avoid distractions.
Autobiography cited, mentioning Blackstone's difficulty in raising its first fund, with 97% of people turning them down.
Founder of Bridgewater Associates, discussed his early, modest financial goals for his company.
Former President of the United States who served as an advisor to The Carlyle Group.
Worked at The Carlyle Group for 25 years before being elected Governor of Virginia. Rubenstein initially doubted his political prospects.
Was 33 years old during the Declaration of Independence and did not believe the country would survive more than 20 years.
Author of an astounding, Pulitzer Prize-winning book on J. Edgar Hoover.
A historian interviewed by Rubenstein for his program at the Library of Congress. She believes in falling in love with her subjects when writing.
Author of 'The Power Broker' and a multi-volume series on Lyndon Johnson. An exhibit was held on his work.
Author of a book from 1929 about the early 1920s, who also discussed Carnegie's philosophy on giving away money.
Mentioned in 'Manhunt' as having been invited to join Lincoln the night of the assassination; his presence might have deterred Booth.
Accompanied JFK on his trip to the West, a significant event that JFK wanted to showcase.
Co-founder of The Carlyle Group, discusses his career path, entrepreneurial journey, and views on history, finance, and leadership.
Cited for his saying, "If you want a friend in Washington, get a dog," reflecting on the transient nature of power and relationships in politics.
Former Secretary of State, Treasury, and White House Chief of Staff who became an advisor to The Carlyle Group, significantly aiding in fundraising, especially in the Middle East.
Author of a new book on the greatest sentence ever written, highlighting the long-term thinking of the Founding Fathers.
Mentioned in the context of historical periods where people felt the world might end, yet humanity persevered.
Subject of an astounding, Pulitzer Prize-winning book by Beverly Gage.
Chief Justice of the United States, interviewed by Rubenstein about the court. He initially wanted to be an American history professor.
Subject of Robert Caro's multi-volume biography. The fifth volume is highly anticipated.
Subject of the biography 'Titan'. Described as a ruthless businessman and a good father/husband.
Cited as a great leader for saving the Union and emancipating slaves with grace and humility. Subject of numerous books.
One of four US presidents assassinated, potentially the subject of a book discussed.
US president who was assassinated; his assassination is considered famous and the subject of a book.
Rubenstein recalls meeting Bezos early on and the missed opportunity to take 20% of Amazon, which he estimates would be worth $14 billion now.
Former head of OMB and protege of Jim Baker, who became an advisor to The Carlyle Group.
Former Prime Minister who served as an advisor to The Carlyle Group.
As Secretary of State in 1823, he recognized the fading of the Declaration of Independence and initiated making copies.
Subject of a book titled 'American Scoundrel' by Kai Bird, discussed by Rubenstein as an example of a subject not necessarily liked by the author.
Subject of a Pulitzer Prize-winning book by Kai Bird.
Mentioned as a favorite figure; the interviewer got married at Carnegie Hall because of his admiration for Carnegie's book.
Cited as a great leader for setting the tone for the presidency and getting the country off to a good start.
Assassin of Abraham Lincoln, discussed in the context of 'Manhunt' and how security might have prevented the act.
US president who was assassinated. Books have been written about his assassination, and the security protocols of his time are discussed.
David Rubenstein is the principal owner and expresses worry about the team making the playoffs.
The Magna Carta is on permanent display there, courtesy of David Rubenstein.
California Public Employees' Retirement System, which bought a stake in The Carlyle Group, valuing it at $2 billion in 2009.
Mentioned as a team the Baltimore Orioles are competing with for a playoff spot.
Rubenstein is an early signatory and discusses his commitment to giving away most of his wealth.
Hosts a program where Rubenstein interviews historians about American history subjects in front of members of Congress.
Discussed in the context of the assassination, with Rubenstein noting mistakes made by the Secret Service, such as allowing the motorcade route to be published and removing the bubble top from the car.
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