“We have a system today in the United States where 45% of Americans don’t pay any income tax…You have to have skin in the game,” Schwarzman told Bloomberg.
This concept of skin in the game is an interesting one. But really, for the poor and the working poor today, how can you pay taxes or have skin in the game when you’re barely able to put food on the table? How can you have skin in the game when you can’t find a job that enables you to support your family?
If having skin in the game means you’re more apt to vote and contribute to society then I’m all for that. However, the poor could just as easily say why do the rich have to have so MUCH skin in the game? How come the rich feel like they need ten cars or three different houses or life sized portraits of themselves at lavish parties? Sure, they’ve worked hard and earned all the money they’ve made and can do what they want with it. Yet, how come the rich Wall Street geniuses have to use so much leverage only to come crawling for a bailout when their risky bets go bad? How about we meet half way on this one Mr. Schwarzman.
After hearing this quote about skin in the game I was reminded of this wonderful passage in the book The Quants that features Mr. Schwarzman. This is from 2007, when things were all wonderful on Wall Street – right before the epic collapse:
Stephen Schwarzman, cofounder and chief executive of private equity powerhouse Blackstone Group, threw himself a lavish sixtieth-birthday bash in midtown Manhattan. Blackstone had just completed its $39 billion buyout of Equity Office Properties, the largest leveraged buyout in history, and Schwarzman was in a festive mood. The celebrity studded, paparazzi think blowout smacked of the grandiose robber baron excesses of the Gilded Age, and it marked the crest of a decade long boom of vast riches on Wall Street – though few knew it at the time.
The location was the Seventh Regiment Armory on Park Avenue, New York police closed part of the fabled boulevard for the event. The five-foot six Schwarzman didn’t need to travel far for the festivities. The elite gathering was held near his thirty five-room Park Avenue co-op, once owned by oil tycoon John D. Rockefeller. He’d reportedly paid $37 million for the spacious pad in May 2003. (Schwarzman had also purchased a home in the Hamptons on Long Island, previously owned by the Vanderbilts, for $34 million, and a thirteen thousand square foot mansion in Florida called Four Winds, originally built for the financial advisor E.F. Hutton in 1937, which ran $21 million. He later decided the house was too small and had it wrecked and reconstructed from scratch.)
The guest list at Schwarzman’s fete included Colin Powell and New York mayor Michael Bloomberg, along with Barbara Walters and Donald Trump. Upon entering the orchid festooned armory to a march played by a brass band, ushered by smiling children in military grab, visitors were treated to a full-length portrait of their host by the British painter Andrew Festing, president of the Royal Society of Portrait Painters. The dinner included lobster, filet mignon, and baked Alaska, topped off with potables such as 2004 Louis Jadot Chassagne-Montrachet. Comedian Martin Short emceed. Rod Stewart performed. Patti LaBelle and the Abyssinian Baptist Church choir sang Schwarzman’s praises, along with “Happy Birthday.” On its cover, Fortune magazine declared Schwarzman “Wall Street’s Man of the Moment.”
High society tongues were still wagging about the party a few months later, when Schwarzman gave himself another eye pooping gift. In June, Blackstone raised $4.6 billion in an IPO that valued the company’s stock at $31 a share. Schwarzman, who was known to shell out $3,000 a weekend on meals, included $400 on stone crabs ($40 per claw), personally pocketed nearly $1 billion. At the time of the offering, his stake in the firm was valued at $7.8 billion.
Yeah, that’s a lot of the skin in the game there for one party. Perhaps Schwarzman shouldn’t show so much skin.