Jonathan Gray, C’92, W’92, joined Blackstone’s mergers and acquisitions and private equity group straight out of Wharton and the College of Arts and Sciences in 1992. Almost 26 years later, in February 2018, he was named President and Chief Operating Officer. He is a rumored successor to founding CEO and financial industry icon, Stephen Schwarzman. The Blackstone Group (NYSE: BX) is an American multinational private equity, alternative asset management and financial services firm that today has over $450 billion under management. But it had just about $1 billion when Jonathan joined the founding team, making the trip from Philadelphia to New York.

Along the way, he married his college sweetheart, raised a beautiful family and became a leading philanthropist. “Luck has been a core competency for me” is how he began our conversation, expressing humility and continuous gratitude for the different turns his life has taken.

It’s not every day that one speaks with someone in control of over $450 billion. So, to prepare, I phoned a friend who knows Jonathan Gray, and he described him as uniquely nice and very successful at the same time.

“Call me Jon,” he said when we began our conversation.

What did you want to be when you grew up?

My dream was to be a professional athlete playing for Chicago. In high school, I played basketball. We were crazy, rabid Cubs, Bears and Bulls fans, growing up. I went to, I think, almost every Chicago Bears home game from 1975 to 1988 with my brother and dad who had season tickets.

In your award acceptance speech, you said that you entered the university thinking you might want to write for the New York Times. How did you get from the College of Arts and Sciences and the New York Times to Wharton and Blackstone?

I loved buying stocks, starting from around the time I got a few stocks for my bar mitzvah (like McDonald’s and Coca-Cola). I’d always had an interest in the markets. At Penn, I was in Sammy (Sigma Alpha Mu), where a bunch of my fraternity brothers were in Wharton, so I thought I could do that, too!

Blackstone, at the time, was about 90 people, and we had one private equity fund that was around $800 million under management. I was also a bit of a political junkie, and I knew several Blackstone executives had served in the White House. Pete Peterson, one of the founders (who passed away earlier this year) had been Commerce Secretary under President Nixon. Roger Altman had been Assistant Treasury Secretary under President Carter, and David Stockman was President Reagan’s Budget Director. And there were other notable people, such as Steve
Schwarzman who had run M&A at Lehman Brothers.

So, the firm wasn’t well-known, but it had very prestigious people, and people were just starting to talk about this sort of private equity business — it was called the LBO [leveraged buyout] business at the time, and Blackstone was the only place that hired kids right out of school.

You began at Blackstone in M&A, but you are best known for building the Blackstone real estate platform into the largest in the world. How did you make the transition to real estate?

Part of the reason was, when Blackstone offered me the opportunity to switch over to real estate, it seemed like a way for me not to go back to business school. I didn’t know anything about real estate, but I liked principal investing (investing Blackstone’s own money as opposed to raising capital from investors). I was doing M&A the first year, as well as private equity, which I really liked because we would analyze and then decide whether or not to buy the company. If it was a portfolio company, we’d decide whether to invest in the business or whether to sell the business. Whereas, with the M&A stuff, I found that I would work all weekend on some pitch book, stay up all night, and then probably wouldn’t even get to go to the meeting.

Your breakout success included moving beyond buying divisions of companies to buying whole companies. Is that correct?

In 2004, there had never been a takeover that was done with public real estate debt. The CMBS [commercial mortgage-backed security] market had exploded, and you could borrow so much more than you could corporately — which made sense because real estate is a hard asset. But no one had ever been able to take that and bring it to a corporate buyout. We convinced Bear Stearns and Bank of America to provide the financing, and we bought Extended Stay America. That was a $3.5 billion deal at the time, and we brought in our private equity fund because it was so large.

Then we started looking at Prime Hospitality, which had a bunch of different divisions in hotels, some high-end hotels, some brands and other stuff. However, there was a bunch of it that we didn’t want. We bought the company and then quickly started disassembling it. So, we figured out — wow, there was a fruit basket concept, where if we bought a whole company, actually, the sum of the parts was greater than the whole. We also figured out with these businesses that, sometimes, they weren’t necessarily managed particularly well. Like classic private equity, there were things we could do to operate and invest capital and so forth. Between 2004 and 2007, we kept doing more and more, ultimately leading to buying Equity Office at $39 billion and Hilton at $26 billion in 2007.

Once you established this investment strategy, what was it about you and Blackstone versus other firms that enabled you to expand it?

Unlike other people who were doing this, many of whom were following us, we were pretty disciplined. So, we were selling down a lot — something like $60 billion of real estate prior to the crash, and we were really focused on the quality of the things we were buying. There were two key elements of the business. The first was turning it from one-off individual assets or small portfolios into corporate real estate deals, super-sizing the business in the 2004 to 2007 period. The second was, in the post-crisis period when people either didn’t have capital or didn’t have conviction, and a lot of folks froze, we believed that there was actually good opportunity, and so we started buying back debt on our own properties inexpensively. We started buying all sorts of assets — U.S. housing, London office buildings, Australian shopping malls.

We really began expanding our footprint. We grew our small European business; we expanded into Asia; we went beyond real estate private equity into core real estate and more-stabilized, long-term-hold real estate; we went into real estate debt, mezzanine debt, liquid debt and mortgage debt. While most people were waiting for the “all clear” signals, we expanded the business to such a point that, today, we have $120 billion of equity capital under management in that business and became, by far, the largest real estate player globally.

In February 2018, you were elevated to the role of President and COO. How did you prepare for this role, and how would you describe what you do now?

I went on the Management Committee about 11 years ago and on the Blackstone Board of Directors six years ago. Two or three years ago, they started training me to think about having more responsibility. So when the announcement finally came at the beginning of this year, nobody was surprised, and I was as welltrained as one could be to take on the new role. Now, my responsibility is to help oversee the firm, to oversee all the business units across the firm, and to help tell our stories to the public markets — since, we’re in the press all the time. In addition, I’m thinking about new strategic initiatives for the firm, thinking about the big limited partners we have.

I’m also thinking about how we deploy capital, so I sit on investment committees across the firm. That’s our main job — raising capital, deploying it and delivering great returns. I’m also involved in people issues, including compensation. So, my job is to make sure the trains run on time at Blackstone.

You described growing the global footprint of the Blackstone business after the Great Recession. In your new role, do you find that you travel internationally more than you did before?

I think I travel differently. I’ll camp out for a longer period of time. Before, I might go to London for a day, and go and see properties or operating partners of ours. I’ve probably been to London five or six times this year, but on two of the visits, I camped out for four or five days because I spent a lot of time with our people. So, I’ve been to Europe a bunch, and I’ve been to Asia three times this year. I think you have to have a real passion for this. Some would say it’s not for the faint of heart.

What makes going to work every day fun for you?

One of the things that make this job so much fun is the breadth of things I get to see and talk about. It could be U.S. infrastructure, or Japanese residential, or energy assets in Europe. What is consistent is the high-quality people; a disciplined investment process; and in almost every market, trying to be a leader in scale. I love the firm and the people here.

The award you received is about leadership, and what’s clear throughout your comments is that you enjoy leading people.

You know, it’s funny, but I do! I have a policy that, before I go to sleep at night, I clear out my email. I get hundreds of emails every day. I want people to know that I got their note, and I respond, even with a short “Great, thanks.” When you do that, it creates a level of responsiveness that people feel. If you treat outside parties in a positive way — you play long ball in your dealings with other people, you always honor what you say you’re going to do — then the people you work with and who work for you see that, and you can help set the tone of a business. You can get people excited and energized.

I love seeing talent grow, and in my real estate business, we have some amazing talent around the world. It makes me so proud to have played a part in that. If you enjoy leadership, and you enjoy investing, there couldn’t be a better job than the one I have.

Who are some outstanding leaders who have impacted your life?

Steve Schwarzman, our CEO, is so passionate about excellence. Most of us can look 3 feet in front of us; Steve is looking 3 miles ahead. When you work with somebody who has that kind of vision — that you can do more, and that you should always be striving for excellence — that’s very powerful.

Pete Peterson was a great people person. He showed the power of building relationships over a lifetime. Nobody had a better Rolodex in the world in business or politics. You’d go into Pete’s office with something to do, and he would do it right then — he’d make a call. He could call almost anybody in the world.

John Schreiber co-founded the real estate business with Pete and Steve. John is the father of eight kids. He is the most lowkey, humble person. He was so diligent about the numbers and reading all the material. He cared about training young people, including me, on how to do things. He never lost patience. He just taught us how to be thoughtful investors.

Tony James, my predecessor in this role, is so analytically capable. He could look through a deal and, in an instant, isolate the key issues and risks to a business or real estate asset and would always press you on the downside.

What have you learned about being a philanthropist?

There’s no better feeling than giving. It’s the ability to impact somebody’s life — to give somebody opportunity — in education and healthcare, and to make advances in cancer. And then the appreciation that people have for that — that feeling. I’ve described the philanthropy that Mindy and I do as the best investments we’ve made.

How would you like to be remembered one day?

Somebody who worked hard and cared a lot about what he did. But who also cared about the people he did it with, and who recognized the importance of giving back.