The David Rubenstein Show: Robert F. Smith

you wanted to get into tech banking, like everything you know, the land of the blind, iron man is king, where there were a lot of African Americans in tech at that time, very few, very few, which gave you prompted me to say: I'm going to give up all this and start my own company. Very few software companies were actually run efficiently. We take these cores of best practices. You became very involved in philanthropy. Philanthropic efforts ran in my family. My family dynamics. One thing we have to do is. make sure our society is a just society, could you fix your time please?

Well, people wouldn't recognize me if they fixed my tie, but that's okay, let it be. Okay, I don't consider myself a journalist and no one else would consider themselves a journalist. I started pursuing the life of an interviewer even though I have a day job running a private equity firm. How do you define leadership? What motivates someone? When you were a kid in Denver, the son of teachers, did you ever do it? I think you would become the richest African American in the United States. I basically grew up in a family of, I'll call it, achievers.

You, my mother, my father, they both had doctorates in education and they emphasized not only my brother and me, but also the rest of the family, the importance of really, you know, educating yourself, working very hard and, you know, trying to get to the pinnacle of success in one's own community, and you know, when I look back at those days and the formative elements of who we are. When I was in our communities, I saw parents who generously gave time, energy, effort and brainpower to our community and I think what that led me to do was always think about striving for excellence, talk about your background in a moment, but I Now I would like to just explain to people what you really did that made this great fortune, what we did and what I was able to do was put a couple of ideas together.

You know that software is still truly the most productive tool introduced into our business economy in recent years. The last 50 years and through my work when I was an investment banker, I was able to see several software companies and how they operated and I came across one that turned out to be a client and ultimately the owner of that business that I trusted. They ended up being my first investor and that particular business had a set of practices that used business practices that helped them run that business more efficiently than any other software company I've ever seen and in essence, you know what I would tell you. .

I know you took some of the core of those best practices and said that if you took them as an engineer and created a process to implement those best practices throughout the enterprise software world, you could do pretty well when you grew up in Denver. Then I grew up in a time when desegregation was just beginning and before that you know like in every city in America and big cities there are segregated communities and there still are for the most part , and it's Unfortunately, I grew up in a predominantly African American community, we all lived in a commune for the most part because there was still redlining, I still had access to capital to buy houses, which essentially created the basis for a lot of the wealth in United States, so it was a time in my growing up where I really understood the importance of community and I grew up in a pretty much segregated community until we started riding the bus.

Forced busing created desegregation. Renting school systems when you were very young. My mother brought you to the March on Washington that you did when Martin Luther King gave his famous speech. I think the impact of her bringing me and my brother here was not only that you knew over the summer, but that we understood that our community represented something of ours. The community was striving for something and it was important that we were a part of it and I think that is part of my lifelong soul, which is that I have to give back and help my community move forward and in this, in this wonderful country called the United States now as we have this discussion we are at the museum of African American history and culture of which you are one of the largest donors this is very close to where Martin Luther King gave a speech and your mother lived in Denver at the time they brought here to the right ones, but she grew up in Washington, she didn't, yes, and your grandparents, what did they do?

My grandfather was actually the Postmaster General of three post offices here in the DC area and before that, when he was in high school, he actually worked in the Senate building and what he did was he actually he worked on the Senate floor and served coffee and tea and, you know, he was able to take hats and coats from various senators when they came in when President Obama was first. When I opened, I brought my grandfather, who was 93 years old at the time, and as we were sitting there and in our seats and you know, I really understood and felt the majesty of the moment for him, he said, look, Grant said look up at that Senate building and He pointed to a window above one of the flags and said I used to work on that one in that room and he said I remember looking out that window when FDR was being inaugurated and he said I remember there wasn't a black face in between the crowd and here we are and I'm sitting with my grandfather watching the inauguration of the first black president.

He said that America is a great place as long as you're willing to work hard and push a set of principles and ideals that are important and downright authentic, so that stays with me to this day, so you went to Cornell, you You majored in engineering, I did Chemical Engineering and now the chemical engineering school is named after you as a result of the gifts you have given, how about that? that you graduated from Cornell and then your first job is Goodyear, yeah, well, your timing was right and you went to air products and chemicals right when air products and chemicals and you worked in Applied Research and Development and you had some wonderful experiences there.

I developed some to sell a line of products, I don't think you can call them fresh products, that actually extended the shelf life of the food and then from there I went on to renovate food by hand and there I had product and process development teams and for me everything my life and at that time it was all about you know how you create a solution, your unique solutions that no one else had ever thought of, you create ideas that no one else or you know had ever thought of and you solve problems, do you? How you go from working in the engineering departments of these various companies to a financial engineer at Goldman Sachs is actually a pretty interesting story.

I had done very well with this excellent student during our first year of business school, so I had to come back from summer graduation to get this award and have my background checked. There was a gentleman named John Newton Doll who ran his own investment bank at the time, who was the keynote speaker and he approaches me after he gets my reward. He has a speech. You say you have. a really interesting experience, have you ever thought about a career and Investment Banking? And I said okay. I said there are a group of former investment bankers in my class.

I don't like any of them and he says well, why not? I told him well, they think. They know everything in a pretty arrogant way I said, you have to understand that I'm an engineer, we know everything that bothers us and he chuckled and I was glad he wasn't offended by my joke, but what I did was say You know, I honestly don't understand what investment bankers are. Know? I was a scientist, I was a technologist, you know, I thought about the world through that lens and this is another case where someone offered to help me, so it's important that I continue to pay that advance and he says that once You come to my office and let's talk about it, he invites me to sit down and have lunch, he picks up the phone and David calls people like Stan O'Neal, okay?

At one point I was CFO of the Maryland Hilton when I ran Merrill Lynch and Ken Chenault and since they are all prominent African Americans, they are probably all looking for African American business leaders and they all attended the meetings and from there they introduced me to other people. to attend meetings, I had literally over a hundred interviews in the fall of my second year of business school and I discovered that mergers and acquisitions was the only business I wanted to be in investment banking and I said because, with the exception of war, this is how assets are transferred on this planet it is a CEO level discussion, it is a board level discussion, there is a strategic discussion and that was quite interesting to me and I thought it could add particular value and knowledge about that particular business, three jobs you had before you went to business school, did you feel any discrimination against you because you are American?

Oh, yeah, I mean, it's one of the ones I have in the United States and still, you know? I remember a time when I was at Air Products and they invited me to give a I spoke in California, in San Francisco, at one of the big conventions, and this guy, you know, came up and asked me questions about how extension works. the shelf life of rice and cooked rice, and I tell you how it works. It is explained that the dynamics, the biology in the organ, are not elliptical issues that you have to think about in addition to the microbiological issues, the guy said, you know you are a very smart guy, you just have to overcome your heritage to be able to be successful. in business and you know that stuck with me at a time where you know after all this wonderful work that I'm doing, he still saw me through that lens as opposed to the work that I had done so you went to Goldman and said, "I'm leaving, yeah, they try to talk you out of it, of course, at some point in your life you know you have to look in the mirror and said, 'You know you have to take a risk.'" You went to the Columbia Business School and I guess you did pretty well there because then you went to Goldman Sachs.

Great, what year did you join Goldman in 1994? So you worked there for a while and then how did you decide that you wanted to go into the business? technology? banking law, so like all things, you know, the land of the blind, an iron man is king and at that time technology for us were defense contractors, we had another company that we took public, one called Microsoft, we had this other company we called called IBM and that was the tech world as far as Goldman was concerned, where there were a lot of African Americans in tech at the time, very few, very few.

I was our first M&A banker in San Francisco, focused on technology. and then we decided to form a tetra and that created another nexus and a dynamic of opportunities. Your job is to convince clients to hire Goldman. You got involved to give them good advice. Did you know Steve Jobs? I didn't know. Steve Jobs personally, but I was on the team where we really engaged, we had two at the time, you may not remember that Apple was under attack. Steve was told he wouldn't come back unless there was a different board, so we fired the board and disbanded. from the CEO and invited Steve to come back, so you're doing very well, you now live in the San Francisco area, you're having great success by investment banking standards.

I guess you're, you know, highly compensated. and so on, what prompted you to say: I'm going to leave all this and start my own company? So the interesting thing that happened, as you know, as an engineer, I realized back in my days at Goodyear, in the rubber days, the impact that software really had on companies what I noticed is that there are very few software companies. that they were actually well run efficiently, why the big part was that most executives who started software companies wrote code or saw a market opportunity and sold code that never existed. anyone who taught them how to run software companies, so I didn't come across this small company, I'll say small, in Houston, Texas, which is the most efficient software company I've ever seen, they had some very basic things that just did it extremely well and I said well, if you took those basic things and ultimately applied them to other enterprise software companies, you could run those businesses very similar to the way they ran theirs and you would create tremendous value in those companies, that was the idea that was presumptuous and they said it's a good idea, why don't you do it right?

Yeah, in essence, I said well, if you really thought about taking some of these best practices and putting them into buying enterprise software companies and driving them forward, you could really do it. pretty good and I said that's a great idea, would you do that? and I said, well, you know, they gave me one of those offers that seemed pretty interesting and I remember my lawyer saying this is a bad deal, Robert, but you should take it,yes of course. You went to Goldman and said, "I'm leaving." They tried to dissuade you, of course, they made a speech against it, but you know I like all things David, at some point in your life, you know you have to look yourself. in the mirror and said: you know you have to take a little risk and go see if this is the age you were when you took this.

He was 39 years old and it's so interesting that of course I started researching it, it was the same thing. age when others stopped what they were doing to start their businesses. I said, well, let's try it, so you started buying companies with this Houston company's money, how many deals have you done now if you look at it? today there are a little more than three hundred one of the things you did that was unique many people think that people who buy what they do is leverage a company, borrow a lot of money, tell the CEO to do the best job they can and then they , you know, they hope for the best.

Great, what you actually did was something different. You actually created a system to make sure each of your companies followed the system. Can you explain it? Sure and it is important that you know it from the beginning. In the software world you couldn't borrow money from software companies anyway, it wasn't until probably oh six oh seven that you could really push software companies, so there was no debt available, so the only value you could create had to be inherent to the business, now you had to improve the operation, so what we do now, we take you to these cores of best practices and, in essence, we have now developed a complete systemic approach .

This is how special best practices are used to improve the effectiveness of anything. That functional area is within that company, then a group emerged now called Vista Consulting Group that offers. I have over a hundred people in that group that really delivered these best practices to the management team and management. The team adopts those best practices the way I like to think of it, we install best practices in those businesses, which really breaks the Rubik's cube of profitable growth, we are not only increasing the profit margins of those businesses, but in We really can't accelerate growth. in those businesses at the same time let's describe the fish until today, how many employees is fish to have, we have about 300, so call it about a hundred in my investment team a hundred and so on and VCG and call it about a hundred in management, so 300 people in the core of what Vista is and at what point did you realize you were pretty good at this was the first year the second year a third year when did you realize?

Hey, I'm really good at that. It took me a while to believe. Whether it's or not, it wasn't until we actually finished our first fun that we closed the last deal and the first funds and we're actually pretty good at this. You have signed the donation commitment. One thing we have to do is make sure that our society is a just society, our society has the ability to cure its own problems and, you know, as we accumulate wealth, on the one hand, you know we must also solve the problems that we face. today while we're alive, so I guess.

I need to

show

you this way, David, here we go, very impressive, what we have here is that this Center is really designed to capture all the records of the African American experience and there are the records that were institutional. You know, we thought of Friedman Bureau. in other places we can now go and capture them and digitize them and you can have access to them. This is the best of institutional records, but the real beauty here is how to do it now and give everyone the opportunity to put in their families'. the history and its narrative, the setting of the US or part of being a part of us here in a place that is accessible so that generation after generation can now discover who they were, how they contributed and not just the five hundred people that we see represented and that everyone knows.

But millions of people will come, what about your family? Well, I hope they're here, but I'm excited. We should probably take a look and see if any of that is accessible on Ancestry and FamilySearch. You can search for individual people first. The hit we get is a war, war between 1951 and 1914, Sam, yeah, there you go, what about 1881? That was a good assumption in the census. This is the year 1940. A great-grandmother, great-grandmother, so here you can see they live on Florida Avenue. She is a. domestic mm-hmm and they are renting her house, yes, she has an 8th grade education, huh, and in the 1940 census she is 59 years old, yes, these are all my grandfather's siblings.

I didn't put this together well, yes, when you became very rich. In recent years, you've become very involved in philanthropy, a lot of your giving has been related to projects or provisions related to African Americans, and I'd like to talk about just a couple of them, for sure, the museum of African American history and culture. and now we are on what attracted them to that cause. Sure there are two elements that we have been stained by the history of slavery and that are still stained by the part that you know of racism, but what we have to do is make sure that we have a monument to the people who really gave their blood on the ground that could create what is the best country in the world.

That's point number one, point number two. I think it's important for African Americans to have a place to come. feel proud of who we are and where we are going and also contribute to its history. Most of my gift is there, actually, the digitization of the African-American experience so that any family can now digitize their photographs, their narrative, there they are. I know it's your videos, whatever they are and now they're part of this museum and people will be able to learn about their family stories in ways that come to life, was it just something that your parents instilled in you or why? you decide to become such an active philanthropist in just a few years.

I watched my mother write a $25 check to the United Negro College Fund every month while she was growing up and even when she wanted a new pair of you know, all-star converse, she said, go win. the money to get them yourselves while writing that $25 check that she could have bought two pairs with, you know, she instilled in me the importance of giving to the community. I saw my father, who was on the board and ran, you know, the local YMCA is at the East Denver YMCA and I know how he contributed time and energy and brainpower to raise funds so that kids in our neighborhood could go and spend camps. or summer camps and enjoying the outdoors and understanding the importance of the outdoors and building meaning of the spirit in the soul, so throughout my life growing up, you know philanthropic efforts were part of my family, my family dynamic, you signed the Giving Pledge, it was very difficult to do, but it says you're going to give away half of your wealth now that it was.

It's hard, you know, it's, it's, it's, it's very interesting, you know, and it's wonderful that you know Bill and Warren and people like you who are actually out there having and being in that evangelist, so this is something What we have to do is ensure that our society is a just society, our society has the ability to cure its own problems and, you know, as we accumulate wealth, on the one hand, you know we must also solve the problems that we face today while we are alive. . What I think is that today I know the problems that the communities that I care about face and if I have the ability to do something about it, frankly, it is up to me to do something about it and the promise to donate is a good way to do that. put up a sign that says listen, this is the right thing to do for anyone who accumulates wealth of any size, regardless of whether you sign the pledge to really care about the community in very meaningful ways, you have another very interesting philanthropic project, you have a ranch. that you've become, yes, it's called Lincoln Hills, it's actually the oldest African American resort community founded by African Americans and it was founded as a place where African Americans could buy a piece of Leon land for $25, build a cabin and that's what that they would come summer and spend your vacation I went there the first time and I was only six months old so it goes back a long way in history, everyone from Duke Ellington to Zora Neale Hurston to Langston Hughes to Count Basie they all came there and stayed there because they couldn't in the hotels in Denver during that period of history, so over time, after desegregation, many African American institutions fell into disrepair and were sold in different parts and now we have developed a wonderful program that serves our community.

In many different ways, 6,000 inner-city kids come to the ranch each summer, we also reach between two and three hundred wounded veterans each year during the winter, although when the ranch has pretty much closed, one of the things we identified to my wife What we identified was that there are programs that we once convened together, we got up, we partnered, and they actually take care of aging foster children, so now we have built a 16-story ranch house on the ranch. rooms and we can host up to 30 children during the holidays, so encourage them and do all kinds of fun activities with them.

You are a great fly fisherman here. I love it. Yes. Now tell me what the appeal is because you have a big brain and you're trying to outwit a small brain. So why is it like this? now it's because those little brains are actually focused on teasing you because you're on their territory, but the beauty of it, honestly, David is nature, you're standing. I think about it, you know all the things in this world we live in today. you depend on water to live I think that water is, in essence, the literal lifeblood of this planet and you are standing in this water with your feet on the ground and the water runs around you and at some point yes Open to it, all things turn white and you stand there and you start to realize that you were part of this greater consciousness of existence and this is fly fishing, it's just a way to stay on the water without looking ridiculous now. my parents are alive, my mother still is and she must be very proud of what you have achieved.

Does he call you all the time to tell you how great you are? Well, she usually calls me to tell me what I need to do a little better or Consideration about what our community needs is still very relevant and valid, so she identifies areas where, according to her, you know Robert, you need to think about this and on how you can help this child or these hundreds of children in certain ways, so which is the best? The pleasure of your life to please your mother or earn a lot of money by giving away money by catching a 30-inch rainbow.

Okay, know the greatest pleasure in all honesty, David, it's Frankie only to free a human spirit and when you can free it. a human spirit and to see that spirit truly become its best self and that person become its bet, that's the greatest thrill on the planet, so what would you like people to say as your legacy? ? Over time, you could slow down, you could do something else. Do you ever go to the government, you know, I don't know, you know, I like all the things, you look for areas where you can bring a unique solution and solve a problem.

I think the problems I want to solve now are equal opportunities. for African Americans to help bring them into what the commercial enterprise that is America is, you know, how we create sustainable career opportunities for people, not just a job or not just a place to go to work, and I think it's through education. internships, so I hope to be able to establish and build a sustainable fabric to identify these people, educate them in a series of schools, give them the right internships and put them on the path to not only be creative business leaders, but also creative engineers and technologists who contribute to what is the fabric of the United States.

Robert Smith is a great story, a great American story, congratulations on what you have accomplished and thank you very much, thank you David.