Transcript: I’m not sure the legacy of George W. Bush will be the legacy that he thought it would be when he took office.  No doubt the legacy will be how Iraq turns out.  No matter what George W. Bush thinks, in my view, about what his legacy will be, it will be inextricably linked to the war.  If the war is ultimately seen as a successful effort against terrorism and a successful military venture by the United States, then his legacy will be good.  If it’s seen ultimately as a disastrous effort to stop Saddam Hussein from utilizing weapons of mass destruction, and an effort to keep Al Qaeda from coming to the United States, it may be viewed differently.  If a terrorism attack occurs in the United States, it may be viewed one way.  If no terrorism attack occurs here for five years, 10 years into the future, his effort may be looked at differently.  I think the president is very much inspired by Harry Truman’s situation.  Harry Truman left Washington in 1953 when Dwight Eisenhower became president a very unpopular person.  His popularity ratings were probably 15 to 19 percent, and nobody had a big sendoff for him.  He walked to the train station essentially and went back to Missouri.  In hindsight, people think that Harry Truman was a great president.  In hindsight they think he did some very courageous things.  I think George Bush is propelled to think that the same thing might happen to him; that five years, 10 years, 15 years down the road people will say, “Well it’s a good thing that he fought the war in Iraq because of the things that developed subsequently.”  I don’t think we have that perspective today.  I think today the war is not that popular for sure, and George Bush isn’t viewed today as Harry Truman is viewed today.  But I think he views it possible . . . possibly the case that he will be viewed that way.

Recorded on: 9/13/07

Transcript: Well, I think the United States has a schizophrenic view on foreign direct investment.  We want the ability to let our companies invest anywhere around the world unfettered.  And anytime any of our countries . . . companies are not allowed to invest around the world, we yell “protectionism” and we complain that people are not being fair to our country.  On the other hand when people want to invest in this country we get upset.  The Dubai port situation was an embarrassment to our country.  When China looked at buying – through one of its oil companies – Unocal, we acted as if the Red Army was about to invade Los Angeles.  Now the truth is we try to have it both ways and we really shouldn’t.  We should encourage our companies in the United States to invest overseas.  I think that produces great . . . greater wealth for people in the United States.  I think it produces greater cooperation among countries and companies.  But I think we should be very open to foreigners investing in this country.  And I think we have to recognize that as the world is shifting its wealth away from the United States towards the Far East and the Middle East, that those sources of capital in the Far East and the Middle East are going to increasingly invest in places like the United States, and we shouldn’t view this as criminal.

Recorded on: 9/13/07

Transcript: Well there’s no doubt that a system that was invented by a limited number of middle aged white men about 200 years ago is being tested from time to time. And very few governmental systems survive for 200+ years without a lot of changes. Ours is very unique in that regard. However, as Winston Churchill once famously said about democracy – “It’s the worst system except for every other one” – the same is true probably of our own government. It may not be the best system. Maybe it’s the worst, except every other one is probably worse than ours. We have a lot of problems in our governmental system, but I don’t know of anything that’s really better. One thing that does concern me, though, is that when I came to Washington about 30 years ago, the Democrats and the Republicans, while they disagreed during the day, I think generally they were civil towards each other, and I think they recognized that each had a legitimate point of view in opposing the other side. Today the vehemence, the vituperative attitude towards each other is really, in my view, a bit out of control. And I do think that unless we can get the two parties to be more civil and to cooperate much more, I do think it’s going to be harder to govern the country under the kind of system that we currently have.

Recorded on: 9/13/08

Transcript:  I think Alan Greenspan’s view of it would probably be that we had a dramatic change in the economy when the Soviet Union and its satellites basically dissolved.  And we put onto the workforce a whole new set of workers who helped make certain products more efficiently; who helped make our own lifestyle by giving us cheaper products in some ways; and who helped with our own productivity.  Right now it’s clear that . . . that people are basically looking at the world through the economic prism of capitalism.  And capitalism has a lot of pluses and a lot of problems.  And sometimes . . . it sometimes can be very inefficient and unfair.  But I think there is now a global chase for greater wealth, and this is putting a lot of pressure on companies and countries to compete much more effectively than it did . . . than they did before.  Right now we are not in a situation where the U.S. economy can live by itself; where the European economy can live by itself; or the Asian economy can live by itself.  The economies are all interrelated, and I think if you don’t recognize that, you’re not likely to be a major force in the 21st century economy.

Recorded on: 9/13/07

Transcript:  Well, human nature in my view is very complex.  But I do think in the end most humans want roughly the same thing.  They want a good life for themselves.  They want to be happy.  They want a good life for their children and their grandchildren.  They want an appropriate amount of shelter.  They want to do something that makes their being on earth worthwhile.  In other words I think in the end, everybody wants to feel that they’ve done something on their . . . in their time on earth that was productive and that was useful.  So that everybody can say on their deathbed, “Yes, I did something productive.  I did justify my presence on the face of the earth.”

Recorded on: 9/13/07

Transcript:  Well, I do think that people who have money have an obligation to recycle their money to other people in society who are probably less fortunate.  I do think that it’s unrealistic, though, to think that anything that rich people are going to be able to do overnight is gonna transform the world.  Most of the people who live in the world are living at the poverty line or below.  And so it’s not realistic in my view that no matter how much money other people might give away, all of a sudden we’re gonna eliminate poverty.  I do believe, though, that people who have a great deal of wealth have a responsibility to society, and to themselves, and to their own children, and to their grandchildren to do something to make the world a little bit better, and to help people who are not as fortunate.  Yes.

Recorded on: 9/13/07

Transcript: Well, the United States is very different than most other countries.  We give a larger percent of our money away in the United States than other countries tend to do.  The concept of this type of philanthropy in Europe is just not as common.  The governments are expected to make these kinds of contributions.  Perhaps it’s our tax code.  Perhaps it’s our charitable nature that has left the United States in this very enviable position.  I do think that it would be a mistake for the government to take a higher percentage of our net worth and then it decides where the charitable contributions go.  Because there’s no evidence that government is better at deciding these kinds of things than the market itself.  There will always be wealthy people who give away money in ways that seem ridiculous.  There will always be money given away to pets or other kinds of things that seem strange to many others.  But in the end I don’t think we should change our laws so that we have to deal with the one or two percent of the people who are doing things with their money that seem silly in some ways.  I think by and large most of the people who have money are giving it away to productive causes.  Now who is to say that giving money to the discoverer of . . . the potential discoverer of the cure for cancer is more valuable than somebody who gives money away to the opera?  Opera is good, too, for society, so obviously there has to be some balance.  I don’t really think we should have the government really getting deeply involved in trying to decide what people should do with money that they give away.  I’m not sure that’s a good idea.

Recorded on: 9/13/07

Transcript: Well, inevitably you see how society reacts to people.  Society I think values people who have done things like giving away money; doing things that help other people.  If you lived in a society where selfishness was valued highly, then I suppose my own conduct might be different.  But I grew up in a society, and I live in a society, and I have certain values that came about as a result of that society where giving away money or doing things for other people is highly valued.  And I suspect I’d like to be respected for doing things that other people respect.  And one of those things is helping other people; giving away money; helping with scientific endeavors, those type of things.  But I’m glad that I live in a society where selfishness isn’t . . . isn’t valued all that great.  There are some societies where that is different.  But I do think that most businessmen, when they . . . if they’re very wealthy, on their deathbeds they probably wish they’d done something different with their lives in some respects, or given away money.  You know it’s often said that on your deathbed you don’t say, “Geez, I wish I’d worked a little bit harder.”  Or it’s not the case on your deathbed where you say, “Geez, I wish I was a little bit richer as I die.”  I think most people as they get to the end of their lives wish they had given away more money, or wish they had done more things for other people. In my position I travel a great deal.  I’m on a plane approximately 260 days a year, and I probably go to 50 to 60 countries a year.  And I am struck by the similarity between what we’ve learned in genomes and what we’ve . . . what I’ve observed around the world, and this is what I mean.  Ninety-nine point . . .  99 percent of everybody’s genome is roughly the same.  It’s just a small percentage that isn’t the same.  And if you talked to people all over the world, 99 percent of them are roughly the same in terms of what they want.  They want shelter.  They want a good life for their children.  They want to be able to live a happy, secure life.  Very few people are really different from that.  And just as the genome means that we’re pretty much all the same and all descended from pretty much the same person, in the end most people around the world are pretty much all the same in what they want with their lives.  And I see very little dissimilarity, no matter what countries I’m in, between what people really want for themselves, their lives, and their children’s lives.

Recorded on: 9/13/07

Question: What does China’s ascendance mean for the world order?

Transcript: Well we have to remember of course that for 15 of the last 18 centuries, China was the largest economy in the world.  In the 1700s it went down a bit, and it’s now only beginning to recover what’s regarded as its rightful position in the world.  I think we have to recognize that two-thirds of the population of the world really lives in Asia or the Asian subcontinent.  And in the end that population mass is so significant that the world’s economic wealth is gonna drift to that region.  And I think also the world’s political power will drift to that region in time.  It’s hard to believe that at the beginning of the 20th century, that the United States would have become as powerful as it ultimately became.  In the year 1900, nobody would have thought the United States would have dominated the world as it did for the latter part of the 20th century.  At the beginning of the 21st century, it’s obviously hard to predict what’s gonna happen in the year 2021 . . . or 2100.  But it’d be my belief that by the end of this century, you will see China and India as the most important countries probably in the world.

Question: How much economic influence does China have?

Transcript: Well the U.S. economy is the largest economy in the world, and it will be for at least another decade or so, perhaps two decades.  So I think China will probably pass the U.S. in maybe two decades or so.  But right now China has about $1.2 trillion in foreign reserves – the largest foreign reserve level anywhere in the world.  At some point China will begin to exercise the power that comes with that kind of foreign reserve, and they will begin to invest around the world and buy things around the world.  They won’t only buy U.S. Treasury bills where a lot of that money has gone.  And so as China begins to assert itself a bit more, I think China will have more political and economic and military power around the world.  It’s inevitable.  I think the United States has to recognize that you can’t borrow all the time and continuously have a lifestyle that you wanna have.  Right now we are about $10 trillion in debt.  In other words if you add up all the debt in the United States, about $10 trillion.  At some point we have to recognize we have to pay off that debt or reduce our lifestyle.  And when people stop buying our Treasury bills or demand much greater terms for our Treasury bills, it will begin to squeeze or lifestyle even more.  So I think the United States has lived a very, very good life, and people here in my generation have lived quite well.  But I’m worried that my children and my grandchildren will not have as nice a lifestyle, because inevitably we’re gonna be paying off debt for many years into the future.  And our ability to sustain the kind of lifestyle we want will be diminished.

Recorded on: 9/13/07

Transcript: Well the first thing you have to recognize is that anybody predicting what’s gonna happen 10 or 15 years down the road is most certainly gonna be wrong, because nobody would have predicted 10 or 15years ago the kind of things we have today.  But that said, my own view is that with globalization; with the advent of the Internet; with the advent of instant communications, the world has really become much smaller in many ways; “flat” in the words of Tom Friedman.  And as a result what you’re going to see is increasingly large population countries which no longer have technological disadvantages because they have all the technology and the knowledge that they need because it’s instantly available to them.  They will increasingly pull away from the rest of the world in terms of wealth, in terms of power.  So I think China and India will become the giants of the 21st century.  I don’t think you’ll find situations in the 21st century where a small country like England could rule a large country like . . . like India with 2,000 troops in India.  The idea that a small country can have the economic wealth, or the political power, or the military strength to control large countries I think is a thing of the past.  I think large countries by population will ultimately become large countries by wealth.  So I think the largest countries in the world will ultimately become the most powerful countries in the world – a bit of a reversal of what we’ve had.  But I think in the 21st century, you’ll see China and India becoming very, very important to the world.  And I think the United States will probably not be as significant a factor in the world at the end of the 21st century as we’ve been at the beginning of the 21st century.

Recorded on: 9/13/07

Transcript: There’s no doubt that there has become a growing concern about the income disparity in the United States.  CEOs are making incomes than ever before, and the gap between what CEOs are making and the lowest paid workers in those companies are making is increasing.  And there’s no doubt that after 30 or 40 years of a war on poverty, we still have a great deal of poverty in the United States and we are the wealthiest country in the world.  Clearly in other countries in the world, in the developing countries, emerging countries, the poverty level is far greater than even here.  I’m not sure that increasing taxes on private equity is gonna solve all these problems.  I do believe, though, that Congress needs to look at how to reform the tax code in ways that does make everything work a little bit more fairly.  For example, right now the tax code is 10,000 pages or more.  It’s virtually incomprehensible.  At our firm, the former head of the IRS is . . . is an employee, and he cannot fill out his own tax returns.  And I doubt if any former head of the IRS or current head of the IRS can fill out their own tax returns because it’s too complicated.  I think we need to simplify the system much better.  And I think with simplification would come greater equity.  That’s one of the things we should do.  But there’s no doubt that the income disparity in our country has increased, and we should do some things to deal with it as soon as we can.

Recorded on: 9/13/07

Transcript:  In 1922, the United States Congress said that there is a reason why we should encourage people to invest capital, because investing capital creates jobs and makes the economy better.  And as a result, in 1922 for the first time, the Congress said we will have a lower rate for capital gains or for capital that is invested in terms of its taxation than we do for ordinary income.  And from that point forward, it was recognized in the United States and many other countries of the world that it was an advantage to capital being invested.  It creates jobs.  It’s good for the economy.  When we invest in private equity, we are investing capital on behalf of investors.  And we are hopefully creating jobs, hopefully making companies better, and hopefully making a profit.  When we invest money on behalf of investors, the capital that we invest is treated as a capital gain when there are profits, and that is not in dispute.  The issue that is in dispute is how the professionals who invest the money get compensated.  Historically we’ve been compensated by having the profits that we get a share of the profits earned by our investors taxed as capital gains.  In other words, typically our money is other people’s money when we’re investing it.  Eighty percent of the profits goes to the investors.  It’s taxed at capital gains rates.  And 20 percent comes to the people who do the transactions.  That 20 percent is known as a “carried interest” or a “promote”.  Historically that’s been taxed at capital gains rates as well.  Of late, Congress and others have said, “Well what we’re really doing is providing a service to our investors, and that service enables us to get this 20 percent.  And for providing this service, we’re really providing ordinary working kinds of services.  And therefore that should be taxed as ordinary income at a higher rate than the capital gains rate.”  And that’s a dispute that’s now going on in Congress.  My own view is that what we do is take enormous risks.  We are like the people putting up capital.  We could lose it all.  We could get no compensation at all if we do not succeed.  And so we do take the kind of entrepreneurial risk that was envisioned in 1922 when Congress set up the capital gains system.  So my own view is that the capital gains treatment is appropriate for people in our system; but I recognize that we have to explain this to members of Congress.  This is an issue that’s relatively new to members of Congress.  It wasn’t one they’d ever focused on before.  And so it’s not as if we can sit in our offices and just say intellectually what we’re doing is the same as investing our own capital.  We have to go to members of Congress.  We have to go to the press.  We have to go to the public and explain why we’re adding value, why we deserve to be treated this way.  And I should add that this system has worked quite well.  Capital gains treatment for private equity has worked quite well in producing the kind of private equity industry we have today.  It’s made our country and economy much more efficient.  In the 1980s it was thought that Japan would have a better economy than ours by this time, and that Japan would be a bigger economy.  That didn’t happen.  Because of private equity and other forces like private equity, our economy has been transformed, and transformed into a more productive economy.  And I think before Congress changes things, they should think twice about whether they’re going to tinker with something that works quite well.  There’s an old saying: “If it’s not broke, don’t fix it.”  There’s also a concern about a law of unintended consequences.  Sometimes when you try to change a law, you get consequences you didn’t intend.  For example it was reported in the 1970s – late ‘60s, early ‘70s – that some people were paying no tax on their income.  There were about 10 people in the United States in those days who had a million dollar income and they paid no tax because of various loopholes.  Should Congress pass the AMT – so called the Alternative Minimum Tax – which made it possible . . . or impossible for people to avoid tax at all, everybody has to pay some tax.  It was designed to affect about 10 people.  It now affects about 50 million people.  The law of unintended consequences applied, which is to say Congress tried to have a fix on a limited number of people.  It didn’t quite work.  I’m afraid if Congress tries to change the tax structure here, not only will they upset a very good thing for our economy; but I think they could have an unintended consequence that might be very adverse for our economy. If the private equity industry stops doing what it does – if the private equity industry doesn’t feel that it can invest as efficiently as before – we might find that people move offshore to do investments.  We might find that the private equity industry doesn’t yield the kind of returns that pension fund investors have come to expect.  Remember pension funds are investing a lot of money in private equity.  They’re getting very good returns.  The best returns they’re getting are coming from private equity.  And so we shouldn’t do something that is working for pension funds and working for economy without fully understanding whether the consequences are really worth it.  I don’t really believe if this were done, we would pick up all that much revenue for the United States government.  And in fact I think there are many ways that the government could pick up revenue much more readily.

Recorded on: 9/13/07

Transcript:  Well, “subprime” is a wonderful word, and it was a little bit alluring to people.  If you had said “not credit worthy loans” as opposed to “subprime”, people might have been a little bit more careful.   But the word “subprime” kind of rolled off your tongue, and it didn’t sound offensive.  So people bought a lot of these subprime loans not recognizing that a lot of the people who were taking out these loans probably couldn’t honor their mortgage commitments.  The effect on our business has been twofold.  One, a lot of people who bought subprime loans were also people who bought LBO loans.  And as subprime loans went down in value and began to default, many of them didn’t have the money any longer to buy LBO loans.  In addition they began to worry that if subprime had a problem, maybe LBOs had a problem.  So many of them pulled back, and that’s had a big effect on our . . . on our industry.  A second effect has been that the whole securitization of private equity and LBO loans has been a global business.  And now loans are taken down by people all over the world.  Well as the subprime market in the United States declined and had a lot of problems, people around the world began to get nervous as well.  And even though they weren’t directly affected by subprime, they began to be worried that they might be affected by things comparable to that in their own country.  So they began to pull back in buying LBO loans as well.

Recorded on: 9/13/07

Question:  What is private equity?

Transcript: My job at Carlyle has been to largely raise the money; make sure the investors are pleased with what we . . . what we do; to help recruit people to run our various funds; and to try to think of how the firm can be positioned and grow; and how we can make the firm a leading organization in the world in which we operate.  One of my other partners spends time overseeing the investment.  Another one takes care of a lot of the administrative issues and problems that we inevitably have as an organization gets growing.  The three of us have worked together quite well.  And when you have three people working together for 20 years, that’s very unusual but also very good when you can get it to be done that way. Private equity is essentially this: It’s the effort by individuals to take a company where you might control it or you might have a stake in it; put capital into it and help improve it; make it more efficient; make it more productive; help it grow; make it more profitable; and ultimately sell your stake so that on behalf of the investors you have, you can realize a return of 25 percent to 30 percent a year.  Investors who give us money recognize that what we do is a bit risky.  And therefore they want very good rates of return for taking that risk.  Historically 25 percent to 30 percent a year return are what investors that we have are seeking.  And that’s the kind of thing we do.  But in the end private equity is all about creating new jobs, making companies better, making companies more productive, and making our economy more efficient.

Question: What company are you most proud of?

Transcript:  Well a company that’s well known to people is Hertz, for example.  Hertz is one of the largest auto rental companies in the world.  It was owned by Ford for a number of years, but Ford was preoccupied with other problems.  It didn’t put a lot of time and attention into Hertz.  And as a result Hertz was not in as strong a shape as perhaps it could have been.  With two other firms we bought Hertz a few years ago.  We did some things to improve the management.  We made it much more efficient.  We made it much more cost productive.  And as a result we took it public not long ago, and it’s become a very big success for us and for our investors.  It’s a much more efficient company and a better company than it was before.  So we’re quite proud of what we’ve done there. 

Question: What does the private market have that the public market doesn’t?

Transcript:  The way our public markets have evolved, the people who run public companies have to worry about their public shareholders.  And those shareholders want to make sure the stock prices are going up all the time.  And so they’re very attentive to what’s going on every single day.  You repeatedly have to worry about quarterly earnings and making sure your quarterly earnings go up.  You can’t take a lot of long term steps that might depress earnings because your shareholders will be upset.  So you’re in a bit of a fishbowl when you’re running a public company.  People are always complaining that you’re not doing things well enough, or efficiently enough, or fast enough.  You’re compensated too highly for what you do, and as a result many CEOs find running companies in the public domain much more complicated than it used to be.  In a private setting, you don’t have to worry about quarterly earnings.  You don’t have to worry about public shareholders.  You don’t have to worry about dealing with the press in quite the way you do with a public company.  And as a result a lot of CEOs like to run companies in a public setting because they can take two, three, four, five years to improve a company and really make it good for the long term.  And then when it does go public again, it’s in a much better position to make it do what it needs to do. Public markets have a great value.  They do enable people to get capital.  They do enable people to sell and trade shares.  And so the public markets do play an important role.  But the way our public markets have evolved, we have so much pressure on the CEOs and the companies to continually get better quarterly earnings.  And anytime you don’t meet certain quarterly earnings targets, you are penalized enormously.  It is become very dispiriting to people to work in some of these public companies and find your stock price goes down dramatically because you might have missed quarterly earnings projections by a few pennies.  So I think the public markets do play an important role; but I do think they are not quite as hospitable to companies as maybe they were 20 or 30 years ago. 

Question: How is the private equity sector doing?

Transcript:  Private equity has grown to be one of the largest industries in the United States, and one of our largest exports in the United States.  We export more foreign or private equity capital than we practically do any other product or type of capital in the United States.  It’s been a very productive industry for those people who have invested with us.  They’ve made very, very good rates of return for many, many years.  And in fact most of the large public pension funds in the United States invest in private equity.  Today the private industry has become a bit of a public equity industry because it’s so visible.  Because we own so many companies, we become so visible in the types of things we’re doing that it’s not quite so appropriate to say we’re private anymore.  And in fact many private equity firms have gone public.  But I think many people have come to resent the profits that we’ve made.  Many people have come to be resentful of the visibility we have, and perhaps the power that we have in the economy.  And as a result more and more people are beginning to look for flaws in the industry.  More and more people are beginning to challenge what we do.  More and more people are beginning to say we should be regulated or taxed differently.  So we have a whole set of different issues that we have to confront than we did years ago.  Previously we just had to talk to our investors and say, “Here’s the rates of return we’ve achieved.  Here’s how much money we’ve made for you.  Give us more money and let us continue to work on your behalf.”  Now we have to address the concerns of Congress, regulators, the press, labor unions, the environmental groups – many different types of people.  And we have to talk about not just our profits, but how many jobs we’ve created; how many taxes we’ve paid; how many community organizations we might have made charitable contributions to.  It’s a much different environment than the one we saw 20 years ago.

Recorded on: 9/13/07

Question: Why did you found Carlyle?

Transcript: Well, I can’t say that I was that prescient to say 20 years ago that I knew private equity would become what it has become.  In fact the phrase “private equity” had not been invented in 1987 when I started Carlyle.  I had been practicing law for a number of years in Washington as I had for a number of years in New York earlier before I went to the White House.  In both cases I didn’t find that I had a passion for the law, and therefore I didn’t think I would be great at it.  And I wasn’t going to be an Edward Bennett Williams or Arthur Liman or some other great lawyer.  In my view to be great in anything you have to love what you’re doing.  You have to wanna do it regardless of the compensation.  You have to wanna do it virtually to the exclusion of everything else.  And when practicing law I really didn’t find that passion.  I didn’t have that lust for the law.  And so I did look to do something else, and I began to read about some people who had served in government, or who had practiced law who had gone into the investment world.  And I thought it seemed more attractive to me; more of a chance to be a principal; more of a chance to be in control of one’s life; more of a chance not to be an advisor, but somebody making something happen.  So I started Carlyle in 1987.  We called it a merchant bank.  We only had four people.  We only had five million dollars to invest over a several year period of time.  Today, as many people know, it’s grown to be one of the largest private equity firms in the world.  We’re now managing about $75 billion, and have offices throughout the world, and companies that have over $100 billion in sales between the various companies we control.  I wouldn’t have anticipated that then and never saw myself as a great capitalist when I was in law school, or working at the White House, or as a young man.  But as events have unfolded, I have become, you know, very actively involved in the private equity world. 

Question: Staring small, growing tall.

Transcript: We were a relatively small firm based in Washington, D.C. for a number of years – 1987, 1988, 1989.  We began to get a little more attention when Frank Carlucci joined us in 1989, a former Secretary of Defense.  And we became about 25 people or so.  Former Secretary of State Jim Baker joined us in 1993.  We got more visibility as a result of that.  And subsequently former President Bush, John Major, a number of other prominent people joined us and we gained more and more visibility.  But the most important thing was that our track record turned out to be very good.  We turned out to be very good at investing.  Over now 20 years, we’ve invested a great deal of money.  It’s averaged a gross internal rate of return of about 30% a year over 20 years.  And in our early years that was . . . that was what we were doing as well.  So as people heard about this and read about us, they gave us more and more money.  The firm was a Washington based firm, and that was unusual because most firms of this type were based in New York.  By being based in Washington, we had access to government officials, and that helped us recruit people to join us.  It also made people think we knew how to invest in government-related industries a bit, and that was probably helpful.  What really transformed Carlyle from a small Washington firm to what we’ve become today was not only the fact that we were very good at what we did, and we had a good track record, and people liked to give us money to invest; but we came up with a concept which was to do many different types of private equity investing.  Historically private equity firms only did one thing.  They did either buyouts, or venture capital, or real estate.  And they typically only did it in the country in which they were based.  We came up with the idea that we could centralize fundraising, accounting, legal, tax, other things, but have discreet funds run by discreet sets of managers doing buyouts, venture capital, real estate; doing it in the United States, Asia, Europe, all over the world.  So now we have approximately 60 different funds operating around the world in a very unique way.  And it’s enabled us to grow; enabled us to have a very large investor base and become a very visible firm.

Recorded on: 9/13/07

Question: Who are you? 

Transcript: David Rubenstein. Co-founder and Managing Director of The Carlyle Group.

Question:  Where are you from?

Transcript:   Originally from Baltimore, Maryland. Baltimore was not actually that diverse a community, at least the part that I grew up in.  Baltimore had in its mortgages provisions that forbade the sellers of homes who had those mortgages to sell to people who were Jewish or who were Black.  And as a result the Jews or the Blacks in Baltimore were constrained in where they could live.  In the Jewish community in particular, they were only allowed to live in really the Northwest part of Baltimore.  So I grew up in kind of the Jewish ghetto in Northwest Baltimore.  And until I was about 13, I didn’t realize that everybody in the United States wasn’t Jewish.  Everybody I knew was Jewish.  Later in life I realized not that many people are Jewish in terms of percentages.  But it was a very cloistered environment in many ways; a very ghettoized Jewish community.  It was in a reasonably wealthy community in some parts, but a blue collar community in other parts.  Everybody in the Jewish community was not equally wealthy.  There were some, like my parents, who were blue collar workers. I think the Jewish community in Baltimore was interesting in striving to make a better life for itself and for the children that it was producing.  It was a family oriented community, and Baltimore is a very family oriented town.  At the time when I was growing up, Baltimore was the eighth largest city in the United States.  It had a population of almost a million.  It’s now gone down considerably, but it was a vibrant city then.  It was known for its athletic prowess in many sports.  It was also known for being an industrial town and for having many other major businesses based there.  Since then much of the business has basically moved away unfortunately, and the city has had a number of problems. I don’t believe anybody really knows at six, eight, 10, 15 years old what they’re really going to do.  And I think if you do know at that age, it’s very, very unusual.  And it’s very unusual if you think you’re gonna do something and you actually wind up doing it at 20, or 30, or 40, or 50.  In my case I think as a young man, I recognized that I didn’t come from wealth.  Neither of my parents were college educated or high school educated, and I was an only child.  And therefore I recognized that if I was going to make my way in the world, I would have to do it probably on my academic achievements and my abilities intellectually because I wasn’t a great athlete.  I wasn’t particularly personable.  I wasn’t handsome.  I wasn’t gonna be an actor.  I wasn’t gonna be a politician.  And as a result I tried to work very hard in school and get the best grades I could.  I recognized that to get college and graduate school training, I would need to have scholarships because my parents really couldn’t afford to send me to the best schools.  And so I tried very hard to do well in school, and that’s really . . . probably was the focus of my early years – to do well academically and try to not only please my parents, but put myself in the position where I could win some scholarships. As a young man, I thought that I was interested in politics and government.  But because I wasn’t wealthy, I wasn’t particularly charming, I wasn’t handsome, I didn’t think I’d have the personality to be a candidate, I thought I’d be an advisor to somebody who was a candidate or an official.  But I thought the path to that was through the law.  So I went to law school, practiced law briefly in New York for a large firm.  And at that firm I worked for Ted Sorenson who had been John Kennedy’s top advisor.  And he helped me get a job with someone who was running for President of the United States, and I thought maybe I would wind up in the White House as Ted Sorenson did.  Unfortunately that person was Birch Bayh, and he ran in 1976 but didn’t get anywhere.  And as I was sitting in my office on Capitol Hill – Chief Counsel to one of his committees – I got a call from somebody saying would I like to work for somebody else who was running for president, and I said, well, I would take another chance.  And that person was Jimmy Carter.  I went to work for him in Atlanta.  A few months later he was elected President of the United States – not because of anything I did.  He was 33 points ahead in the polls when I joined him; but he only won by one point, so people wondered what my contribution really was.  Nonetheless he didn’t have a lot of other people he was gonna give White House jobs to other than those who worked in the campaign.  So at 27 years old, three years out of law school, I became the Deputy Domestic Policy Advisor to the President of the United States – a job I was not particularly qualified for.  But I got an office in the west wing.  I was very shortly going on Air Force One and Marine One; going to Camp David advising the President of the United States.  It was obviously a very heady experience, so I thought I had fulfilled my goal to be a government official and a White House advisor.  Unfortunately in 1980 we lost the reelection and I had to go back and practice law, and I viewed it as a very much of a depressing situation; but I had to recognize that life takes those kinds of turns.

Recorded on: 9/13/07