Going Private With Carlyle CEO Harvey Schwartz | Bullish

Key Concepts

Insecurity, randomness of success, unconventional career paths in finance, private markets, shift of power from banks to private markets, mental illness stigma, resilience, second chances, private credit, systemic risk, evolution of private capital, Carlyle Group, alternative investments.

Harvey Schwartz's Early Life and Career

• Early Challenges: Harvey Schwartz describes his childhood as difficult, marked by his mother's bipolar disorder and his father's schizophrenia. Both parents experienced multiple suicide attempts. He notes the significant stigma around mental illness during that time, making it difficult to discuss his family situation.
  • "The rule in the family was you could not talk about the family."
• Academic Struggles: Schwartz admits to being a "tragically bad high school student," nearly failing and having to leave to California to graduate. He received all F's on his interim report card.
  • Example: One teacher told him, despite the F, that he could one day head the math department at MIT.
• Turning Point: He credits a family in California with providing structure and support, enabling him to graduate.
• College Rejection and Second Chance: Initially rejected by Rutgers University, he was admitted after an alumna intervened, highlighting the role of chance and advocacy in his life.
• Early Career Struggles: After college, Schwartz faced financial difficulties, working multiple jobs, including at a car wash and as a bartender, before finding a stable position at Citibank.
• Goldman Sachs and Rise to Leadership: He joined Goldman Sachs in 1997 and rapidly advanced, eventually becoming a contender for the CEO position. He emphasizes the value of diverse experiences and opportunities he was given.

The Shift to Private Markets and Carlyle

• Move to Carlyle: Schwartz's decision to become CEO of Carlyle was driven by the significant growth and potential of private markets.
• Private vs. Public Markets: He explains that companies are increasingly choosing private capital over public markets due to its efficiency and flexibility. The number of public companies has decreased significantly since 2000.
  • Statistic: The number of public companies has decreased by approximately half from 2000 to 2025.
• Carlyle's Position: When Schwartz joined, Carlyle was the smallest of the big five alternative investment firms and needed realignment.

Private Credit: Growth, Risks, and Evolution

• Rise of Private Credit: The Great Financial Crisis and subsequent regulations (Dodd-Frank Act) led to banks reducing risk and lending, creating an opportunity for private credit firms to offer loans to riskier businesses.
• Private Credit Explained: Private credit is presented as a customized lending option, bypassing traditional banks and public exchanges.
  • Analogy: Compared to a Wagyu steak made to order, contrasting with the "burger" of traditional bank loans and the "buffet" of junk bonds.
• Industry Growth: Private credit has experienced massive growth, tripling in value from 2015 to 2025.
  • Statistics: Grew from $517 billion in assets in 2015 to over $1.7 trillion in 2025, with a projected 50% increase in the next four years.
• Systemic Risks: Concerns are raised about potential systemic risks associated with the rapid growth of private credit, including rising interest rates, potential defaults, and the lack of transparency.
• Regulatory Concerns: Worries about a "shadow banking system" are mentioned, where activities that caused problems in traditional banking are now happening outside the regulated system.
• Accessibility and Future Evolution: The discussion touches on the potential for making private credit investments more accessible to a broader range of investors, including through ETFs and 401(k)s.
• Carlyle's Strategy: Under Schwartz, Carlyle has increased its focus on private credit, which now constitutes over 40% of its business.

Schwartz's Vision and Legacy

• Future of Private Capital: Schwartz believes that private capital is still in its early stages and will continue to grow due to increasing demand for infrastructure, energy, and defense.
• Optimism: He expresses optimism about the future of the industry and Carlyle's role in providing capital.
• Personal Impact: The interviewer highlights Schwartz's unconventional path and human story, suggesting that his experiences inform his leadership and perspective on the industry.

Synthesis/Conclusion

The interview with Harvey Schwartz reveals a non-traditional path to the top of the finance world, marked by personal challenges and a willingness to embrace change. His story underscores the growing importance of private markets and the potential risks and opportunities associated with the rise of private credit. Schwartz's leadership at Carlyle reflects a broader trend of power shifting from traditional banks to alternative investment firms, and his vision emphasizes the continued evolution and expansion of private capital in the global economy. The interview also highlights the importance of resilience, adaptability, and recognizing the role of chance in achieving success.