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Tony James

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2026-05-05
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2026-05-05
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  1. “Well, that's true in that instance, but there are times when. Are times when you're not on that side of it, of course But I would say in general, when a deal committee comes in, I don't want them coming into, when a deal team comes in to the committee with a recommendation, they better want to do it. Otherwise, what are we doing there? Right. So, if they're coming in with conviction, do it almost by definition, I'm going to challenge them. And I'm going to try to find the weakness or the things they haven't thought about or whatnot. And so people often accuse me of no matter what they say, arguing the other side. There's some truth to that, but there's a reason for it.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  2. “And I could go on and on. There are lots of Lots of principles that for me work well in an elite investment organization, but they might not work in another organization. Sure.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  3. “How we talk to each other, how we think our analytical rigor, frankly, the lessons we learn from our failures and our successes. All that is transmitted from senior management, me and the partners, let's just say to the junior people through investment committees And so, if you're not able to hold your own in those, if you're just presiding over them or you're not engaged or you haven't done the work. You lose a lot, in my opinion”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  4. “You got to be flawless. And also, for a firm like Blackstone, it's investment committees that are the cultural crucible of what defines the firm.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  5. “Working really hard to have great investment and great thought process. And part of those catchings, those little things is sending a message. Someone's watching.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  6. “So robust debate's a big one, lack of hierarchy is a big one. I feel so strongly that you have to model the behavior that you want your people to have, which means you've got to work as hard as they do. And it extends into personal values and things as well. I think running an investment organization like Blackstone, I think you almost have to be a really good investor. I know there'll be exceptions to that, but our firm, where you earn your chops, your respect is being able to talk to some of the best investors in the world on an equal footing, and you're not losing a step with them. And similarly, when I go over those investment committees, I mean, if I'm not going to go over them carefully, then the sloppiness will go up a lot, the same amount of care. So I want people coming in there.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  7. “People don't take it personally is not so easy. And you really want to be very direct about this because the more indirect you are, it's so inefficient. You're not really saying what you're thinking. You've got to take weeks to get around to it.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  8. “Yeah. Well, I think I'm a good manager of small elite teams, Navy SEAL-type teams. I don't think I'd be a good manager of the U.S. Army or Costco or a huge Swiss bank, for that matter. And I think my style is there's certain principles that I have around which those kind of smaller elite investment organizations react well to. I mean, one of them is robust debate. Lack of hierarchy, lack of status hierarchy, not just organizational hierarchy, so that if we're talking about a business, I want you to argue with me. I want you to challenge me. But you've got to be able to, and I want to be able to challenge you, but I got to do that so that you don't get insecure or hurt feelings. And creating a culture where you can have robust debate because you're all in it together in a search for truth.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  9. “Very much against bureaucracy and hierarchy. So we did a lot. We added, there were some businesses I felt we should be and we added those. And there were some businesses we shouldn't be in, like the viror business as we spun those out So it was a long journey, but it was. Fantastic journey”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  10. “Down in return for more commodity returns, we weren't doing that. And so that was. It was a great run, I have to say, but we got very lucky. But I started focusing right away on culture, again, coming from DLJ, where I had, and my experience with Costco, culture is so important. And that required making some changes in people and talent. I think virtually every leader of every business almost was changed because a lot of culture comes from leadership. Move from being a collection of talented people but difficult people that didn't work together to a team orientation We put in place processes. People initially said, Why should any process is by definition bureaucracy so I don't want that? But processes that encourage better decisions, sharing of information and more efficient use of time actually frees people up. And I'm”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  11. “And AIG had just put $100 million into Blackstone for 10% of the company and the rights to invest in our funds. So at best, it was worth a billion dollars. And when I left, it was worth $170. So that's a 170 fold value increase. And while we're growing the business and increasing the value, Our IRR and all our funds went up. So we weren't. We weren't driving sometimes an asset manager can drive”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  12. “Yeah, I mean, Blackstone was in private equity in real estate, in hedge fund fund of funds, and a tiny credit business, and then an M&A business and a restructuring advisory business. All those businesses were kind of subscale a little bit. The private equity business, they'd raised a fund and had made a couple of disaster investors that were within a year write-offs with about a third of the fund. The advisory business, the MA business was down 50 or 75 percent from its peak and not going up. The fund of funds business was tiny and not very profitable. And the real estate business was, again, a small business. All those, it, There were things to do to grow all those businesses. What I'm prouder of, honestly, than moving the AUM from $16 billion to nearly a trillion is the market cap of the company because AUM is just AUM.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  13. “Once you've been on, I wanted to paint on a somewhat bigger campus and starting my own firm with two guys in a corner. And so that was the choice I made. And Steve, as I say, I was originally not going to do it, but Steve was very convincing and he lived up to everything. And it was a great partnership, I have to say. I mean, we worked really well together for 18 years.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  14. “And so I felt I looked when I looked at Blackstone, they were in every business Blackstone in was in, DLJ had been in and had reported to me. And there was no one else in the world that had that mix of businesses under their authority. So I thought I'm uniquely knowledgeable about every business. And I'd seen, and Blackstone had growing pains at the time, but DLJ had had those same growing pains a few years before, so I knew how to work through them. And I thought, gee, if I could get my hands on Blackstone, I could be dangerous. The other thing is, if you start, you know, when you're used to running a big firm, after the merger of Group DLJ and Chris Suisse, it was the largest by headcount, the investment bank in the world. Did stay that way because of all the bloodletting. But”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  15. “I did think about starting my own firm. I had a lot of people encouraging me to do that, both LPs and also professionals. You know, I kind of what I like doing, if you think about the development of a successful company, there's kind of an S-curve. It starts off small and entrepreneurial. It's kind of, if it's not a tech company, it's kind of flat for a while, bumps along. Then there's this kind of escalation curve where you create a lot of value and a lot of size. And then you get, if you're lucky enough, you get very successful and it's kind of protect the bastion. What I like doing is that steep part of the S-curve. I like taking something small and growing it and making it better and making it very successful. And then once it's very successful, it's not that much fun to protect the castle anymore when the grows by.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  16. “And we agreed to try it. Like so many entrepreneurs, we've all seen this, right, where they say they want to bring someone in. And there were issues around Blackstone at the time in all the businesses. But then once those issues have kind of fade, then the entrepreneur wants to reassert control. I have to say, Steve was an absolute prince. I mean, he always respected my role running the day-to-day firm. When a lot of the, I made a lot of changes, and when I made those changes, a lot of people didn't like him. He backed me 100%, even when he wasn't necessarily sure they were right. They turned out to be right. But he was a great boss, really. I have to. And that's hard. It's his baby To give that element of control, that level of control to someone else, I'm not one in a hundred would have done that. So credit to Steve.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  17. “My first reaction was, geez, Steve, you're a tough boss, and I really haven't had a boss in like 15 years And I don't really, you know, DLJ went public and went private a few times. So I didn't really need to work. And I said, Steve, I don't know that I want to be told what to do or what not to do. I haven't had that a long time. He said, no, no, no. You come in, you run the firm day to day. We'll talk all the time. I'll back you if we don't agree. By the way, we agreed 98% of the time. I'll back you. But if performance is not good, I reserve the right to get rid of you. I said, that's fair So we cut a deal where he could get rid of me a drop of a hat. I was vested up to the minute whatever I had.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  18. “So then after that, I was running investment banking for a long time, and Steve was a client, not necessarily the closest client. He did a lot with Chemical Bank and Jimmy Lee and other banks. But we would have a casual, like a once-a-year lunch or something like that. And then after DLJ was sold, I had to agree as part of the condition of the merger agreement to stick it out for two years. No other employee did, by the way. But I'd stuck my two years out and then decided that it wasn't fun. And that I want to do something else anyway. My DLJ that I felt that same sense of proprietary ownership for that I felt for Costco was gone. Steve called out of the blue and said, Can we have lunch? And one thing led to another. And he said he'd been looking to hire someone for a couple years Would I consider coming in and helping him run the firm?”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  19. “And I felt like if I could give Steve a pound of flesh. Then I could get the whole thing done. And the idea of someone putting money up, and actually if Steve had to pay more interest rate, which wasn't Steve really, it was the LPs, had to pay higher interest rates, I would lose some money. All that appealed to him So that did the trick. And he agreed. We got the deal done. And, you know, we both looked back on that slightly differently. But I think we each accomplished something in our own heads, which is sometimes what it takes to make a deal.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  20. “Yeah, and how to avoid it. But what might happen? And we couldn't sell it without the reset. And of course, what that tells you is the market all thought it would be reset. Right, or at least you want to take the risk out of it. So we kind of went round and round and round that. We had done a bridge loan, so we were, we needed to get this financing done. And the story is Steve said, well, are you willing to put your money, your own personal money on the line? And I said, yes. And so we had, okay, if it resets to the max. You'll pay me a certain amount of money. And I said, okay, frankly, the amount I would pay Steve was dwarfed by the amount the firm would lose if we didn't get the deal done. And Steve might have knuckled under anyway, but to me this was a very good example of losing a battle to win the war.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  21. “But Steve said, no, I'm not going to do the reset because I know you guys will reset it to the max. That's just, you know. And what Steve has a great nose for how to get screwed. And”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  22. “Yeah, okay. I think our first serious engagement dates back to 1989. I think it is when we were working on a deal together to buy a railroad company called CNCNW. And it was a hairy time because the markets were falling apart. We were sort of pregnant with this public bid for this railroad company. We were an equity shareholder, but we were also providing all the high yield debt and the MA and on and on and on and on. Part of our business model put a little equity in and get all the investment banking business. And we had a big high yield deal, which had a reset note. Steve was balking at the concept of a reset. No, I think we were pricing at 15% and it could reset up to 18. Think of those rates today.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  23. “They owned a newspaper and I think Wall Street Journal was up for sale. And I said, Sherry, what do you think about newspapers? He says, the newspaper business. He says, it's not a business, Tony. It's an oil well. It's depleting to zero. And I said, well, what about the Wall Street Journal? Well, that's not a newspaper. That's a trade journal. I mean, everything gets right. Distills it into such an accessible, understandable. A way of thinking about things. Charlie was my rock. I talked to him every two weeks, whether we were in the border or not. We talked about the world. There are many times, and I'd say, Shirley, I'm starting to worry about this thing. He was an absolute rock So, I mean, I love the guy, honestly. I have a bust of him in my conference room, my office. Real mentor, so loyal, so supportive.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  24. “Charlie believed in the company. So even when we would have doubts, the management and the board, Jesus, this is going to work, is Amazon going to flatten us. Now they're buying Whole Foods. Oh my God, are they going to do this or that? He believed in the company. No, you're the best. Just go right at him, open that unit in Bentonville, and you'll beat the heck out of Walmart. And it happened And no, don't worry about Whole Foods. You'll crush them. It happened. And so he was really a believer. With good reason, he wasn't blind. But sometimes that sense of confidence. And I tried to put that in the businesses that I've run too, that sense of confidence. You are good. You're really, really good. Believe in yourself. You can do anything. And people lose that. Charlie could distill everything into a soundbite.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  25. “And And he isn't either, by the way, which I love. It doesn't mean he was always right, but he was right, hugely high percentage of the time.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  26. “Well, first of all, Charlie never compromises intellectually. If he doesn't like something, you're in never in any doubt what he thinks about things.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  27. “So, the more value we give. So, whatever, if Costco can go find a new source for batteries and save a nickel, 100% of that nickel gets lower prices. None of it goes into higher margin. And so they're always driving down prices. So their customer value proposition keeps growing. Most companies Either nibble away at it because they're tempted to have a little more earnings, or they let it be static. And Costco is always driving to increase the customer value proposition. So I think those are all good lessons for any business.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  28. “And we really, we've always had so much growth in doing just what we do if we do it really well. We just have never been distracted by that. So focus, focus, focus, execution, flawless execution of details, build for the long term, build quality, and keep driving your prices down. Keep enhancing your value to your customer. Never let that be static.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  29. “Yeah, $250 billion. I think there's some similarities between DLJ Costco and Blackstone, actually, but focusing on Costco, we built that. It was first of all all about taking care of the customer. If you really take great care of the customer. Then, you know, a lot follows from that. You have a robust business model with a fantastic following franchise, and you get a lot of growth and your shareholders do fine. So take care of your customer, build quality long-term. Don't ever worry about short-term expediency. Gee, we're having a soft quarter. Let's raise prices or let's sell some real estate. We don't have to own the real estate or this other thing. It's so easy to get enticed into short-term expediency. Similarly, people have been coming to us for years of you should buy this or you should buy that.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  30. “And then if you're an investor, as I was for many years at Blackstone, the window on the world that you get from the second largest retailer world, what goods are working, what goods aren't working, how are consumers reacting, what's the cost of supply, what are tariffs doing to our income costs? How are we handling? How are we handling shipping and all that stuff? It's a huge source of Value added information So, for a lot of, I mean, I love it and I feel like a real sense of identity there.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  31. “I mean, David, when you find a couple of executives and back them before there's a company, before there's a dollar of revenue, before there's an order, you feel as much as they do that you're a founder. And so it becomes like, and I've been a director now. I'm on my third CEO. So it feels like I identify with a company as if it's mine. I don't want to take any credit away from the great management we've had. We have had great management. But emotionally, I feel that kind of connection and that sense of ownership. Also, it's just such a great company. I'm constantly learning from them the things they do and the way they think about it. And they're not very down there and very focused, but they come to such good decisions all the time.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  32. “And you're not like betting on a new technology. Is the market going to embrace it or is it going to work? Because there was. It was pretty prosaic, or someone like even me, I could understand it. But also there was a working model. So we did that, and then it was one of the all time great investments, I have to say. One thing I learned is a lot of people I think hold things too long. I'll probably sell too early.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  33. “He knows exactly, he never compromises, he never does something that's expedient. It's always about serving the customer and driving the competitive advantage to where no one else can go. Just relentless about that and incredible standards of excellence and focus, focus, focus. And the guy traveled 225 days a year. So, you know, as a CEO. And was at every opening, knew the price of every item in the store. And so you can't meet a guy like that who's a total force of nature and not be blown away. At the same time, he was coupled with Jeff Broughtman, who was a clever lawyer, real estate lawyer, and also owned some retailers up in Seattle. So he really knew that market. And the economic model of the store was so powerful that it was compelling, I thought.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  34. “They walked in unknown to me and said, gee, we have what we think is a really interesting opportunity. There was one unit like that called Price Club that had opened in San Diego. Where Jeff had been the number two, or Jim had been the number two there, and Jeff recruited him to come start Costco and open the same thing. There was a research report from a Goldman Analyst named Joe Ellis that sort of laid out the business model. And it was very, very powerful and elegant. And so, and it was proven in one case. And the Pacific Northwest was a very good market, very affluent and very good market. Jim was one of the best executives I've ever met, maybe the best. He's driven, he's excellent on the smallest details of execution, but also the biggest principles”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  35. “The timing was really good. Now, that happened to be essentially a merger of equals, but that's never pretty. Especially when you have two firms of such different cultures.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  36. “Because working at DLJ had a little bit of feel to it that people still talk about, they still get together twice a year.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  37. “And then our success in high yield and private equity meant we'd running out of balance sheet. Our bridge fund was $1 billion, and all of a sudden you were doing $1 billion bridge loans. So you can do one deal at a time. And if one mistake and you're out of business, because 100 million of that was ours at the bottom, by the way. Which was 40% of our equity or something. So it just seemed to me like everything looked great right then. But it was unsustainable. And I tried to push the management. I was number two, but I tried to push the CEO to kind of like invest in the future a little bit. But he didn't really want to, honestly, and it would have meant some tough years for earnings. So we decided to sell the company. And I think in retrospect, a lot of people blame me for that decision, for pulling the rug out for a little because.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  38. “I think there were macro and micro reasons. DLJ had had a hell of a run, as I mentioned. And this was 2000. And honestly, I looked around and said, Mile, the market's at some kind of peak. And at the same time, though industry was changing, Glass-Steagall was coming down, so the banks were coming in with very deep capital pockets. Regulations were changing about how closely research, which was DLJ's strength, could work with investment banking Marcus were changing. We'd gone from negotiated rates to very low commission rates. And so the big firms were essentially doing the cash business on break-even basis to make money on the derivatives. We didn't have a derivatives business and we didn't have the technology to build one.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  39. “So that was a key asset. Once it got put into a Swiss bank, they had all of the institutional issues. And the lack of commitment to the principal business that all the other big firms had, so it kind of started to waste away.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  40. “In Southern California. And around that, we did massive amounts of high yield, and one thing and another. That put us on the map and led to us raising a fund, and it was a very high return fund. So that then we got a lot of follow-ons. But we were pretty aggressive about starting new businesses. We started a secondary business, a fund to funds business, real estate, as I mentioned. All these things. And they all pretty much all work. The private markets in those days was not as competitive. And prices were lower as a multiple of EBITDA and whatnot. And companies were asset heavy. So there was a lot to work with there. And we built that business when we sold DLJ to Credit Suisse. It was about $29 billion AUM business. Blackstone at the time was hyteens. So just to put that in context.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  41. “So ultimately, they gave me the responsibility, and we started off with a landmark deal. I think it was the third biggest LBO ever called. We bought the retailing subseries from Household International. We ended up with Vaughns and Ben Franklin. TGI and Coast to Coast Hardware Stores. And we sliced and diced and sold them all. And we closed and we put up a couple hundred million dollars equity. And the day after closing, we pulled out $400 million or some huge number because we sold the discount business to another discounter and ended up essentially owning a great grocery store in Southern California called Vaughns for free.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  42. “Right. Well, again, KKR does that hoot ideal back in 1980 and said, wow, this is something we can do. We don't even have to have a client. We're the client in a way. And so I went to the firm and I said, we should do this as I was running MA at the time, which in and of itself was some kind of distortion of reality because I was like 30, maybe not 30, 29. And they said, go back to work. We have a principal business called Sprout, the venture capital. And they know how to buy things and you know how to advise. So go back to advising. And I sent him a few deals over the next year or so. And they said, no, that doesn't work. And then someone else would do it and make a lot of money. And I kept going to the firm and saying, this is ridiculous. These guys don't know how to get out of their way.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  43. “We were Ken Mullis was a big one, and Bennett was huge. And although Bennett was only an associate at the time. But I always believe in young talent, great young talent. And unleash them. So that's always served me well throughout my career.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  44. “It was a huge Drexel's going on was a huge boost to our banking business. It didn't really help our principal business much, but it was a huge boost to our recruit.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  45. “It doesn't have to trade up much to be juicy. So we use that and we develop quite a following. And then when Drexel went under, the bigger firms were also ambivalent about high yield. It had a taint, especially when Drexel went under. And so we were sitting there in second place, and we just inherited the world in that sense. And it became the most profitable part of Wall Street. We accounted for all of 40% of all trading volume and high yield for 12 years.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  46. “And we turned it heavily. We bet the fund and we bet the firm on every bridge loan. And ultimately, that lack of capital became an Achilles heel. But we had a remarkable stretch of making the right credit assessments and the right market assessments. So every time we got, we would win the business and we would have the distribution. Because we were often controlling the issuer, we could put a little extra vig in the interest rate. So we became known as the distributor of high yield that people should buy on the issue because we'd price it to trade up. With debt, it doesn't have to trade up much. It's not like equities.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  47. “Yeah, well, of course, back then, Drexel was the big gorilla, and we were second in high yield. We were more of a client than a threat to Drexel. Of our principal business. Drexel had the high yield, the highly confident letter. If we said we were highly confident, people would say, well, so what? Sure. You don't matter. So we created this bridge fund.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  48. “There are old line bankers that didn't understand it and didn't actually want to understand it really. They just didn't want their clients to complain about competing with something that the firm bought. And so that institutional ambivalence gave us a huge runway that we just plowed through. And it became a magic synergy between the investment banking and the merchant banking. And ultimately, we built funds of funds and real estate businesses, venture capital. We had a business back then called Sprout, which was one of the big three back in the 70s. Gone now.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  49. “So, just by rolling your fees, you could kind of own the company. And then that drove, then we had, could and had to build a high yield business and other debt businesses. A lot of those were our biggest IPOs. One thing led to another. So we built the whole investment banking business. Cheek by jowl with the principal business. So it was in that sense it was a true merchant bank. There was no reason really that a KKR or a forceman little that were the big players back then should ever existed. Year old from Goldman should have beaten them. But the bitfronts are ambivalent about this business. They're ambivalent because it wasn't quite an agency business.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source

  50. “More bankers, more clients, more of a track record, more capital, more distribution. There was nothing we had that should win. So that struck me as a way to kind of end run. They weren't really doing it themselves. It was a new sector. We could buy clients we couldn't actually win competitively and then do all their investment banking business. And that really fed on itself out of the, we built a private equity business. I think our first fund had a 90% IRR. Those days it was easier because prices were lower. Companies were more undermanaged And essentially, you could borrow 100% of the purchase price.”

    2026-05-05 · a16z Podcast · Building Blackstone, Backing Costco, with Tony James · IDENTIFIED FROM THE TRANSCRIPT · source