Summer 2013 – Endowing a New “Chinese” Rhodes

A $300 million gift aims to smooth Western relations with China by mixing top students in Beijing.

Stephen Schwarzman managed to turn his Blackstone Group into an investment behemoth without benefit of ever having won a Rhodes Scholarship. Yet he still seems to wish he’d gotten one.

Today, Schwarzman’s extensive philanthropic giving is focused particularly on learning, from his support of New York’s Inner-City Scholarship Fund to a $100 million donation to the New York Public Library. In April, he announced his most ambitious foray yet into education philanthropy: the Schwarzman Scholars, a program modeled on the Rhodes, which will every year unite 200 top young college graduates from the U.S., China, and other nations to study together at Tsinghua University in Beijing (the alma mater for many of China’s elites). With his own $100 million gift and his promise to raise another $100 million in matching funds, Schwarzman has put the new $300 million venture on track to launch in 2016.

Schwarzman’s announcement made a splash, with reactions ranging from glowing admiration for his vision to concern about censorship or Chinese government control (Schwarzman insists that the courses will have academic integrity and independence). One Beijing-based dissident speculated that the project is an attempt to curry favor with Chinese officials who could be helpful to Blackstone’s business goals.

One man’s ingratiation, of course, can be another’s pragmatism. The large role that China will inevitably play in forthcoming global developments demands deeper personal ties and more mutual understanding among the next generation of leaders, argues Schwarzman. Thus the mix of idealism and utility in his mingling of future elites.

Philanthropy recently spoke with Stephen Schwarzman about the Schwarzman Scholars program and what he hopes it will achieve.

PHILANTHROPY: What inspired this gift?

SCHWARZMAN: I’m on the advisory board of the Tsinghua School of Economics and Management, and they asked me if I’d be interested in helping them attract more international students in conjunction with several initiatives around their 100th anniversary. I had to think about what would get top students to want to study in China, since its top two universities are ranked in the 50 to 60 range in the world. So I realized if we were going to do this, we would have to do something different and create a truly spectacular experience and environment that would be intellectually challenging and attractive to them on a host of different levels.

PHILANTHROPY: What problem did you want to address?

SCHWARZMAN: The problem I’m trying to address is what to do about the tensions and instability that will grow between China and its largest competitors, as it emerges as the world’s largest economy in the next decade or two.

China is growing at approximately three times the rate of the West. At the same time that China is rising, the developed world is either stalling or decreasing in its economic importance. China is creating 10 million jobs per year, while Europe, for example, is producing none. That creates frustration and anger in the developed world.

Economic problems, certainly, and potentially military problems as well may develop. We’re already seeing some of that tension occurring between China and Japan.

Attracting future leaders to China to study for a one-year master’s degree so they can understand the country, its culture, and its motivations is one important way to help address this issue and seemed like a constructive contribution. Over time, that group of top-level students from across the globe will grow into 10,000 people, and they will be in a good position to interpret China to their home populations, while also giving feedback to China itself on how its actions are perceived in the outside world.

PHILANTHROPY: How do you create something influential from scratch?

SCHWARZMAN: I looked around for an analog for this that we could learn from. The Rhodes Scholars program was an obvious model. We took its interview program, selection process, and procedures as a guide. This seemed a pretty compelling way to get some of the best and the brightest of a generation to experience where the world is going, as opposed to where the world has been. The axis of global economic activity is obviously moving towards the Pacific.

Success will require making the program really attractive to candidates with many alternatives. Our building at Tsinghua looks like an Oxford college, so the living environment will be familiar to Western students. Our academic program has a mix of Chinese and Western professors. We offer access to Chinese leaders and trips around the country so that the students will meet experts and see other parts of China and have Chinese mentors in their field of study.

For example, in law, a student in our program could be assigned to a Chinese law firm, and learn how law firms work in China, as opposed to his or her home country. Students will meet their mentors’ families, and gain a knowledge base beyond what they’d get just by being students.

Like the Rhodes program, we’ll have a mix of students. Attendees will be 45 percent American, 20 percent Chinese, and 35 percent from the rest of the world (split among the top 20 economies). This will be a unique program with no real precedent in China.

PHILANTHROPY: You’ve been going to China since 1990, so you’ve gained some perspective on the country. I’d be curious to know about Chinese philanthropy. Are you expecting donations from Chinese nationals? Has there been any buy-in from Chinese donors? Is there excitement among some of the businessmen with whom you’ve interacted?

SCHWARZMAN: We did not approach any Chinese potential donors before the announcement; we did that to keep the program confidential. So we don’t know yet what that response will be. My expectation is that it will be pretty good.

Philanthropy is really just kick-starting in that part of the world. The U.S. is quite an unusual country with respect to philanthropy, and other countries are slowly developing more of a tradition. Because this program was endorsed by the new president of China, it’s an easier place for Chinese to give and I expect we’ll have good results. We are already seeing some interest.

PHILANTHROPY: Cecil Rhodes intended his scholarships to create a sense of common purpose, even ethnic solidarity, among English-speaking people. There was a built-in aspect that grew out of the English colonial experience. The program you’re devising cuts across language and culture and has a globalist perspective. How are you going to create a sense of solidarity within that cadre?

SCHWARZMAN: First of all, the courses are going to be taught in English, which is the global language. Without any impetus, about half of Tsinghua’s courses are already taught in English.

When Cecil Rhodes died in 1902 and endowed his program, it was a nationalized world. Our program is a mirror image. We’re now in a world where people tend to think globally. China is in the thick of a globalized world based on international trade and the Internet. I think that’s a pretty unifying magic.

The fact that the students are going to live together will also unify. There will be eight students living in a suite with a shared living room. This community of scholars will have its own building. Of course, there’ll also be lots of other people at the university, people students will meet when they bridge out into extracurricular activities.

PHILANTHROPY: Is there anybody you looked to as a model for successful philanthropy?

SCHWARZMAN: No, I just look at problems and try to figure out how I can be helpful. I generally try to transfer models that have already worked to new situations. So I look back, but just for lessons learned, not to echo people in any way.

PHILANTHROPY: Are there any other big gifts you’re mulling?

SCHWARZMAN: Schwarzman Scholars is more than just a monetary gift. It involves designing the architecture of the program itself, the building, the curriculum, the endowment funds, the extracurricular activities. I want the program to be a demonstration of excellence, so this will absorb me for some time. We’re still in the start-up period. I still have to raise another $100 million in addition to the $100 million I’ve given and the $100 million I’ve raised already. So for the next couple years I need to focus on the start-up of this program.

In the interim, there are all kinds of philanthropy that I do as a regular course. They just aren’t as consequential and personal as this.

PHILANTHROPY: Let’s take a look at the distant future. What does success look like at the 100th anniversary of this scholarship program?

SCHWARZMAN: A century from now, there’ll be 10,000 outstanding graduates of the Schwarzman Scholars program. They’ll be all around the world. A lot of those students will be in positions of thought leadership in their home countries.

Historically, over a 5,000-year period, China produced 20 to 25 percent of global GDP for the most part. It currently has just 12 percent. After World War II, the country was basically devastated and stood at 2 percent of global GDP. We can reasonably expect that China will return to the range of 25 percent GDP. If it does, then this program will be an important link between the two largest economies in the world. I am a strong believer in the U.S. economic future as well.

I see this program as the highest prestige student exchange between the two countries. I see it helping transition the Chinese education system toward a bit more of a Western model. And I see a much better-informed global community regarding China as a result. That’s what I see.