David M. Rubenstein, Co-Founder and Co-Executive Chairman of The Carlyle Group, spoke last Wednesday as the keynote speaker in a moderated fireside chat with Heather Lee JD ’19 at Harvard Law School. He discussed the co-founding of The Carlyle Group—one of the world’s largest and most successful investment firms with $216 billion of assets under management—and his views on philanthropy.
The keynote discussion was part of the Harvard Association for Law and Business (HALB) Private Equity Roundtable.
“HALB has strived to connect students with the leaders of the law and business worlds since its foundation in 2005,” said Lee, HALB Co-President. “This year’s Private Equity Roundtable was a key initiative to bolster our mission by allowing students to hear from leaders like Mr. Rubenstein, whose influence spans across law, business, and philanthropy.”
Professor Vladimir Bosiljevac, the Bruce W. Nicholas Lecturer on Law who teaches courses on private equity at Harvard Law School, introduced Mr. Rubenstein by noting his extensive philanthropic contributions to educational institutions, medical research centers, and arts and culture non-profit organizations, coined “Patriotic Philanthropy.”
The event opened with questions from Lee about Mr. Rubenstein’s youth. As the only child of parents without a high school education and a father earning a modest sum as a postal worker, Mr. Rubenstein realized early the need to learn and absorb.
“One of the great advantages in my life was that I grew up with no money,” he said. “You get a sense that if you want to do anything in the world, you have to do it on your own.”
After winning a scholarship to Duke University and The University of Chicago Law School where Mr. Rubenstein was the editor of The Law Review, he began practicing law at Paul, Weiss under partner Ted Sorensen who famously drafted John F. Kennedy’s inaugural address. But Mr. Rubenstein quickly realized that he didn’t enjoy the work as an attorney.
“People said to me, you’re not that good at being a lawyer,” said Mr. Rubenstein. “My client said to me, you’re really not cut out for this, maybe you should try something else.”
Sorensen introduced Mr. Rubenstein to Jimmy Carter’s presidential campaign team, and he followed Carter into the White House, becoming the Deputy Assistant to the President for Domestic Policy. Known for his Herculean work ethic at the White House, Mr. Rubenstein arrived first, left last, and made meals of vending machine snacks.
“I had no interest in making money, only in giving back to the country,” Mr. Rubenstein said.
When Carter lost to Ronald Reagan, Mr. Rubenstein returned to practicing law and confirmed his lack of passion for the legal practice. With his motivation low, Mr. Rubenstein came across an article describing an early leveraged buyout transaction by William Simon, a former U.S. Treasury Secretary who was a pioneer of the practice of buying companies with significant amounts of debt and selling them for a profit.
Spurred by another article reporting that entrepreneurs start companies between the ages of 28 and 37, 37-year-old Rubenstein began looking for partners in Washington, D.C. to start a leveraged buyout firm. With no finance experience and competing against established New York players, Mr. Rubenstein turned to creative marketing.
“If you are getting kicked out of town, get out in front and pretend you are leading a parade,” said Mr. Rubenstein, quoting Everett Dirksen, former Senate Minority Leader in 1959. “It means take advantage of the situation.”
He recruited three others—William Conway, Daniel D’Aniello, and Stephen Norris—and founded The Carlyle Group in 1987. The team distinguished their expertise from firms in New York by touting an understanding of companies affected by the federal government.
After a few high-profile transactions, including the $130 million buyout of BDM International Inc., and recruiting Washington insiders, George H.W. Bush, Jim Baker, Frank Carlucci and others, the group began reinventing the leveraged buyout model.
While early partnership agreements required general partners to manage single funds, Mr. Rubenstein convinced his co-founders to create multiple funds dedicated to differentiated strategies—growth capital, buyout, venture, real estate, distressed debt, and others. This approach capitalized on Carlyle’s growing credibility as a brand and centralized legal, tax, and accounting services across funds.
“It was a model that hadn’t happened before in private equity,” said Mr. Rubenstein, “I had to go out and raise money for the funds perpetually.”
Mr. Rubenstein ultimately built an international fundraising team to constantly raise money.
“The sun never sets on a Carlyle fundraising effort,” he said.
On philanthropy, Mr. Rubenstein noted that his focus has centered on gifts that are “patriotic.” Continuing his lifelong goal to serve his country, Mr. Rubenstein has donated significant amounts to the repairs of the Washington Monument, Monticello, and many other historic landmarks. He has also made publicly available his collections of the Magna Carta, the Declaration of Independence, the Thirteenth Amendment, and many other historical documents.
“I’m trying to remind people about our history on the theory that, if they learn more about history, we won’t repeat some of the mistakes that we’ve made in the past,” Mr. Rubenstein explained.
Speaking to the crowd, Mr. Rubenstein urged students to be deliberate in how they spend their future wealth. He was an original signer of the Giving Pledge, committing to donate a majority of his wealth to philanthropy.
“Learn how to use the money that you are going to make, have a reasonable purpose, and do something useful with it,” said Mr. Rubenstein.
“It was wonderful to welcome David M. Rubenstein at Harvard Law and hear him speak about the founding and growth of Carlyle, as well as his approach to philanthropy,” said Joe Kurtenbach, JD/MBA ’20 and the private equity chair of HALB. “This was a terrific opportunity for law students to learn about the private equity industry from one of the leaders who helped shape it.”
This year, the Private Equity Roundtable has also featured a panel on the State of Private Equity with A.J. Murphy (Managing Director of Silver Lake), Daniel Brand (Senior Managing Director of CVC), Eric Lee (General Partner of Welsh, Carson, Anderson & Stowe), Adam Nebesar (Managing Director of Bain Capital), and Kristin Steen (Managing Director of CCMP Capital). The Roundtable was generously sponsored by Kirkland & Ellis LLP.
The Private Equity Roundtable was organized by the Harvard Association for Law and Business (HALB) under the leadership of Heather Lee ’19, Eric Lim ’20, Nancy Zhu ’20, Joseph Yim ’20, Joe Kurtenbach JD/MBA ’20, Caroline Zhang ’21, Alex Yang ’21, and Amy Aixi Zhang ’20.