The Lost Years & Last Days of David Foster Wallace

The Lost Years & Last Days of David Foster Wallace
He was the greatest writer of his generation - and also its most tormented. In the wake of his tragic suicide, his friends and family reveal the lifelong struggle of a beautiful mind

DAVID LIPSKY

Posted Oct 30, 2008 12:31 PM


He was six-feet-two, and on a good day he weighed 200 pounds. He wore granny glasses with a head scarf, points knotted at the back, a look that was both pirate-like and housewife-ish. He always wore his hair long. He had dark eyes, soft voice, caveman chin, a lovely, peak-lipped mouth that was his best feature. He walked with an ex-athlete's saunter, a roll from the heels, as if anything physical was a pleasure. David Foster Wallace worked surprising turns on nearly everything: novels, journalism, vacation. His life was an information hunt, collecting hows and whys. "I received 500,000 discrete bits of information today," he once said, "of which maybe 25 are important. My job is to make some sense of it." He wanted to write "stuff about what it feels like to live. Instead of being a relief from what it feels like to live." Readers curled up in the nooks and clearings of his style: his comedy, his brilliance, his humaneness.

His life was a map that ends at the wrong destination. Wallace was an A student through high school, he played football, he played tennis, he wrote a philosophy thesis and a novel before he graduated from Amherst, he went to writing school, published the novel, made a city of squalling, bruising, kneecapping editors and writers fall moony-eyed in love with him. He published a thousand-page novel, received the only award you get in the nation for being a genius, wrote essays providing the best feel anywhere of what it means to be alive in the contemporary world, accepted a special chair at California's Pomona College to teach writing, married, published another book and, last month, hanged himself at age 46.

"The one thing that really should be said about David Foster Wallace is that this was a once-in-a-century talent," says his friend and former editor Colin Harrison. "We may never see a guy like this again in our lifetimes — that I will shout out. He was like a comet flying by at ground level."

His 1996 novel, Infinite Jest, was Bible-size and spawned books of interpretation and commentary, like Understanding David Foster Wallace — a book his friends might have tried to write and would have lined up to buy. He was clinically depressed for decades, information he limited to family and his closest friends. "I don't think that he ever lost the feeling that there was something shameful about this," his father says. "His instinct was to hide it."

After he died on September 12th, readers crowded the Web with tributes to his generosity, his intelligence. "But he wasn't Saint Dave," says Jonathan Franzen, Wallace's best friend and the author of The Corrections. "This is the paradox of Dave: The closer you get, the darker the picture, but the more genuinely lovable he was. It was only when you knew him better that you had a true appreciation of what a heroic struggle it was for him not merely to get along in the world, but to produce wonderful writing."

David grew up in Champaign, Illinois. His father, Jim, taught philosophy at the University of Illinois. His mother, Sally, taught English at a local community college. It was an academic household — poised, considerate — language games in the car, the rooms tidy, the bookcase the hero. "I have these weird early memories," Wallace told me during a series of interviews in 1996. "I remember my parents reading Ulysses out loud to each other in bed, holding hands and both lovin' something really fiercely." Sally hated to get angry — it took her days to recover from a shout. So the family developed a sort of interoffice conflict mail. When his mother had something stern to say, she'd write it up in a letter. When David wanted something badly — raised allowance, more liberal bedtime — he'd slide a letter under his parents' door.

David was one of those eerie, perfect combinations of two parents' skills. The titles of his father's books — Ethical Norms, Particular Cases — have the sound of Wallace short-story titles. The tone of his mother's speaking voice contains echoes of Wallace's writing voice: Her textbook, Practically Painless English, sounds like a Wallace joke. She uses phrases like "perishing hot" for very hot, "snoof" for talking in your sleep, "heave your skeleton" for go to bed. "David and I both owe a huge debt to my mother," says his sister, Amy, two years younger. "She has a way of talking that I've never heard anywhere else."

David was, from an early age, "very fragile," as he put it. He loved TV, and would get incredibly excited watching a program like Batman or The Wild Wild West. (His parents rationed the "rough" shows. One per week.) David could memorize whole shows of dialogue and predict, like a kind of plot weatherman, when the story was going to turn, where characters would end up. No one saw or treated him as a genius, but at age 14, when he asked what his father did, Jim sat David down and walked him through a Socratic dialogue. "I was astonished by how sophisticated his understanding was," Jim says. "At that point, I figured out that he really, really was extraordinarily bright."

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David was a big-built kid; he played football — quarterback — until he was 12 or 13, and would always speak like an athlete, the disappearing G's, "wudn't," "dudn't" and "idn't" and "sumpin'." "The big thing I was when I was little was a really serious jock," Wallace told me. "I mean, I had no artistic ambition. I played citywide football. And I was really good. Then I got to junior high, and there were two guys in the city who were better quarterbacks than me. And people started hitting each other a lot harder, and I discovered that I didn't really love to hit people. That was a huge disappointment." After his first day of football practice at Urbana High School, he came home and chucked it. He offered two explanations to his parents: They expected him to practice every day, and the coaches did too much cursing.

He had also picked up a racket. "I discovered tennis on my own," Wallace said, "taking public-park lessons. For five years, I was seriously gonna be a pro tennis player. I didn't look that good, but I was almost impossible to beat. I know that sounds arrogant. It's true." On court, he was a bit of a hustler: Before a match, he'd tell his opponent, "Thank you for being here, but you're just going to cream me."

By the time he was 14, he felt he could have made nationals. "Really be in the junior show. But just at the point it became important to me, I began to choke. The more scared you get, the worse you play." Plus it was the Seventies — Pink Floyd, bongs. "I started to smoke a lot of pot when I was 15 or 16, and it's hard to train." He laughed. "You don't have that much energy."

It was around this time that the Wallaces noticed something strange about David. He would voice surprising requests, like wanting to paint his bedroom black. He was constantly angry at his sister. When he was 16, he refused to go to her birthday party. "Why would I want to celebrate her birthday?" he told his parents.

"David began to have anxiety attacks in high school," his father recalls. "I noticed the symptoms, but I was just so unsophisticated about these matters. The depression seemed to take the form of an evil spirit that just haunted David." Sally came to call it the "black hole with teeth." David withdrew. "He spent a lot of time throwing up junior year," his sister remembers. One wall of his bedroom was lined with cork, for magazine photos of tennis stars. David pinned an article about Kafka to the wall, with the headline THE DISEASE WAS LIFE ITSELF.

"I hated seeing those words," his sister tells me, and starts to cry. "They seemed to sum up his existence. We couldn't understand why he was acting the way he was, and so of course my parents were exasperated, lovingly exasperated."

David graduated high school with perfect grades. Whatever his personal hurricane was, it had scattered trees and moved on. He decided to go to Amherst, which is where his father had gone, too. His parents told him he would enjoy the Berkshire autumn. Instead, he missed home — the farms and flat horizons, roads stretching contentedly nowhere. "It's fall," David wrote back. "The mountains are pretty, but the landscape isn't beautiful the way Illinois is."

Wallace had lugged his bags into Amherst the fall of 1980 — Reagan coming in, the Seventies capsized, preppies everywhere. He brought a suit to campus. "It was kind of a Sears suit, with this Scotch-plaid tie," says his college roommate and close friend Mark Costello, who went on to become a successful novelist himself. "Guys who went to Amherst, who came from five prep schools, they always dress a notch down. No one's bringing a suit. That was just the Wallace sense that going East is a big deal, and you have to not embarrass us. My first impression was that he was really very out of step."

Costello came from working-class Massachusetts, seven kids, Irish-Catholic household. He and Wallace connected. "Neither of us fit into the Gatsby-ite mold," Costello says. At Amherst David perfected the style he would wear for the rest of his life: turtleneck, hoodie, big basketball shoes. The look of parking-lot kids who in Illinois were called Dirt Bombs. "A slightly tough, slightly waste-product-y, tennis-playing persona," Costello says. Wallace was also amazingly fast and good company, even just on a walk across campus. "I'd always wanted to be an impressionist," Wallace said, "but I just didn't have an agile enough vocal and facial register to do it." Crossing a green, it was The Dave Show. He would recount how people walked, talked, held their heads, pictured their lives. "Just very connected to people," Costello recalls. "Dave had this ability to be inside someone else's skin."

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Observing people from afar, of course, can be a way of avoiding them up close. "I was a complete just total banzai weenie studier in college," Wallace recalled. "I was really just scared of people. For instance, I would brave the TV pit — the central TV room — to watch Hill Street Blues, 'cause that was a really important show to me."

One afternoon, April of sophomore year, Costello came back to the dorm they shared and found Wallace seated in his chair. Desk clean, bags packed, even his typewriter, which weighed as much as the clothes put together.

"Dave, what's going on?" Costello asked.

"I'm sorry, I'm so sorry," Wallace said. "I know I'm really screwing you."

He was pulling out of college. Costello drove him to the airport. "He wasn't able to talk about it," Costello recalls. "He was crying, he was mortified. Panicky. He couldn't control his thoughts. It was mental incontinence, the equivalent of wetting his pants."

"I wasn't very happy there," Wallace told me later. "I felt kind of inadequate. There was a lot of stuff I wanted to read that wasn't part of any class. And Mom and Dad were just totally cool."

Wallace went home to hospitalization, explanations to his parents, a job. For a while, he drove a school bus. "Here he was, a guy who was really shaky, kind of Holden Caulfield, driving a school bus through lightning storms," Costello recalls. "He wrote me a letter all outraged, about the poor screening procedures for school-bus drivers in central Illinois."

Wallace would visit his dad's philosophy classes. "The classes would turn into a dialogue between David and me," his father remembers. "The students would just sit looking around, 'Who is this guy?' " Wallace devoured novels — "pretty much everything I've read was read during that year." He also told his parents how he'd felt at school. "He would talk about just being very sad, and lonely," Sally says. "It didn't have anything to do with being loved. He just was very lonely inside himself."

He returned to Amherst in the fall, to room with Costello, shaky but hardened. "Certain things had been destroyed in his head," Costello says. "In the first half of his Amherst career, he was trying to be a regular person. He was on the debate team, the sort of guy who knows he's going to be a success." Wallace had talked about going into politics; Costello recalls him joking, "No one is going to vote for somebody who's been in a nuthouse." Having his life fall apart narrowed his sense of what his options were — and the possibilities that were left became more real to him. In a letter to Costello, he wrote, "I want to write books that people will read 100 years from now."

Back at school junior year, he never talked much about his breakdown. "It was embarrassing and personal," Costello says. "A zone of no jokes." Wallace regarded it as a failure, something he should have been able to control. He routinized his life. He'd be the first tray at the dining hall for supper, he'd eat, drink coffee dipped with tea bags, library study till 11, head back to the room, turn on Hawaii Five-O, then a midnight gulp from a scotch bottle. When he couldn't turn his mind off, he'd say, "You know what? I think this is a two-shot night," slam another and sleep.

In 1984, Costello left for Yale Law School; Wallace was alone senior year. He double-majored — English and philosophy, which meant two big writing projects. In philosophy, he took on modal logic. "It looked really hard, and I was really scared about it," he said. "So I thought I'd do this kind of jaunty, hundred-page novel." He wrote it in five months, and it clocked in at 700 pages. He called it The Broom of the System.

Wallace published stories in the Amherst literary magazine. One was about depression and a tricyclic anti-anxiety medication he had been on for two months. The medication "made me feel like I was stoned and in hell," he told me. The story dealt with the in-hell parts:

You are the sickness yourself.... You realize all this...when you look at the black hole and it's wearing your face. That's when the Bad Thing just absolutely eats you up, or rather when you just eat yourself up. When you kill yourself. All this business about people committing suicide when they're "severely depressed;" we say, "Holy cow, we must do something to stop them from killing themselves!" That's wrong. Because all these people have, you see, by this time already killed themselves, where it really counts.... When they "commit suicide," they're just being orderly.

It wasn't just writing the novel that made Wallace realize his future would lie in fiction. He also helped out friends by writing their papers. In a comic book, this would be his origin story, the part where he's bombarded with gamma rays, bitten by the spider. "I remember realizing at the time, 'Man, I'm really good at this. I'm a weird kind of forger. I can sound kind of like anybody.' "

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Grad school was next. Philosophy would be an obvious choice. "My dad would have limbs removed without anesthetic before ever pushing his kids about anything," Wallace said. "But I knew I was gonna have to go to grad school. I applied to these English programs instead, and I didn't tell anybody. Writing The Broom of the System, I felt like I was using 97 percent of me, whereas philosophy was using 50 percent."

After Amherst, Wallace went to the University of Arizona for an MFA. It was where he picked up the bandanna: "I started wearing them in Tucson because it was a hundred degrees all the time, and I would perspire so much I would drip on the page." The woman he was dating thought the bandanna was a wise move. "She was like a Sixties lady, a Sufi Muslim. She said there were various chakras, and one of the big ones she called the spout hole, at the very top of your cranium. Then I began thinking about the phrase 'Keeping your head together.' It makes me feel kind of creepy that people view it as a trademark or something — it's more a recognition of a weakness, which is that I'm just kind of worried that my head's gonna explode."

Arizona was a strange experience: the first classrooms where people weren't happy to see him. He wanted to write the way he wanted to write — funny and overstuffed and nonlinear and strange. The teachers were all "hardass realists." That was the first problem. Problem two was Wallace. "I think I was kind of a prick," he said. "I was just unteachable. I had that look — 'If there were any justice, I'd be teaching this class' — that makes you want to slap a student." One of his stories, "Here and There," went on to win a 1989 O. Henry Prize after it was published in a literary magazine. When he turned it in to his professor, he received a chilly note back: "I hope this isn't representative of the work you're hoping to do for us. We'd hate to lose you."

"What I hated was how disingenuous it was," Wallace recalled. "'We'd hate to lose you.' You know, if you're gonna threaten, say that."

Wallace sent his thesis project out to agents. He got a lot of letters back: "Best of luck in your janitorial career." Bonnie Nadell was 25, working a first job at San Francisco's Frederick Hill Agency. She opened a letter from Wallace, read a chapter from his book. "I loved it so much," Nadell says. It turned out there was a writer named David Rains Wallace. Hill and Nadell agreed that David should insert his mother's maiden name, which is how he became David Foster Wallace. She remained his agent for the rest of his life. "I have this thing, the nearest Jewish mother, I will simply put my arms around her skirt and just attach myself," Wallace said. "I don't know what it means. Maybe sort of WASP deprivation."

Viking won the auction for the novel, "with something like a handful of trading stamps." Word spread; professors turned nice. "I went from borderline ready-to-get-kicked-out to all these tight-smiled guys being, 'Glad to see you, we're proud of you, you'll have to come over for dinner.' It was so delicious: I felt kind of embarrassed for them, they didn't even have integrity about their hatred."

Wallace went to New York to meet his editor, Gerry Howard, wearing a U2 T-shirt. "He seemed like a very young 24," Howard says. The shirt impressed him. "U2 wasn't really huge then. And there's a hypersincerity to U2, which I think David was in tune with — or that he really wanted to be sincere, even though his brain kept turning him in the direction of the ironic." Wallace kept calling Howard — who was only 36 — "Mr. Howard," never "Gerry." It would become his business style: a kind of mock formality. People often suspected it was a put-on. What it was was Midwestern politeness, the burnout in the parking lot still nodding "sir" to the vice principal. "There was kind of this hum of superintelligence behind the 'aw, shucks' manner," Howard recalls.

The Broom of the System was published in January of 1987, Wallace's second and last year at Arizona. The title referred to something his mother's grandmother used to say, as in, "Here, Sally, have an apple, it's the broom of the system." "I wasn't aware David had picked up on that," his mother says. "I was thrilled that a family expression became the title of his book."

The novel hit. "Everything you could hope for," Howard says. "Critics praised it, it sold quite well, and David was off to the races."

His first brush with fame was a kind of gateway experience. Wallace would open The Wall Street Journal, see his face transmuted into a dot-cartoon. "Some article like 'Hotshot's Weird New Novel,' " he said. "I'd feel really good, really cool, for exactly 10 seconds. Probably not unlike a crack high, you know? I was living an incredibly American life: 'Boy, if I could just achieve X, Y and Z, everything would be OK.' " Howard bought Wallace's second book, Girl With Curious Hair, a collection of the stories he was finishing up at Arizona. But something in Wallace worried him. "I have never encountered a mind like David's," he says. "It functioned at such an amazingly high level, he clearly lived in a hyperalert state. But on the other hand, I felt that David's emotional life lagged far behind his mental life. And I think he could get lost in the gap between the two."

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Wallace was already drifting into the gap. He won a Whiting Writers' Award — stood on a stage with Eudora Welty — graduated Arizona, went to an artists' colony, met famous writers, knew the famous writers were seeing his name in more magazines ("absolutely exhilarating and really scary at the same time"), finished the stories. And then he was out of ideas. He tried to write in a cabin in Tucson for a while, then returned home to write — Mom and Dad doing the grocery shopping. He accepted a one-year slot teaching philosophy at Amherst, which was strange: Sophomores he had known were now his students. In the acknowledgments for the book he was completing, he thanks "The Mr. and Mrs. Wallace Fund for Aimless Children."

He was balled up, tied up. "I started hating everything I did," he said. "Worse than stuff I'd done in college. Hopelessly confused, unbelievably bad. I was really in a panic, I didn't think I was going to be able to write anymore. And I got this idea: I'd flourished in an academic environment — my first two books had sort of been written under professors." He applied to graduate programs in philosophy, thinking he could write fiction in his spare time. Harvard offered a full scholarship. The last thing he needed to reproduce his college years was to reactivate Mark Costello.

"So he comes up with this whole cockamamie plan," Costello recalls. "He says, 'OK, you're going to go back to Boston, practice law, and I'm going to go to Harvard. We'll live together — it'll be just like the house we had at Amherst.' It all ended up being a train wreck."

They found an apartment in Somerville. Student ghetto: rickety buildings, outdoor staircases. Costello would come home with his briefcase, click up the back stairs, David would call out, "Hi, honey, how was your day?" But Wallace wasn't writing fiction. He had thought course work would be a sideline; but professors expected actual work.

Not writing was the kind of symptom that presents a problem of its own. "He could get himself into places where he was pretty helpless," Costello says. "Basically it was the same symptoms all along: this incredible sense of inadequacy, panic. He once said to me that he wanted to write to shut up the babble in his head. He said when you're writing well, you establish a voice in your head, and it shuts up the other voices. The ones that are saying, 'You're not good enough, you're a fraud.' "

"Harvard was just unbelievably bleak," Wallace said. It became a substance marathon: drinking, parties, drugs. "I didn't want to feel it," he said. "It was the only time in my life that I'd gone to bars, picked up women I didn't know." Then for weeks, he would quit drinking, start mornings with a 10-mile run. "You know, this kind of very American sports training — I will fix this by taking radical action." Schwarzenegger voice: "If there's a problem, I will train myself out of it. I will work harder."

Various delays were holding up the publication of his short-story collection Girl With Curious Hair. He started to feel spooked. "I'm this genius writer," he remembered. "Everything I do's gotta be ingenious, blah, blah, blah, blah." The five-year clock was ticking again. He'd played football for five years. Then he'd played high-level tennis for five years. Now he'd been writing for five years. "What I saw was, 'Jesus, it's the same thing all over again.' I'd started late, showed tremendous promise — and the minute I felt the implications of that promise, it caved in. Because see, by this time, my ego's all invested in the writing. It's the only thing I've gotten food pellets from the universe for. So I feel trapped: 'Uh-oh, my five years is up, I've gotta move on.' But I didn't want to move on."

Costello watched while Wallace slipped into a depressive crisis. "He was hanging out with women who were pretty heavily into drugs — that was kind of alluring to Dave — skanking around Somerville, drinking himself blotto."

It was the worst period Wallace had ever gone through. "It may have been what in the old days was called a spiritual crisis," he said. "It was just feeling as though every axiom of your life turned out to be false. And there was nothing, and you were nothing — it was all a delusion. But you were better than everyone else because you saw that it was a delusion, and yet you were worse because you couldn't function."

By November, the anxieties had become locked and fixed. "I got really worried I was going to kill myself. And I knew, that if anybody was fated to fuck up a suicide attempt, it was me." He walked across campus to Health Services and told a psychiatrist, "Look, there's this issue. I don't feel real safe."

"It was a big deal for me, because I was so embarrassed," Wallace said. "But it was the first time I ever treated myself like I was worth something."

By making his announcement, Wallace had activated a protocol: Police were notified, he had to withdraw from school. He was sent to McLean, which, as psychiatric hospitals go, is pedigreed: Robert Lowell, Sylvia Plath, Anne Sexton all put in residences there; it's the setting for the memoir Girl, Interrupted. Wallace spent his first day on suicide watch. Locked ward, pink room, no furniture, drain in the floor, observation slot in the door. "When that happens to you," David said, smiling, "you get unprecedentedly willing to examine other alternatives for how to live."

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Wallace spent eight days in McLean. He was diagnosed as a clinical depressive and was prescribed a drug, called Nardil, developed in the 1950s. He would have to take it from then on. "We had a brief, maybe three-minute audience with the psychopharmacologist," his mother says. Wallace would have to quit drinking, and there was a long list of foods — certain cheeses, pickles, cured meats — he would have to stay away from.

He started to clean up. He found a way to get sober, worked very hard at it, and wouldn't drink for the rest of his life. Girl With Curious Hair finally appeared in 1989. Wallace gave a reading in Cambridge; 13 people showed up, including a schizophrenic woman who shrieked all the way through his performance. "The book's coming out seemed like a kind of shrill, jagged laugh from the universe, this thing sort of lingering behind me like a really nasty fart."

What followed was a phased, deliberate return to the world. He worked as a security guard, morning shift, at Lotus Software. Polyester uniform, service baton, walking the corridors. "I liked it because I didn't have to think," he said. "Then I quit for the incredibly brave reason that I got tired of getting up so early in the morning."

Next, he worked at a health club in Auburndale, Massachusetts. "Very chichi," he said. "They called me something other than a towel boy, but I was in effect a towel boy. I'm sitting there, and who should walk in to get their towel but Michael Ryan. Now, Michael Ryan had received a Whiting Writers' Award the same year I had. So I see this guy that I'd been up on the fucking rostrum with, having Eudora Welty give us this prize. It's two years later — it's the only time I've literally dived under something. He came in, and I pretended not very subtly to slip, and lay facedown, and didn't respond. I left that day, and I didn't go back."

He wrote Bonnie Nadell a letter; he was done with writing. That wasn't exactly her first concern. "I was worried he wasn't going to survive," she says. He filled in Howard, too. "I contemplated the circumstance that the best young writer in America was handing out towels in a health club," Howard says. "How fucking sad."

Wallace met Jonathan Franzen in the most natural way for an author: as a fan. He sent Franzen a nice letter about his first novel, The Twenty-Seventh City. Franzen wrote back, they arranged to meet in Cambridge. "He just flaked," Franzen recalls. "He didn't show up. That was a fairly substance-filled period of his life."

By April of 1992, both were ready for a change. They loaded Franzen's car and headed for Syracuse to scout apartments. Franzen needed "somewhere to relocate with my wife where we could both afford to live and not have anyone tell us how screwed up our marriage was." Wallace's need was simpler: cheap space, for writing. He had been researching for months, haunting rehab facilities and halfway houses, taking quiet note of voices and stories, people who had fallen into the gaps like him. "I got very assertive research- and finagle-wise," he said. "I spent hundreds of hours at three halfway houses. It turned out you could just sit in the living room — nobody is as gregarious as somebody who has recently stopped using drugs."

He and Franzen talked a lot about what writing should be for. "We had this feeling that fiction ought to be good for something," Franzen says. "Basically, we decided it was to combat loneliness." They would talk about lots of Wallace's ideas, which could abruptly sharpen into self-criticism. "I remember this being a frequent topic of conversation," Franzen says, "his notion of not having an authentic self. Of being just quick enough to construct a pleasing self for whomever he was talking to. I see now he wasn't just being funny — there was something genuinely compromised in David. At the time I thought, 'Wow, he's even more self-conscious than I am.' "

Wallace spent a year writing in Syracuse. "I lived in an apartment that was seriously the size of the foyer of an average house. I really liked it. There were so many books, you couldn't move around. When I'd want to write, I'd have to put all the stuff from the desk on the bed, and when I'd want to sleep, I would have to put all the stuff on the desk."

Wallace worked longhand, pages piling up. "You look at the clock and seven hours have passed and your hand is cramped," Wallace said. He'd have pens he considered hot — cheap Bic ballpoints, like batters have bats that are hot. A pen that was hot he called the orgasm pen.

In the summer of 1993, he took an academic job 50 miles from his parents, at Illinois State University at Normal. The book was three-quarters done. Based on the first unruly stack of pages, Nadell had been able to sell it to Little, Brown. He had put his whole life into it — tennis, and depression, and stoner afternoons, and the precipice of rehab, and all the hours spent with Amy watching TV. The plot motor is a movie called Infinite Jest, so soothing and perfect it's impossible to switch off: You watch until you sink into your chair, spill your bladder, starve, die. "If the book's about anything," he said, "it's about the question of why am I watching so much shit? It's not about the shit. It's about me: Why am I doing it? The original title was A Failed Entertainment, and the book is structured as an entertainment that doesn't work" — characters developing and scattering, chapters disordered — "because what entertainment ultimately leads to is 'Infinite Jest,' that's the star it's steering by."

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Wallace held classes in his house, students nudging aside books like Compendium of Drug Therapy and The Emergence of the French Art Film, making jokes about Mount Manuscript, David's pile of novel. He had finished and collected the three years of drafts, and finally sat down and typed the whole thing. Wallace didn't really type; he input the giant thing twice, with one finger. "But a really fast finger."

It came to almost 1,700 pages. "I was just terrified how long it would end up being," he said. Wallace told his editor it would be a good beach book, in the sense that people could use it for shade.

It can take a year to edit a book, re-edit it, print it, publicize it, ship it, the writer all the time checking his watch. In the meantime, Wallace turned to nonfiction. Two pieces, published in Harper's, would become some of the most famous pieces of journalism of the past decade and a half.

Colin Harrison, Wallace's editor at Harper's, had the idea to outfit him with a notebook and push him into perfectly American places — the Illinois State Fair, a Caribbean cruise. It would soak up the side of Wallace that was always on, always measuring himself. "There would be Dave the mimic, Dave the people-watcher," Costello says. "Asking him to actually report could get stressful and weird and complicated. Colin had this stroke of genius about what to do with David. It was a much simpler solution than anyone ever thought."

In the pieces, Wallace invented a style writers have plundered for a decade. The unedited camera, the feed before the director in the van starts making choices and cuts. The voice was humane, a big, kind brain tripping over its own lumps. "The Harper's pieces were me peeling back my skull," Wallace said. "You know, welcome to my mind for 20 pages, see through my eyes, here's pretty much all the French curls and crazy circles. The trick was to have it be honest but also interesting — because most of our thoughts aren't all that interesting. To be honest with a motive." He laughed. "There's a certain persona created, that's a little stupider and schmuckier than I am."

The cruise-ship piece ran in January 1996, a month before David's novel was published. People photocopied it, faxed it to each other, read it over the phone. When people tell you they're fans of David Foster Wallace, what they're often telling you is that they've read the cruise-ship piece; Wallace would make it the title essay in his first collection of journalism, A Supposedly Fun Thing I'll Never Do Again. In a way, the difference between the fiction and the nonfiction reads as the difference between Wallace's social self and his private self. The essays were endlessly charming, they were the best friend you'd ever have, spotting everything, whispering jokes, sweeping you past what was irritating or boring or awful in humane style. Wallace's fiction, especially after Infinite Jest, would turn chilly, dark, abstract. You could imagine the author of the fiction sinking into a depression. The nonfiction writer was an impervious sun.

The novel came out in February of 1996. In New York Magazine, Walter Kirn wrote, "The competition has been obliterated. It's as though Paul Bunyan had joined the NFL, or Wittgenstein had gone on Jeopardy! The novel is that colossally disruptive. And that spectacularly good." He was in Newsweek, Time, Hollywood people appeared at his readings, women batted their eyelashes, men in the back rows scowled, envied. A FedEx guy rang his bell, watched David sign for delivery, asked, "How's it feel to be famous?"

At the end of his book tour, I spent a week with David. He talked about the "greasy thrill of fame" and what it might mean to his writing. "When I was 25, I would've given a couple of digits off my non-use hand for this," he said. "I feel good, because I wanna be doing this for 40 more years, you know? So I've got to find some way to enjoy this that doesn't involve getting eaten by it."

He was astonishingly good, quick company, making you feel both wide awake and as if your shoes had been tied together. He'd say things like, "There's good self-consciousness, and then there's toxic, paralyzing, raped-by-psychic-Bedouins self-consciousness." He talked about a kind of shyness that turned social life impossibly complicated. "I think being shy basically means being self-absorbed to the point that it makes it difficult to be around other people. For instance, if I'm hanging out with you, I can't even tell whether I like you or not because I'm too worried about whether you like me."

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He said one interviewer had devoted tons of energy to the genius question. "That was his whole thing, 'Are you normal?' 'Are you normal?' I think one of the true ways I've gotten smarter is that I've realized that there are ways other people are a lot smarter than me. My biggest asset as a writer is that I'm pretty much like everybody else. The parts of me that used to think I was different or smarter or whatever almost made me die."

It had been difficult, during the summer, to watch his sister get married. "I'm almost 35. I would like to get married and have kids. I haven't even started to work that shit out yet. I've come close a few times, but I tend to be interested in women that I turn out to not get along very well with. I have friends who say this is something that would be worth looking into with someone that you pay."

Wallace was always dating somebody. "There were a lot of relationships," Amy says. He dated in his imaginative life too: When I visited him, one wall was taped with a giant Alanis Morissette poster. "The Alanis Morissette obsession followed the Melanie Griffith obsession — a six-year obsession," he said. "It was preceded by something that I will tell you I got teased a lot for, which was a terrible Margaret Thatcher obsession. All through college: posters of Margaret Thatcher, and ruminations on Margaret Thatcher. Having her really enjoy something I said, leaning forward and covering my hand with hers."

He tended to date high-strung women — another symptom of his shyness. "Say what you want about them, psychotics tend to make the first move." Owning dogs was less complicated: "You don't get the feeling you're hurting their feelings all the time."

His romantic anxieties were full-spectrum, every bit of the mechanics individually examined. He told me a joke:

What does a writer say after sex?

Was it as good for me as it was for you?

"There is, in writing, a certain blend of sincerity and manipulation, of trying always to gauge what the particular effect of something is gonna be," he said. "It's a very precious asset that really needs to be turned off sometimes. My guess is that writers probably make fun, skilled, satisfactory, and seemingly considerate partners for other people. But that the experience for them is often rather lonely."

One night Wallace met the writer Elizabeth Wurtzel, whose depression memoir, Prozac Nation, had recently been published. She thought he looked scruffy — jeans and the bandanna — and very smart. Another night, Wallace walked her home from a restaurant, sat with her in her lobby, spent some time trying to talk his way upstairs. It charmed Wurtzel: "You know, he might have had this enormous brain, but at the end of the day, he still was a guy."

Wallace and Wurtzel didn't really talk about the personal experience they had in common — depression, a substance history, consultations at McLean — but about their profession, about what to do with fame. Wallace, again, had set impossible standards for himself. "It really disturbed him, the possibility that success could taint you," she recalls. "He was very interested in purity, in the idea of authenticity — the way some people are into the idea of being cool. He had keeping it real down to a science."

When Wallace wrote her, he was still curling through the same topic. "I go through a loop in which I notice all the ways I am self-centered and careerist and not true to standards and values that transcend my own petty interests, and feel like I'm not one of the good ones. But then I countenance the fact that at least here I am worrying about it, noticing all the ways I fall short of integrity, and I imagine that maybe people without any integrity at all don't notice or worry about it; so then I feel better about myself. It's all very confusing. I think I'm very honest and candid, but I'm also proud of how honest and candid I am — so where does that put me?"

Success can be as difficult to recover from as failure. "You know the tic big-league pitchers have," his mother says, "when they know that they've pitched a marvelous game — but gee, can they do it again, so they keep flexing that arm? There was some of that. Where he said, 'OK. Good, that came out well. But can I do it again?' That was the feeling I got. There was always the shadow waiting."

Wallace saw it that way too. "My big worry," he said, "is that this will just up my expectations for myself. And expectations are a very fine line. Up to a certain point they can be motivating, can be kind of a flamethrower held to your ass. Past that point they're toxic and paralyzing. I'm scared that I'll fuck up and plunge into a compressed version of what I went through before."

Mark Costello was also worried. "Work got very hard. He didn't get these gifts from God anymore, he didn't get these six-week periods where he got exactly the 120 pages he needed. So he found distraction in other places." He would get engaged, then unengaged. He would call friends: "Next weekend, Saturday, you gotta be in Rochester, Minnesota, I'm getting married." But then it would be Sunday, or the next week, and he'd have called it off.

"He almost got married a few times," Amy says. "I think what ultimately happened is he was doing it more for the other person than himself. And he realized that wasn't doing the other person any favors."

Wallace told Costello about a woman he had become involved with. "He said, 'She gets mad at me because I never want to leave the house.' 'Honey, let's go to the mall.' 'No, I want to write.' 'But you never do write.' 'But I don't know if I'm going to write. So I have to be here in case it happens.' This went on for years."

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In 2000, Wallace wrote a letter to his friend Evan Wright, a Rolling Stone contributor: "I know about still having trouble with relationships. (Boy oh boy, do I.) But coming to enjoy my own company more and more — most of the time. I know about some darkness every day (and some days, it's all dark for me)." He wrote about meeting a woman, having things move too easily, deciding against it. "I think whatever the pull is for me is largely composed of wanting the Big Yes, of wanting someone else to want you (Cheap Trick lives). . . . So now I don't know what to do. Probably nothing, which seems to be the Sign that the universe or its CEO is sending me."

In the summer of 2001, Wallace relocated to Claremont, California, to become the Roy Edward Disney Chair in Creative Writing, at Pomona College. He published stories and essays, but was having trouble with his work. After he reported on John McCain's 2000 presidential campaign for this magazine, he wrote his agent that it would show his editor that "I'm still capable of good work (my own insecurities, I know)."

Wallace had received a MacArthur "genius" award in 1997. "I don't think it did him any favors," says Franzen. "It conferred the mantle of 'genius' on him, which he had of course craved and sought and thought was his due. But I think he felt, 'Now I have to be even smarter.' " In late 2001, Costello called Wallace. "He was talking about how hard the writing was. And I said, lightheartedly, 'Dave, you're a genius.' Meaning, people aren't going to forget about you. You're not going to wind up in a Wendy's. He said, 'All that makes me think is that I've fooled you, too.'"

Wallace met Karen Green a few months after moving to Claremont. Green, a painter, admired David's work. It was a sort of artistic exchange, an inter-disciplinary blind date. "She wanted to do some paintings based on some of David's stories," his mother says. "They had a mutual friend, and she thought she would ask permission."

"He was totally gaga," Wright recalls. "He called, head over heels, he was talking about her as a life-changing event." Franzen met Green the following year. "I felt in about three minutes that he'd finally found somebody who was up to the task of living with Dave. She's beautiful, incredibly strong, and a real grown-up — she had a center that was not about landing the genius Dave Wallace."

They made their debut as a couple with Wallace's parents in July 2003, attending the Maine culinary festival that would provide the title for his last book, Consider the Lobster. "They were both so quick," his father says. "They would get things and look at each other and laugh, without having to say what had struck them as funny." The next year, Wallace and Green flew to his parents' home in Illinois, where they were married two days after Christmas. It was a surprise wedding. David told his mother he wanted to take the family to what he called a "high-gussy" lunch. Sally Wallace assumed it was Karen's influence. "David does not do high gussy," she says. "His notion of high gussy is maybe long pants instead of shorts or a T-shirt with two holes instead of 18." Green and Wallace left the house early to "run errands," while Amy figured out a pretext to get their parents to the courthouse on the way to the lunch. "We went upstairs," Sally says, "and saw Karen with a bouquet, and David dressed up with a flower in his buttonhole, and we knew. He just looked so happy, just radiating happiness." Their reception was at an Urbana restaurant. "As we left in the snow," Sally says, "David and Karen were walking away from us. He wanted us to take pictures, and Jim did. David was jumping in the air and clicking his heels. That became the wedding announcement."

According to Wallace's family and friends, the last six years — until the final one — were the best of his life. The marriage was happy, university life good, Karen and David had two dogs, Warner and Bella, they bought a lovely house. "Dave in a real house," Franzen says, laughing, "with real furniture and real style."

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To Franzen's eye, he was watching Wallace grow up. There had been in David a kind of purposeful avoidance of the normal. Once, they'd gone to a literary party in the city. They walked in the front door together, but by the time Franzen got to the kitchen, he realized Wallace had disappeared. "I went back and proceeded to search the whole place," Franzen recalled. "He had walked into the bathroom to lose me, then turned on his heels and walked right back out the front door."

Now, that sort of thing had stopped. "He had reason to hope," Franzen said. "He had the resources to be more grown-up, a wholer person."

And then there were the dogs. "He had a predilection for dogs who'd been abused, and unlikely to find other owners who were going to be patient enough for them," Franzen says. "Whether through a sense of identification or sympathy, he had a very hard time disciplining them. But you couldn't see his attentiveness to the dogs without getting a lump in your throat."

Because Wallace was secure, he began to talk about going off Nardil, the antidepressant he had taken for nearly two decades. The drug had a long list of side effects, including the potential of very high blood pressure. "It had been a fixture of my morbid fear about Dave — that he would not last all that long, with the wear and tear on his heart," Franzen says. "I worried that I was going to lose him in his early 50s." Costello said that Wallace complained the drug made him feel "filtered." "He said, 'I don't want to be on this stuff for the rest of my life.' He wanted to be more a member of the human race."

In June of 2007, Wallace and Green were at an Indian restaurant with David's parents in Claremont. David suddenly felt very sick — intense stomach pains. They stayed with him for days. When he went to doctors, he was told that something he'd eaten might have interacted with the Nardil. They suggested he try going off the drug and seeing if another approach might work.

"So at that point," says his sister Amy, with an edge in her voice, it was determined, 'Oh, well, gosh, we've made so much pharmaceutical progress in the last two decades that I'm sure we can find something that can knock out that pesky depression without all these side effects.' They had no idea that it was the only thing that was keeping him alive."

Wallace would have to taper off the old drug and then taper on to a new one. "He knew it was going to be rough," says Franzen. "But he was feeling like he could finally afford a year to do the job. He figured that he was going to go on to something else, at least temporarily. He was a perfectionist, you know? He wanted to be perfect, and taking Nardil was not perfect."

That summer, David began to phase out the Nardil. His doctors began prescribing other medications, none of which seemed to help. "They could find nothing," his mother says softly. "Nothing." In September, David asked Amy to forgo her annual fall-break visit. He wasn't up to it. By October, his symptoms had become bad enough to send him to the hospital. His parents didn't know what to do. "I started worrying about that," Sally says, "but then it seemed OK." He began to drop weight. By that fall, he looked like a college kid again: longish hair, eyes intense, as if he had just stepped out of an Amherst classroom.

When Amy talked to him on the phone, "sometimes he was his old self," she says. "The worst question you could ask David in the last year was 'how are you?' And it's almost impossible to have a conversation with someone you don't see regularly without that question." Wallace was very honest with her. He'd answer, "I'm not all right. I'm trying to be, but I'm not all right."

Despite his struggle, Wallace managed to keep teaching. He was dedicated to his students: He would write six pages of comments to a short story, joke with his class, fight them to try harder. During office hours, if there was a grammar question he couldn't answer, he'd phone his mother. "He would call me and say, 'Mom, I've got this student right here. Explain to me one more time why this is wrong.' You could hear the student sort of laughing in the background. 'Here's David Foster Wallace calling his mother.' "

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In early May, at the end of the school year, he sat down with some graduating seniors from his fiction class at a nearby cafe. Wallace answered their jittery writer's-future questions. "He got choked up at the end," recalls Bennett Sims, one of his students. "He started to tell us how much he would miss us, and he began to cry. And because I had never seen Dave cry, I thought he was just joking. Then, awfully, he sniffled and said, 'Go ahead and laugh — here I am crying — but I really am going to miss all of you.' "

His parents were scheduled to visit the next month. In June, when Sally spoke with her son, he said, "I can't wait, it'll be wonderful, we'll have big fun." The next day, he called and said, "Mom, I have two favors to ask you. Would you please not come?" She said OK. Then Wallace asked, "Would your feelings not be hurt?"

No medications had worked; the depression wouldn't lift. "After this year of absolute hell for David," Sally says, "they decided to go back to the Nardil." The doctors also administered 12 courses of electroconvulsive therapy, waiting for Wallace's medication to become effective. "Twelve," Sally repeats. "Such brutal treatments," Jim says. "It was clear then things were bad."
Wallace had always been terrified of shock therapy. "It scares the shit out of me," he told me in 1996. "My brain's what I've got. But I could see that at a certain point, you might beg for it."

In late June, Franzen, who was in Berlin, grew worried. "I actually woke up one night," he says. "Our communications had a rhythm, and I thought, 'It's been too long since I heard from Dave.' " When Franzen called, Karen said to come immediately: David had tried to kill himself.

Franzen spent a week with Wallace in July. David had dropped 70 pounds in a year. "He was thinner than I'd ever seen him. There was a look in his eyes: terrified, terribly sad, and far away. Still, he was fun to be with, even at 10 percent strength." Franzen would sit with Wallace in the living room and play with the dogs, or step outside with David while he smoked a cigarette. "We argued about stuff. He was doing his usual line about, 'A dog's mouth is practically a disinfectant, it's so clean. Not like human saliva, dog saliva is marvelously germ-resistant.'" Before he left, Wallace thanked him for coming. "I felt grateful that he allowed me to be there," Franzen says.

Six weeks later, Wallace asked his parents to come to California. The Nardil wasn't working. It can happen with an antidepressant; a patient goes off, returns, and the medication has lost its efficacy. Wallace couldn't sleep. He was afraid to leave the house. He asked, "What if I meet one of my students?" "He didn't want anyone to see him the way he was," his father says. "It was just awful to see. If a student saw him, they would have put their arms around him and hugged him, I'm sure."

His parents stayed for 10 days. "He was just desperate," his mother says. "He was afraid it wasn't ever going to work. He was suffering. We just kept holding him, saying if he could just hang on, it would straighten. He was very brave for a very long time."

Wallace and his parents would get up at six in the morning and walk the dogs. They watched DVDs of The Wire, talked. Sally cooked David's favorite dishes, heavy comfort foods — pot pies, casseroles, strawberries in cream. "We kept telling him we were so glad he was alive," his mother recalls. "But my feeling is that, even then, he was leaving the planet. He just couldn't take it."

One afternoon before they left, David was very upset. His mother sat on the floor beside him. "I just rubbed his arm. He said he was glad I was his mom. I told him it was an honor."

At the end of August, Franzen called. All summer long he had been telling David that as bad as things were, they were going to be better, and then he'd be better than he'd ever been. David would say, "Keep talking like that — it's helping." But this time it wasn't helping. "He was far away," Franzen says. A few weeks later, Karen left David alone with the dogs for a few hours. When she came home that night, he had hanged himself.

"I can't get the image out of my head," his sister says. "David and his dogs, and it's dark. I'm sure he kissed them on the mouth, and told them he was sorry."

[From Issue 1064 — October 30, 2008]

James B. Stewart | The Birthday Party: How Stephen Schwarzman became private equity’s designated villain

Profiles
The Birthday Party
How Stephen Schwarzman became private equity’s designated villain.
by James B. Stewart February 11, 2008

On June 18, 2007, Stephen A. Schwarzman, the chairman and chief executive of the Blackstone Group, and his driver approached the Fifth Avenue entrance of the New York Public Library. Schwarzman, a member of the library’s board, was being honored that night. To his dismay, television reporters and cameramen were milling on the steps and the sidewalk. He evaded them by using a side entrance. A TV cameraman managed to penetrate the cocktail party that preceded the ceremony, and Schwarzman was startled when the glare of a camera-mounted spotlight hit him in the face.

In the previous few weeks, he had become the designated villain of an era on Wall Street—an era of rapacious capitalists and heedless self-indulgence that had driven the Dow Jones Industrial Average to new highs, along with the prices of luxury real estate and contemporary art, while the incomes of ordinary Americans stagnated or fell. Blackstone, the partnership that Schwarzman founded, in 1985, with Peter G. Peterson, Secretary of Commerce under Richard Nixon and a former chairman and C.E.O. of Lehman Brothers, was a new type of financial institution: a manager of so-called alternative assets, such as private-equity, real-estate, and hedge funds—esoteric vehicles that barely existed when Blackstone began but now accounted for trillions in assets. Most of the investments came from corporate and public pension funds, endowments of universities and other nonprofit institutions, insurance companies, and rich people. Blackstone was the world’s largest manager of these alternative assets, with $88 billion. Its investors included Dartmouth College, Indiana University, the University of Texas, the University of Illinois, Memorial Sloan-Kettering Cancer Center, and the Ohio Public Employee Retirement System. It had taken control of a hundred and twelve companies, with a combined value of nearly $200 billion. It had just completed what was at the time the largest private-equity buyout ever, the purchase, for $39 billion, of Equity Office Properties, and was on the verge of acquiring Hilton Hotels.

Blackstone was also about to become the largest private-equity firm to offer shares to the public. A week before the library tribute, the company disclosed, as required by the Securities and Exchange Commission, that Schwarzman would receive $677.2 million in cash from the public offering and that he would retain shares worth an estimated $7.8 billion, making him one of the richest men in the country. Coming soon after the lavish and widely chronicled sixtieth-birthday party that Schwarzman had given himself in February, an unflattering profile on the front page of the Wall Street Journal, and strident calls from Congress to raise taxes on private-equity funds like Blackstone’s, the disclosures could only tarnish the public offering.

Nevertheless, investors were eager to buy shares. On June 21st, a heavily oversubscribed public offering was priced at thirty-one dollars a share, at the top of the projected range, causing Blackstone to be valued at $31 billion—not far behind the venerable Lehman Brothers. The next day, Blackstone shares, trading under the symbol BX, opened at $36.45 and closed slightly lower, at $35.06. Schwarzman’s friend James B. (Jimmy) Lee, Jr., a vice-chairman at J. P. Morgan Chase, sent him a congratulatory e-mail:


You were like Indiana Jones over the last few weeks. . . . They rolled giant boulders at you . . . fired poison darts at you . . . threw you into that giant snake pit . . . and yet you still found the grail, and got the blonde. . . . Bravo.

Schwarzman had demonstrated extraordinary timing. Just days before, two Bear Stearns hedge funds holding mortgage-backed securities collapsed—the first tremors of what became a full-blown credit crisis. By the end of the year, major financial institutions had recorded losses on mortgages and related financial instruments of more than a hundred billion dollars. The chiefs of Merrill Lynch and Citigroup lost their jobs. Citigroup, Merrill, Bear Stearns, Morgan Stanley, and UBS turned in near-desperation to sovereign wealth funds (funds held by governments) and rich investors in the Middle East and Asia for capital infusions.

In this chaotic environment, Blackstone had managed to avoid nearly all the pitfalls of subprime mortgages and mortgage-backed securities. It specializes in commercial, not residential, real estate. Indeed, its hedge funds are designed to profit from market turmoil, and the enormous assets that it manages deliver steady fees in good markets and bad. The stock peaked on its first day of trading, however; by mid-January, its value had been cut almost in half.

Schwarzman still had his cash from the offering, which turned out to be $684 million, but his Blackstone stake, worth $8.83 billion after the first day, was worth just $4.62 billion.

Schwarzman has made himself an easy target for critics of Wall Street greed and conspicuous consumption. He lives in splendor in Manhattan, and he has an expanding collection of trophy residences that are lavish even by the current standards of Wall Street. In May, 2000, Schwarzman paid $37 million—reportedly a record sum at the time for a Manhattan co-op—for a thirty-five-room triplex on Park Avenue that was once owned by John D. Rockefeller, Jr. In 2003, he paid $20.5 million for Four Winds, the former E. F. Hutton estate in Florida, which occupies a choice spit of land between the ocean and the Intracoastal waterway. Designed by the Palm Beach architect Maurice Fatio, the thirteen-thousand-square-foot, British-colonial-style estate was a designated historic landmark; local residents were startled when Schwarzman had the house razed. The ensuing fourteen-month wrangle between Schwarzman and his New York architects and the Landmarks Preservation Commission filled countless pages of testimony. It turned out that Schwarzman had got approval for a proposed expansion, and, as the house was dismantled, workers had numbered and stored everything so that it could be rebuilt in an expanded form. In 2006, he paid $34 million for a Federal-style house, on eight acres on Mecox Bay, in the Hamptons, that was previously owned by the Vanderbilt heir Carter Burden.

Schwarzman also owns a coastal estate in Saint-Tropez and a beachfront property in Jamaica. He typically spends summer weekends and August in East Hampton; July in Saint-Tropez; and winter weekends in Palm Beach. His children use the house in Jamaica; he rarely goes there. The five properties and their renovations appear to have cost Schwarzman at least a hundred and twenty-five million dollars. “I love houses,” he told me recently. “I’m not sure why.”

Whatever his indulgences, Schwarzman has always drawn a strict line between personal expenses and Blackstone’s business operations; colleagues say that he keeps a close watch on office spending. The company’s offices, on Park Avenue, are furnished with slightly threadbare traditional rugs and furniture and a mixture of modest prints and photographs. (The offices are scheduled to be renovated later this year.) Blackstone does not own a corporate jet. Instead, it uses Schwarzman’s private jet. (In 2006, the company paid him $1.54 million for the privilege.) Schwarzman must approve any other chartered flights. Partners pay for their own lunches; there is a twenty-five-dollar limit on dinner expenses for employees working at night. Even subscriptions to the Wall Street Journal are deemed personal expenses, and all the partners pay for their own. One exception has always been company events; Blackstone has a long history of opulent anniversary and closing dinners, often at the Four Seasons, which is referred to by some as the Blackstone cafeteria. Still, until recently Schwarzman had trouble getting a prime table in the Grill Room at lunch. According to a friend of both men, when Schwarzman asked Peterson why, his co-founder replied, “It takes more than just money.”

Another traditional measure of wealth is charitable activities and donations, and Schwarzman’s philanthropic activities have received wide notice. With a hundred and fifty million dollars from the public-offering proceeds, Blackstone established the Blackstone Foundation. Schwarzman has contributed to or raised money for a long list of nonprofit institutions, including the Frick Collection, the Whitney Museum, Phoenix House, the Red Cross, the Inner-City Scholarship Fund, the American Museum of Natural History, New York City Outward Bound, the Asia Society, and the Central Park Conservancy. His competitive instincts are as keen here as in business; he told me that every fund-raiser that he has chaired or at which he has been the honoree has set a new record. He is on the board not only of the New York Public Library but of the Frick and of New York City Ballet. Jimmy Lee jokes that his friend has received more accolades and raised more money for the Catholic Archdiocese of New York than any other Jew; Edward Cardinal Egan is a close friend. (Schwarzman has also raised money for the American Jewish Committee.) As chairman of the board of trustees of the Kennedy Center, in Washington, he shares a box every year with the President and the center’s honorees.

In America, board memberships and contributions to worthy causes in the arts and education have traditionally helped cleanse a man of any taint of new money and can temper populist resentment of great wealth. For someone of Schwarzman’s wealth and business prominence, affiliations with boards—which are stocked with the lawyers, bankers, and business executives who are Blackstone’s clients, potential clients, or advisers to them—are all but essential. A board member is expected to make contributions that roughly correlate to the size of his personal fortune. In Schwarzman’s case, this aspect of the pact has generated considerable controversy and ill will, especially given his overt displays of wealth.

Schwarzman pledged ten million dollars to the Kennedy Center, but the pledge was to be fulfilled over ten years, which gave it a present value significantly lower than ten million. According to a fellow member of the library board, “He has given, but not remotely what he could. A big capital campaign is coming up. We hope that he’ll give very generously.”

One of Schwarzman’s most controversial proposed gifts was to Yale, his alma mater, which, during the late nineties, agreed to name the freshman dining commons after Schwarzman in return for $17 million. Some people at Yale thought the commitment was in hand, but it emerged that Schwarzman’s gift would actually be a contribution to one of Blackstone’s investment partnerships on Yale’s behalf. No money would change hands until the fund was liquidated, and there was a risk that the investment might be worth far less than $17 million (although there was also the possibility that it would be worth more). Yale balked at trading a significant naming opportunity for what it considered a speculative commitment, and Schwarzman did not give the money. (The naming opportunity remains.)

The president of Yale, Richard C. Levin, won’t discuss the incident other than to say, “We’re still good friends.” He points out that Schwarzman has raised money for Yale as a member of the executive committee of the current fund-raising campaign and was co-chair of the New York region during the previous one. “He’s been supportive and enthusiastic.” Yale, of course, is hoping for generosity in the future. Levin says, “Now that he’s reached a new level of liquidity, we hope that he’ll become a world-class philanthropist.”

Schwarzman’s longtime friend Jeffrey Rosen, a Yale classmate who is now a deputy chairman at Lazard, defended Schwarzman’s cautious approach. “He believes he can compound the money at a higher rate than an institution can. By reinvesting it now, he’ll have more to give away. In five years, who knows how much he could have? Steve is at the dawn of his philanthropic stage. He’ll mature into this.”

Schwarzman himself says, “I’m thinking through how I want to approach that area of philanthropy. Assuming that Blackstone does well over time, and the credit markets recover, I’ll have significant resources for charitable activities.”

Schwarzman has seemed reluctant to embrace the time-honored relationship between wealth, class, good works, and self-restraint. Richard Beattie, a prominent lawyer who is also a longtime friend, told me, “Steve laughs about the old Wasp image—he doesn’t buy into that old-money standard. He thinks it’s ridiculous.” Schwarzman may be rethinking that view, however; he says that he is pondering a major gift, one likely to silence his critics, but that it would be premature to say more.

Schwarzman’s many friends stoutly defend his right to spend or give away his wealth as he sees fit. I spoke to a number of people who attended the sixtieth-birthday party; most felt that, as one friend put it, “it’s his money, and he should be able to do what he wants with it.” He added, “Isn’t this America?”

I knew Schwarzman in the nineteen-eighties, when he was at Lehman Brothers, but I hadn’t seen him for twenty years. Late last year, we met in the Blackstone offices on several occasions. Although he has gained weight, and his dark hair is now streaked with gray, he has the same dark eyes, and he exudes a restless intensity and an enthusiasm that belies his age. Before we sat down, he showed me around his office, an ample corner space, but modest by the standards of chief executives. Half of his desk is crowded with family photographs. Behind his chair, along the windows facing Park Avenue, are scores of photographs of him with prominent people, including President Bush and Laura Bush, the German Chancellor Angela Merkel, Cardinal Egan, Michael Bloomberg, Colin Powell, President Hu Jintao of China, Bruce Wasserstein, and the 2006 honorees at the Kennedy Center—Andrew Lloyd Webber, Zubin Mehta, Dolly Parton, Smokey Robinson, and Steven Spielberg.

As we began talking, he seemed defensive. Nearly everyone, including Peterson, had advised him to stay out of the news and to avoid reporters, but many of his friends and associates had already spoken to me, and he seemed to warm up when I asked him to recount his path from suburban Philadelphia boy to Wall Street billionaire. He has a vivid memory for details, whether it involves an anecdote from his first job on Wall Street or a troubled buyout or his first merger.

Schwarzman and his younger brothers, Mark and Warren, who are twins, grew up in the suburb of Abington; his mother still lives nearby. Schwarzman’s father came from a comfortably middle-class family of merchants in Philadelphia; his mother grew up poor, in the Bronx. Her father died when she was ten, and her mother worked to support the family. “My father was very bright,” Schwarzman says. “My mother had enormous drive. Put that together, and that’s my gene pool.”

Schwarzman attended Abington High School, where he played basketball and ran track. His height—he is five feet eight—worked against him, but he says he learned that by working and training harder than anyone else “you gain an advantage at the margin.” He ran sprints and cross-country. He likes to tell a story about how, early in one cross-country race, he slipped and broke his wrist. Determined to set a record for the course, he got up and kept running, his arm tucked against his side, and set the record. At the finish, his coach asked him what was wrong. “I broke my wrist,” Schwarzman said, then went into shock and was rushed to the hospital. In 2004, he donated a new football stadium to Abington High School—the Stephen A. Schwarzman Stadium.

Schwarzman’s father and grandfather ran a drygoods store, Schwarzmans, which sold bed and bath linens, draperies, and housewares. When Stephen was fifteen, he approached his father with a plan to open more stores and expand into a national chain, “like Sears.”

“That’s a bad idea,” his father told him. So he suggested expanding in Pennsylvania. Finally, he pleaded with him to open just one more store. All his ideas were rejected. “I’m very happy with my life as it is,” his father explained as Schwarzman kept badgering him. “I’ve got enough money to send you and your brothers to college. We’ve got a nice house and two cars. I don’t want any more in life.” Schwarzman found this incomprehensible. He turned to his mother. “That’s your father,” she said. “He’s happy!”

Schwarzman’s father retired at the age of seventy, after selling the store. It closed ten years later, the victim of mounting competition from national chains like Bed Bath & Beyond.

“I admired him,” Schwarzman said of his father. “He knew what he wanted and he achieved it. But that’s not for me. I wanted a much bigger stage. I didn’t know what it was, but I knew something had to be out there.”

When Schwarzman arrived at Yale, in 1965, he was drawn to superiors—certain professors and administrators—and to students who shared his sense of ambition and were likely to get ahead. “I’ve always been comfortable with people who run things, whether it was the principal of my high school or the president of the university,” Schwarzman told me. “I empathize with their problems, with their issues. I ask myself, How would I do that? It’s very easy if you think about what they think. It comes naturally to me.” His academic record wasn’t distinguished, and he often seemed impatient with intellectual pursuits. In his senior year, he was chosen by Skull and Bones.

The summer before his sophomore year, while recovering from a touch-football injury, Schwarzman decided to study classical music, a subject about which he knew almost nothing. He started with Gregorian chants and worked through the repertoire chronologically, listening to recordings and reading related texts. He studied every major work and every major conductor, often spending, he claims, eight to ten hours a day listening to the stereo system. By late summer, he had reached Tchaikovsky. He was especially captivated by the ballet music from “The Sleeping Beauty.” “I’d close my eyes and listen, and I could see dancing,” he recalled. Back at Yale that fall, he shared his newfound enthusiasm with the physicist Horace Taft, the master of Davenport College, where Schwarzman lived, and his wife, Mary Jane, who loved the ballet. The couple grew fond of him, and Mary Jane tutored him on the fine points of ballet and arranged trips to performances for him.

There were no dance performances on Yale’s all-male campus, but the New England women’s colleges were filled with aspiring dancers. It occurred to Schwarzman that with these women he could stage a dance performance, and charge admission. “Put attractive women in tights and you’d sell out,” he said. He got in touch with Walter Terry, the dance critic for Saturday Review, and persuaded him to attend. He scheduled the performance for a weeknight, when nothing else was competing for students’ attention. The event sold out, and Terry wrote about it in Saturday Review, in the issue of March 29, 1969. In the article, Schwarzman, asked about his future, said, “I can’t afford the arts right now. That takes money. So I’m going to a school of business administration.”

Schwarzman had majored in Intensive Culture and Behavior, an interdisciplinary subject, and hadn’t taken a single economics or accounting course. Law school or business school seemed a logical next step, but he had little sense of where either would lead. During his senior year, he had sent a letter to W. Averell Harriman, the wartime Ambassador to Russia and former governor of New York, who was serving as the President’s representative at the Paris peace talks. “There weren’t that many people in that era to admire, and I wrote him a letter saying I admired him and wanted to meet him,” Schwarzman recalled. Harriman, a fellow Skull and Bones man, invited him to lunch at his town house, on the Upper East Side, occasionally interrupting their talk to take calls from Cyrus Vance, in Paris. According to Schwarzman, Harriman asked him, “Young man, are you independently wealthy?”

“No, sir, I’m not.”

“Well, I am the son of a very rich man, which has made an enormous difference—that’s the reason you’re seeing me. If you have any interest in the political world, I advise you to become independently wealthy yourself.”

Schwarzman applied to several law and business schools. He was accepted at Harvard Business School. Feeling that he needed a break, he asked to defer his admission for a year.

To earn some extra money, Schwarzman worked for the Yale alumni office and then the admissions office. Larry Noble, a 1953 graduate who worked in the alumni office, introduced Schwarzman to others in Yale’s extensive alumni network, including his classmate Bill Donaldson, who was running an investment-banking firm, Donaldson, Lufkin & Jenrette. (Donaldson went on to become chairman and C.E.O. of the New York Stock Exchange and chairman of the S.E.C.) Schwarzman waited in the reception area for half an hour, watching as young bankers hurried past in shirtsleeves, followed by secretaries wearing short skirts and big gold earrings. “It seemed fast-moving, intense,” Schwarzman recalled. “Everyone seemed happy.” When Donaldson asked him why he wanted to work at the firm, Schwarzman replied, “Mr. Donaldson, I don’t even know what you do. But if you have such great-looking girls and intense guys then I want to do it.” Schwarzman was hired at a salary of ten thousand five hundred dollars, which, by his account, was “five hundred dollars more than anyone else in my class at Yale.” He quickly realized that he was unqualified. He left after six months, but, before leaving, he had lunch with Donaldson. “I’m sorry I didn’t make more of a contribution,” Schwarzman recalls saying. “If you don’t mind my asking, why did you hire me and waste your money?”

“It’s simple,” Donaldson replied. “One day you’ll be the head of this firm.”

“You must be kidding. Why?”

“It’s my instinct. You have something special and I want to bet on it.”

(Donaldson says that he has no recollection of such an incident, but he does recall telling Schwarzman that if he returned to the firm he would do well.)

Schwarzman met his first wife, Ellen Philips, during his second year at Harvard Business School, where she worked as a researcher and helped grade essays. She was the daughter of Jesse Philips, a wealthy Ohio industrialist. They were married in 1971 and had two children, Elizabeth, in 1976, and Edward, in 1979. Looking for a job after graduating, Schwarzman was shocked when both Goldman Sachs and First Boston turned him down, but he had offers from Lehman Brothers and Morgan Stanley. He claims that he was only the second Jew to get a job offer from Morgan Stanley, but he chose Lehman. Being at Lehman worked to his advantage. As one former Lehman banker describes the firm, “It was survival of the fittest. You produced the business and then you fought over the proceeds. It was every man for himself.” Bruce Wasserstein, then at First Boston, and soon to be regarded as the leading mergers-and-acquisitions banker on Wall Street, said to Eric Gleacher, the head of M. & A. at Lehman, and Schwarzman, “I don’t understand why all of you at Lehman Brothers hate each other. I get along with both of you.” To which Schwarzman replied, “If you were at Lehman Brothers, we’d hate you, too.”

Tropicana, an important Lehman client that was merging with Beatrice Foods, asked Schwarzman to represent the company in the sale, even though Schwarzman had never worked on a merger. (A Tropicana executive had been impressed by a bond presentation Schwarzman made, and felt that, despite his inexperience, he could explain complicated aspects of a merger to a relatively unsophisticated board.) The $488-million deal, in 1978, marked Schwarzman’s emergence as a lead banker in M. & A., a field that was growing, along with junk-bond empires and a new entrepreneurial breed, the corporate raider.

Schwarzman was too new and too young to rival M. & A. strategists like Wasserstein, but his work habits and his competitive drive impressed clients and other bankers and lawyers in that tightly knit world. A former Lehman colleague recalls a concert at Carnegie Hall that he and Schwarzman attended with their wives. As soon as the lights dimmed and the music began, Schwarzman opened his briefcase, pulled out a sheaf of papers, and began working. Though his wife chastised him at intermission, he resumed working as soon as they returned to their seats. He typically was awake by 4:30 or 5 A.M., and often worked until 10 P.M.—a habit that continues today. Schwarzman was a showman as well. Another Lehman colleague told me that once, when he and Schwarzman were to call on Harry Gray, then the acquisitive chief executive of the industrial conglomerate United Technologies, based in Hartford, they travelled to the meeting by helicopter and limousine. When the colleague asked why they didn’t simply drive or take the train, Schwarzman replied, “You have to make an impression. ‘If you want my time, I’m so valuable this is how I travel.’ ” According to Schwarzman, Gray and United Technologies became a significant Lehman Brothers client.

Schwarzman says that he consistently earned the highest bonus of anyone in his Lehman Brothers “class.” He was made a partner in 1978, just six years after arriving at the firm. In 1980, the Sunday Times ran a profile of Schwarzman, with the headline “STEPHEN SCHWARZMAN, LEHMAN’S MERGER MAKER.” In the office the next day, he was beaming and brandishing a copy. “He loved the publicity, loved the attention,” a friend recalls. At Lehman’s annual firm outing that spring, at a country club, his colleagues had a copy of the article printed on a framed mirror, so that Schwarzman’s face would be reflected whenever he read it.

In 1973, Peter G. Peterson joined Lehman as vice-chairman, and soon afterward became chairman and C.E.O. In addition to having been Nixon’s Secretary of Commerce, Peterson, a former chairman and chief executive of Bell & Howell, had headed Nixon’s Council on International Economic Policy and was a prominent member of the Council on Foreign Relations—a man very much in the postwar mold of an Averell Harriman, a John J. McCloy, or a Nelson Rockefeller, moving easily between private business and public service. He was sought after more for his contacts and his influence than for his business skills; in his work for Nixon, he had travelled incessantly and had got to know the chief executives of the world’s major businesses, often dropping their names in conversation. Peterson was a self-made man of an earlier generation, who had grown up in Kearney, Nebraska. His parents were Greek immigrants who ran a restaurant, where Peterson worked throughout his youth. He remembers people lining up at soup kitchens during the Depression and begging for food at the restaurant.

After investing much of his life savings in an equity stake in Lehman, Peterson discovered, three weeks after his arrival at the firm, that Lehman’s head trader, Lew Glucksman, had run up millions of dollars in losses, drastically depleting the firm’s capital and calling into question its ability to survive. The firm was in disarray. Recruited to help build up the roster of corporate clients, Peterson was suddenly made chief executive, mainly because, as one partner recalls, “he hadn’t been around long enough for anyone to hate him.”

Peterson’s instinct was to try to reconcile the warring factions. Urged by many to fire Glucksman, Peterson argued that Glucksman was a talented trader who had had only one bad year; instead, he named him to the management committee, and later promoted him to co-C.E.O. Peterson set up task forces to evaluate the firm’s strengths, weaknesses, and business plan, and asked Schwarzman to serve on one.

Schwarzman, who was twenty-seven, again demonstrated an extraordinary ability to ingratiate himself with an older man—Peterson was forty-seven—in a position of authority. Peterson recalls that Schwarzman was “extremely gifted, probably one of the two or three most gifted people I’ve met in the M. & A. world. More important, he had balance. He could make the major judgment calls. He knew when a C.E.O. needed to be called. He could gain their confidence better than anyone. I could bring in the business, but I couldn’t implement it. He was great at this, great to work with. He’d carry out the deal, and keep me informed.” Peterson recalls that his goal was to get to No. 2 or No. 3 in the M. & A. rankings. “I’d invite in a C.E.O.,” Peterson said. “I’d meet him, and then I’d invite Steve in for lunch. We got a lot of business this way.”

In 1983, Glucksman organized a luncheon to celebrate Peterson’s tenth anniversary at Lehman. The firm gave him a Henry Moore sketch, and Glucksman spoke enthusiastically of their relationship as co-C.E.O.s. By then, Glucksman’s trading operation was making record profits, and Peterson was credited with saving the firm. Business Week had run a cover story on the firm’s resurrection: “Back from the Brink Comes Lehman Brothers.” Five weeks later, Glucksman summoned Peterson to his office and told him that he had the votes to force him out. “I have to run the place by myself,” Glucksman insisted. Peterson asked if he could at least be given an opportunity to resign, and Glucksman refused.

Schwarzman urged Peterson to fight, insisting that they could rally enough support to block Glucksman. But Peterson saw no point in waging a civil war that might destroy the firm, and said that it was time to start something new. As part of his severance package, he insisted on generous stock options, which would be valuable if the firm was ever sold.

Peterson’s departure did not forestall civil war at Lehman Brothers, and within months the firm was losing money. Schwarzman, accurately gauging the ambitions of Peter Cohen, the chairman of American Express, to expand into the potentially lucrative field of investment banking, approached Cohen (a neighbor in East Hampton) and delivered a persuasive assessment of the benefits to American Express of buying Lehman. In 1984, just nine months after Peterson’s departure, Lehman was sold for $360 million. To many, it was Schwarzman’s most brilliant deal yet: he had enriched himself and his mentor while turning the tables on Glucksman and freeing himself to join Peterson in launching a new partnership.

Schwarzman initially refused to accompany Peterson in that new venture, because Peterson already had a partner, the investor Eli Jacobs, but Peterson and Jacobs soon quarrelled. This falling out cleared the way for Schwarzman to join Peterson, in 1985. Peterson and Schwarzman created a founders’ agreement that vested power in their hands alone, guaranteeing that one faction of partners couldn’t start a war over control of the firm. Peterson and Schwarzman had equal equity shares. Initially, they were going to call the firm Peterson & Schwarzman, with Schwarzman conceding top billing to Peterson, but Peterson argued that they needed something more institutional, or future partners would want their names added, leading to constant changes and an unwieldy name. It was Schwarzman’s idea to call it Black—schwarz, in German—stone, petros, in Greek. “I thought that was brilliant,” Peterson says.

“My job was to bring in business,” Peterson explains. He launched a direct-mail campaign, targeting a hundred chief executives, in which he declared that Blackstone would not back hostile deals and would have no conflicts of interest with investment-banking clients, since Blackstone had no investment-banking clients. According to Peterson, the effort resulted in retainer agreements with E. F. Hutton, Firestone, Union Carbide, Bristol-Myers, and Sony, whose chairman, Akio Morita, knew Peterson from his White House years. Peterson, in turn, joined the Sony board, solidifying his links with Japan.

Schwarzman and Peterson had bigger ambitions than a boutique firm: they wanted an institution with an array of businesses that could deliver a “comparative advantage,” the mantra of competition taught at Peterson’s alma mater, the University of Chicago. Schwarzman was also eager to expand into something less subject to volatile market cycles than M. & A. An obvious target was private equity, the new, sanitized name for the leveraged buyouts that had resulted in the scandals of the nineteen-eighties. Combining a merger-advisory business with a buyout fund was bold; leveraged-buyout funds were considered hostile to existing managements, and that was antithetical to Peterson’s insistence that Blackstone’s activities be strictly friendly to its corporate clients. But he and Schwarzman were convinced that a private-equity fund could be useful to established managements, too.

Shortly after they formed the company, a cautionary scandal involving Dennis Levine, who had been a Schwarzman protégé in Lehman’s M. & A. department, became public. Levine was an aggressive banker who had occupied the office next to Schwarzman’s, and who showed an uncanny ability to foresee hostile bids, which, in turn, often enabled Lehman to approach the target company to defend it. In 1986, Levine, who had left Lehman and was at Drexel Burnham Lambert, was arrested and charged with insider trading. This launched the biggest insider-trading scandal in Wall Street history. Levine agreed to coöperate with investigators, and eventually pleaded guilty to four felony counts. Among those implicated in the ensuing investigation were the arbitrager Ivan Boesky and the junk-bond financier Michael Milken. In short order came the collapse of Drexel Burnham, Milken’s firm and the principal force behind the takeover boom; the collapse of the junk-bond market; the savings-and-loan debacle, which was in part a consequence of junk bonds; and the 1990-91 recession.

According to Schwarzman, much of Levine’s insider trading had involved confidential information that he gleaned from his work at Lehman, including deals that Schwarzman had worked on. “Seldom have I felt so violated or betrayed,” Schwarzman said. “I personally talk to every class of first-year associates and analysts and tell them the story of Dennis Levine. I lecture them on what inside information is and how important it is to keep it confidential. Integrity is a core value. Dennis Levine helped drive that home for me.”

“Blackstone puts a huge emphasis on integrity,” Peterson told me. “We have a code of conduct, and every employee signs it every year. You have an affirmative responsibility to speak out about anything questionable, or unethical, you know about. If you don’t, you’re dismissed. In twenty-three years, we haven’t had one scandal.”

Despite the 1987 crash, the ensuing collapse of the junk-bond market, and the recession, the nineteen-nineties were the beginning of a golden age for private equity. As with leveraged buyouts, the power of private equity, and the wellspring of its remarkable profits, is leverage—the use of borrowed money. The private-equity fund raises capital from rich investors, often pension funds or large institutions. (The fund is “private” in that only invited investors are allowed to participate.) It uses the capital to buy an asset, typically a publicly traded company or a unit of a publicly traded company; restructures it financially to add layers of debt; manages it aggressively to cut costs and boost cash flow; then, after five to seven years, pays off the debt and resells the company or relaunches it on the public markets at an enormous profit. The power of leverage is vast: if you invest ten dollars in an asset and sell it a year later for twelve, you have earned twenty per cent. If you invest one dollar, borrow nine, pay a dollar in interest on the debt (an eleven-per-cent rate), and sell the asset for the same twelve dollars, your return is one hundred per cent.

Much as private-equity firms like to extoll the brilliance of their M.B.A.-holding partners and associates, this isn’t a difficult concept, which raises the question of why public companies don’t embrace the same high-leverage, high-profit model. The reason is that private-equity funds exist to generate capital gains, which are taxed at fifteen per cent; public companies focus on earnings, which are taxed at a much higher rate. Public companies are typically valued at a multiple of earnings, and the interest payments associated with high leverage may all but eliminate earnings. Private companies don’t report earnings. Freed from any preoccupation with quarterly earnings reports, private-equity firms like to praise their long-term perspective, but “long term” means between five and seven years, at which point they sell the asset to realize a capital gain and move on to new conquests. Most public companies are managed so as to exist in perpetuity. Even so, in recent years public companies have added huge amounts of leverage to their balance sheets, often by buying back their shares or taking on debt for acquisitions.

In addition to the turbocharging effects of leverage, private-equity operations like Blackstone benefit from an exceedingly generous compensation structure. The private-equity manager takes a management fee—two per cent is common—of the capital raised from the firm’s investors and twenty per cent of all gains (a stake known as “carried interest”), under the formula known on Wall Street as “two and twenty.” What’s left over is returned to the investors. The fees have no relation to the size or sophistication of the deal or the hours worked. Private-equity bankers reap the same twenty-per-cent carried interest on a multibillion-dollar deal as on one involving several million. A few firms have pushed higher, to twenty-five- and even to thirty-per-cent carried interest, but few have been willing to undercut the standard. Investors have tolerated the exorbitant fees, as long as they have been able to get results that surpass what they can earn in conventional stock and bond funds.

Several early Blackstone deals illustrate the firm’s strategy of combining high-leverage buyouts with M. & A. advisory work for established clients. In 1987, USX (the former U.S. Steel) was under pressure to raise its stock price in order to fend off the corporate raider Carl Icahn. To raise cash for a stock buyback, USX decided to sell its transport subsidiaries, which hauled iron ore and other raw materials into USX’s factories and finished steel out of them. It was an unglamorous, low-growth business, but it had a captive customer in USX and predictable cash flow to service debt. Peterson argued that Blackstone was friendly, whereas other bidders might prove little better than a raider, like Icahn. His argument prevailed, and USX sold the subsidiaries, for $640 million, to a company owned fifty-one per cent by Blackstone and forty-nine per cent by USX and the company’s managers. Blackstone invested just $13 million, with the rest in debt financing. USX used the cash to buy back shares, and Icahn eventually went away. According to Blackstone, the project ultimately generated a return of more than two thousand per cent.

Leverage greatly magnifies gains, but it exacerbates losses in equal measure. Recessions are especially treacherous. An early Blackstone employee, recalling 1990 and ’91, says, “These were tough years. Everyone was trying to prove themselves. The culture hadn’t jelled.” Though Schwarzman could be affable and charming—he called every partner on his or her birthday and sang “Happy Birthday”—he was impatient with failure and felt under intense pressure to prove himself. He sharply criticized employees like Steven Winograd and Brian McVeigh in front of others, forcing them out of the firm in the wake of bad deals. He clashed with Larry Fink, who departed with his money-management unit, BlackRock, which now manages more than a trillion dollars in assets. Roger Altman left to become Deputy Treasury Secretary in the Clinton Administration, and eventually started his own private-equity firm, Evercore.

Turnover among partners was relatively high. The stress and the long hours damaged Schwarzman’s marriage; he and Ellen divorced in 1990, though he remained close to his children.

In 1993, Schwarzman hired another refugee from Lehman Brothers, J. Tomilson Hill, the former co-chief executive, to run Blackstone’s fledgling offerings in the world of hedge funds, the third major prong in Blackstone’s expansion strategy. Hedge funds have been the fastest-growing financial vehicles of the past five years—there are some eight thousand—and are fuelled by the same quest for higher returns and low volatility that has driven the private-equity boom. Hedge funds got their name from investment strategies that sell stocks short, or “hedge” against a declining market, thereby generating high returns in both bull and bear markets, but they embrace many investment strategies. The only thing they have in common with private-equity partnerships is the two-and-twenty (or higher) fee structure. Only recently has Blackstone launched its own hedge funds; its focus had been on what is known as a “fund of funds” approach, meaning that it steered clients’ money into suitable hedge funds. In return, Blackstone takes a fee of one per cent of the assets. The combination of private-equity, real-estate, and hedge funds has given Blackstone a presence in all three of the major alternative-asset classes.

In 1993, Schwarzman was introduced to Christine Hearst, a glamorous forty-year-old who had recently been divorced from Austin Hearst, an heir to the Hearst fortune. Christine, an intellectual-property lawyer, grew up on Long Island, the daughter of a New York City fireman. The two were married in 1995, at Schwarzman’s Manhattan apartment, and the reception was held at the Frick Collection.

The severe decline in stock prices between March, 2000, and October, 2002, during which the S. & P. 500 dropped forty-nine per cent and the technology-heavy Nasdaq composite an astounding seventy-eight per cent, was devastating for the large financial companies, pension funds, and nonprofit institutions that depended on equity gains to finance their operations and to fund their obligations to retirees. The traditional investment mix of equities and bonds had served them well during the nineteen-nineties; now they found their asset values and endowments shrinking and, with them, the spending power that balanced operating budgets. Suddenly, the most desirable investments among institutions were those which, like hedge funds, private-equity, natural resources, and emerging-market funds, don’t necessarily track the stock market—so-called non-correlated assets.

Blackstone, too, struggled during the recession of 2001 and the collapse of the technology bubble, but not to the same extent as venture-capital firms and technology investors. As new money fled the stock market and poured into the firm, Schwarzman’s management style evolved, but only incrementally. Partners recall that, for all the firm’s success, Schwarzman acted as though they were only a deal away from failure. One person recalls a voice mail containing harsh criticism of a troubled deal that followed moments after the “Happy Birthday” call. A Blackstone investor recalls a golf outing with Blackstone partners where the game ended abruptly after the fifteenth hole, because Schwarzman expected his partners to be on time for the cocktail party. “It was ridiculous,” this investor says. “When he says jump, they jump. Still, I have to say they’re very disciplined in their business.”

Early on, Peterson agreed that the firm should have only one chief executive, and readily deferred to Schwarzman, a stickler for detail who chose the firm’s wallpaper and furnishings and interviewed every prospective employee. But, as the firm grew, Schwarzman came under pressure to delegate some management responsibilities and to carve out bigger equity stakes for both existing partners and new executives. Among those arguing for a change in course was Peterson, whose partnership with Schwarzman, perhaps inevitably, was increasingly strained. Although Schwarzman and Peterson had initially had equal equity stakes in the firm, over the years, as equity was awarded to other partners, those grants had come disproportionally from Peterson’s holdings. Peterson agreed that Schwarzman’s role merited a larger stake; indeed, he’d told Schwarzman that he wanted to spend less time at the firm and, in return, was willing to relinquish some of his equity. Still, the negotiations were painful. At one point, Peterson said that he would not give up any more, and he insisted on an agreement in writing. By the eve of the public offering, Schwarzman owned almost thirty per cent of the firm; Peterson’s interest had shrunk to eleven per cent.

Schwarzman and Peterson had different approaches to risk. Peterson was inherently more cautious, and Schwarzman found that every time Blackstone ventured into a new line of business he had to persuade Peterson to go along.

One banker who knows both men well explains, “At this point, there’s tremendous animosity between Steve and Pete. Steve gets the credit, but it was Pete’s Rolodex that built that firm. Pete gave and gave equity to accommodate more people, but Steve never gave. Pete may not be perfect. He encumbered the process. Steve did deserve the greater participation. But Steve never understood the importance of Pete’s broad-gauge nature.” A friend of Schwarzman’s put it this way: “The son eclipsed the father. Neither feels he’s gotten sufficient respect from the other.”

These tensions need to be kept in perspective: the Schwarzman-Peterson partnership, which has survived twenty-three years, is one of the most successful and enduring in Wall Street history. While conceding that there were some issues over equity shares, Schwarzman told me, “I have enormous respect for Pete, and we have a seamless relationship. Ours is the longest adult relationship in my life. We’ve never disagreed on any major issue. We do come at life from different points of view. He’s eighty-one—a different generation. He’s a good strategist and planner, a great thinker. We end up reaching the same conclusions.”

Schwarzman recognized that if he was to remain immersed in deals and larger strategic initiatives Blackstone needed a manager. In early 2002, he approached Hamilton (Tony) E. James, the tall, cerebral, patrician head of the investment-banking arm of Donaldson, Lufkin & Jenrette, which had recently been acquired by Credit Suisse First Boston. Already wealthy from the Credit Suisse First Boston deal, James, who had run his own operations for fifteen years, was planning to pursue personal interests, after helping with the merger. But Schwarzman courted him over a series of dinners at his apartment, and every meeting, James told me, “was more intriguing.” Schwarzman argued that Blackstone was outgrowing its entrepreneurial phase and needed more professional management. James had been deeply involved in all of Blackstone’s lines of business while he was at Donaldson. “People say Steve is a tough boss,” James said. “I don’t mind this; I’m happy to be accountable. Just give me the scope to run the business. He convinced me that I’d be empowered. If others didn’t like it, he’d support me one hundred per cent.”

James arrived in the summer of 2002, the stock market’s nadir. He streamlined operations, brought in new partners, imposed new screening standards for potential deals, and expanded committee oversight, so that deals weren’t based on one person’s judgment. He completed an internal evaluation called “Respect at Work,” aimed at boosting morale and coöperation. He worked to soften Blackstone’s aggressive image with clients and other dealmakers. “I didn’t want to be the most difficult partner—I wanted to get the first call,” he says. In contrast to Schwarzman, James worked toward consensus. “You can’t dictate,” he says. “I was more a guide than a leader.” To the surprise of many, Schwarzman delegated broad authority to James to run the firm.

Peterson gives James much of the credit for the firm’s recent success. “At my age, I can afford to be objective,” he told me. “Steve deserves credit. He’s aggressive, focussed, and growth-oriented. But Tony James is a remarkable manager. People love working for him. If you ask the top people why they’re here, they’ll tell you it’s because of Tony James.”

Blackstone’s alternative-asset businesses were not alone in benefitting from the extremely low interest rates and lax lending standards of the post-September 11th and post-Internet-bubble economy. Residential-real-estate values, which also benefit from high leverage, surged as well, becoming what is now widely conceded to be a bubble that rivalled or surpassed the Internet frenzy in magnitude. Not only were there billions of dollars in home refinancings as Americans drew cash from the rising value of their real estate; subprime lending—to borrowers who had bad credit records or who didn’t document their incomes, assets, or jobs—had soared in recent years. This huge expansion in risky loans was made possible by Wall Street banks such as Citigroup and Merrill Lynch, which bundled the loans together and parcelled out the resulting “collateralized debt obligations”—C.D.O.s—to investors eager for higher returns in a low-interest-rate environment. The theory was that any one of these loans was at high risk of default, but a large and diversified portfolio in which only a small percentage of loans defaulted was so safe that it merited an AAA rating from the credit agencies. Though these loans were hugely profitable for the banks that packaged and marketed them, Blackstone wasn’t tempted. Jonathan Gray, the co-head of Blackstone’s real-estate group, explains that subprime mortgages and related securities weren’t Blackstone’s area of expertise. “We invest in what we know and understand,” he said, noting that the firm has less than one per cent in residential real estate. Schwarzman tries to avoid business meetings when he’s in the Hamptons, but in June, 2006, Michael Klein, the chairman and co-chief executive of markets and banking at Citigroup, came over for lunch. Schwarzman and Klein tried to meet at least once a year outside the office to brainstorm, but this year’s discussion had taken on added urgency as stock markets soared and private equity reaped ever larger gains. Klein unveiled a detailed plan for taking the Blackstone Group public, in an initial public offering that, he argued, would value the company at an astounding $30 billion. This wasn’t the first time someone had broached the idea of going public—Goldman Sachs had been raising the issue for some time, especially after its own successful offering, in 1999. Schwarzman, who had taken so many companies public, had often pondered the possibility. Still, at that point no private-equity or other alternative-asset managers had taken their firms public. It was one thing for full-service investment banks like Goldman Sachs and Morgan Stanley to be publicly owned; they were closer to commercial banks than to private partnerships, and much of their income was fee-driven. But private-equity firms like Blackstone had long argued that their financial interests and incentives were identical to those of their investors: Blackstone partners, by investing in the same partnerships and having a carried interest, prospered when their clients did. If Blackstone was a public company, it would need to consider its shareholders’ interests along with those of its investors.

A public offering would also expose aspects of Blackstone’s business that even close observers could only guess at, such as its ownership structure, its partners’ equity shares, its compensation, and, most important, the exorbitant profits that Blackstone was earning, and, by extrapolation, the exorbitant profits of other private-equity and alternative-asset-management firms. At a time of growing discrepancies in income between the poor and the rich, how would the public react to these revelations? It also seemed peculiar that a private-equity firm, which championed the virtues of private ownership, would elect to go public.

Still, Michael Klein convinced Schwarzman that Blackstone could retain many of the benefits of private ownership, and that it would be able to align the interests of management and investors. Investors would continue to invest, Schwarzman felt, as long as Blackstone delivered superior results. Public ownership would generate capital for investment and expansion and a currency—common stock—that could be used for acquisitions. “Michael wasn’t the first to propose this, but he was the first who really understood the earnings power and the growth potential,” Schwarzman says. “I told him the only problem was that his valuation was too low.”

Peterson told me that he also discussed these issues at length with Schwarzman, including the fact that Schwarzman needed to be discreet about his own wealth. “I could have blocked this, but I didn’t,” he said. “Still, I told him, you’re going to be the focus of intense scrutiny. You’ll be the first. You’d better be prepared.”

As secret preparations went forward, at one point involving as many as a hundred and fifty auditors poring over Blackstone’s records, the buyout boom moved into high gear, with a record sixteen hundred announced deals in the first half of 2007 alone. Stock markets rose as many stocks were valued to include the premiums that a private-equity firm could be expected to pay. Banks competed aggressively to lend, and the spread between junk bonds and U.S. Treasuries—historically, a measure of investors’ tolerance for risk—reached an all-time low. In this potentially lucrative buyout environment, Blackstone began to hold back. “We were cautious in the so-called golden age,” Schwarzman says. “We were the least aggressive of all the big firms in the first half of 2007. We were very concerned about the high prices of deals and the vast amount of liquidity fuelling the boom—we had articulated this at an investor conference in May, 2006. Things always come to an end, and when they do they end badly. We only did two large deals—Hilton Hotels and Equity Office Properties.”

Despite Peterson’s advice to avoid personal publicity, Schwarzman began planning the party for his sixtieth birthday, which fell on February 14, 2007. Weeks before the event, the Times ran an article, by Landon Thomas, previewing the plans and speculating about the guest list: “MORE RUMORS ABOUT HIS PARTY THAN HIS DEALS.” The article also mentioned Schwarzman’s tradition of extravagant Christmas parties, including the most recent, which had had a James Bond theme, and featured models circulating dressed as “Bond girls,” with Schwarzman in a tuxedo. “Steve does not like little things, whether it’s deals, Christmas parties, or his own homes,” the investor Roland Betts, who is a member of the Yale Corporation, told the Times.

Schwarzman and his press spokesman tried to discourage the story, without success, and it came out just as the huge Equity Office Properties deal reached its climax. In the event, the scale of the party disappointed no one. Part of the cavernous Park Avenue armory was transformed into a large-scale replica of the Schwarzmans’ Manhattan apartment by Philip Baloun, the party planner who designed the Prince Charles gala at Lincoln Center. Replicas of Schwarzman’s art collection were mounted on the walls, including, at the entrance, a full-length portrait of him by Andrew Festing, the president of the Royal Society of Portrait Painters. Dinner was served in a faux night-club setting, with orchids and palm trees. Guests dined on lobster, filet mignon, and baked Alaska, and were offered an array of expensive wines. (Schwarzman himself doesn’t drink.)

The comedian Martin Short was the m.c.; he poked fun at his short, rich host. The composer-pianist Marvin Hamlisch played a number from “A Chorus Line.” Patti LaBelle sang a song written for Schwarzman, and Rod Stewart sang a medley of his hits, for a reported fee of a million dollars.

Fortune put Schwarzman on the cover of its March 5th issue, proclaiming him “Wall Street’s Man of the Moment: with a history-making deal and headline-making birthday party, Steve Schwarzman has become the symbol of a new era in finance. And that’s always a risky proposition.”

This kind of attention was exactly what Peterson had feared. “I’m a son of Greek immigrants,” Peterson told me. “For years, I’d shop at sales to save twenty-five per cent and take the shuttle to Washington to save money. I waited twenty-seven years to buy the apartment I wanted. Steve made fun of me, said it was irrational. Maybe he’s right. Steve is a different generation. They were brought up differently. They like to consume. They’re boomers. They want it all and they want it now. To hell with the future!”

On March 22nd, Blackstone filed a preliminary prospectus for an initial public offering, revealing that it had more than $78 billion in assets under management and listing its high returns. Two months later, an updated filing disclosed the existence of an investment by a sovereign wealth fund, the State Investment Company of China; it agreed to pay $3 billion for a non-voting stake of just under ten per cent. The Chinese investment—the first equity stake ever taken by the fund—immediately valued Blackstone at more than $32 billion.

On June 12th, Blackstone added the details that everyone on Wall Street had been waiting for: how much Schwarzman would make in the deal and how much of the firm he and Peterson owned. The prospectus disclosed that Schwarzman would take out $677.2 million from the offering and would retain a twenty-four-per-cent ownership stake, valued at nearly $8 billion, at the expected thirty-dollar-a-share offering price. Peterson would withdraw $1.9 billion, to be placed in a charitable trust, and would retain just a four-per-cent stake, valued at $1.3 billion. Tony James would withdraw $188.5 million and retain a 4.9-per-cent stake, valued at more than $1.6 billion.

“You have no idea what an impression this made on Wall Street,” a friend of Schwarzman’s who works at another bank says. “You have all these guys who have spent their entire lives working just as hard to make twenty million. Sure, that’s a lot of money, but then Schwarzman turns around and, seemingly overnight, has eight billion.”

Two days later, the Wall Street Journal ran a front-page story, by Monica Langley and Henny Sender, that recapped the now notorious birthday party, and quoted Schwarzman’s Palm Beach chef, who said that Schwarzman dined on four-hundred-dollar stone crabs and complained about an employee’s shoes because he found the squeak of their rubber soles distracting. The article quoted Schwarzman saying that his business philosophy is “I want war—not a series of skirmishes” and “I always think of what will kill off the other bidder.”

Schwarzman was wounded by the Journal article, which, he noted defensively, didn’t mention that he had sent the chef’s daughter to summer schools at Harvard and Yale and kept the chef on his payroll while he was undergoing treatments for cancer.

The combination of self-indulgence, seeming disregard for those less privileged, and militant hostility toward rivals inflamed many on Wall Street who were already envious of Schwarzman’s record and the additional fortune that he was about to gain.

The day after the Journal story appeared, Senators Max Baucus and Chuck Grassley proposed legislation that would subject private-equity partnerships like Blackstone, whose earnings had been taxed at the lower rate of “passive income,” to ordinary corporate income taxes. In the House, Charles Rangel proposed that carried interest be taxed at the ordinary income rate rather than at the lower capital-gains rate. The measure would effectively increase Blackstone’s tax rate from fifteen per cent to thirty-five per cent, seriously eroding its profitability, and, according to the Joint Committee on Taxation, would generate an extra twenty-six billion dollars over the next ten years.

On June 22nd, the opening day of trading, Blackstone shares reached a high of thirty-eight dollars. On a day that should have been the pinnacle of Schwarzman’s career, with an achievement likely to earn him a place among such figures of finance as J. P. Morgan and Andrew Carnegie, Schwarzman stayed away from the Stock Exchange and didn’t ring the traditional closing bell, apprehensive about further unflattering publicity. He had no plans for that night. His wife was on a long-scheduled African safari. He worked until after 8 P.M., then returned to his apartment and had dinner in the library, in front of the TV. He wanted to escape, perhaps with an episode of “CSI.” He clicked on the remote, and stumbled onto a live panel discussion on CNBC about him and the Blackstone offering.

“I stared at this in complete amazement,” Schwarzman said. “All I wanted was a normal private moment in front of the TV. I thought it was all over.” He sat for about ten minutes before turning the TV off, feeling odd and alone.

Within weeks of Blackstone’s offering, Wall Street was shaken by rising defaults in subprime mortgages, which exposed the inherent risk in all those supposedly safe, diversified C.D.O.s. Losses appeared throughout the global financial system, surfacing in everything from foreign banks to American pension funds, and even a few very safe money-market funds.

Although Blackstone avoided the mortgage and credit debacles that are expected to lead to more than two hundred and sixty billion dollars in losses, the resulting credit freeze caused asset values to plunge, credit to disappear, and leverage to decline, all of which affected Blackstone’s core businesses. Its earnings for its first two quarters as a public company disappointed investors, and its stock went down. Early last month, Blackstone couldn’t raise the financing for the buyout of the mortgage unit of PHH Corporation, which it had agreed to buy in 2007, and the deal collapsed. At the end of the month, Blackstone’s proposed buyout of Alliance Data Systems, for $6.8 billion, also collapsed, and A.D.S. is suing Blackstone to force it to complete the deal. The “bad ending” that Schwarzman predicted in 2006 seemed to be at hand.

“I’ve lived through periods of illiquidity before,” he said. “Asset prices come down. The economy slows or even goes into recession. Then the cycle re-starts. We buy at lower prices with less leverage. There are great opportunities for high returns—much better than the so-called golden age we’ve just come through. From our perspective, we see greater opportunities going ahead.”

When I was talking with Schwarzman in his office, I asked him how it felt to be the focus of so much negative attention.

He paused, and his look hardened.

“How does it feel? Unattractive. No thinking person wants to be reduced to a caricature.” He continued, “Why did this happen? We went public in June, 2007, at the top of a giant bull market, with a society undergoing rapid change. Globalization. Job dislocation. Middle-class anxiety. Private equity is seen as a symbol of the people who are prospering from a world in flux. That’s a lightning-rod situation.”

He said that “plenty of people” had tried to advise him on how extremely rich people are expected to behave—the charitable activities, the good works, the donations. “But you know what?” he said. “I don’t feel like a wealthy person. Other people think of me as a wealthy person, but I don’t. I feel the same as when I was a fifth-year associate trying to make partner at Lehman Brothers. I haven’t changed. I still think of Blackstone as a small firm. We have to prove ourselves in every deal. Every piece of paper is important. I’m always still trying.”

Schwarzman told me that in 1993, at forty-six, he was found to have a rare blood-protein deficiency that put him at risk of a blood clot or embolism, a condition that had killed his grandfather at the same age. He is tested every few weeks and takes a pill each day, which he says should help guarantee him a normal life span. Still, “it’s a reminder that life is fleeting,” he said. “Every day should be a good day. People fool themselves that they’ll be here forever. I get a daily wake-up call that that’s not true. We have limited time, and we have to maximize it. Live life intensely—I’ve always believed in that. I’m happy to be here. I was happy to make it to sixty. That’s the simple reason for the birthday party.” ♦