Business Beyond Borders

Business Beyond Borders


From Everest to San Francisco, Alumnus Richard Blum Touches Many Lives

By Cyril Manning



On the cold slopes of the approach to Everest, the world’s highest dental clinic sits at 11,600 feet. Here, Nawang Doka Sherpa tends to Sherpas, Tibetan people, and trekkers in a land where, until recently, children had four times the normal level of tooth decay and locals blamed evil spirits for such problems. Nawang’s service here would never have been possible without Richard C. Blum, BS 58, MBA 59, the prodigious private equity financier and philanthropist who has made helping her people one of his life’s greatest passions.

In 1968, on his first trek in the Himalayas, Blum struck up a strong friendship with a Sherpa guide named Passang Kami, Nawang Doka’s father. A few years later P.K. (as he was known) confided that without an education, his five daughters would surely spend the rest of their days carrying loads over the mountains. “At that time no Sherpani had ever gone to high school,” says Blum. “I said, ‘P.K., your daughters are daughters to me; you get them into school, and I’ll pay for it.’ We educated all five; two went on to college in the US; and the youngest one, Nawang Doka, went on to become a dentist for her people.”

Blum’s commitment to those five Sherpani girls is typical of his approach to investing in businesses, philanthropy, and friendship: Dick Blum invests for the long term, has a knack for seeing and nurturing latent value, and ultimately, cares first and foremost about improving human lives. The Haas School has named Blum the 2009 recipient of its Lifetime Achievement Award to recognize his countless achievements in the worlds of both business and philanthropy.

“Dick Blum is an exemplar of the type of leader that Berkeley-Haas strives to produce,” says Dean Rich Lyons. “A pioneering businessman, he invested in Asia decades before others, but didn’t stop there. He also dedicated himself to improving the lives of people in remote regions of Asia through his philanthropy and hard work.”

At 74, Blum has proven beyond all doubt that his approach is a recipe for success. Born the son of a clothing salesman who died when he was 10, Blum attended San Francisco public schools, earned a BS and MBA from Berkeley, and went on to build a fortune worth hundreds of millions of dollars by investing in troubled, undervalued corporations and breathing new life into them. His astute business skills have played no small role in his other pursuits, from his leadership on the UC Board of Regents to his philanthropic endeavors in the Himalayas.

Along the way, Blum also has helped his wife, US Sen. Dianne Feinstein, with numerous successful political campaigns. Married in 1980, the couple shares a passion for politics, civil rights, and of course, family — including their four daughters and six grandchildren.

Hybrid Strategy
Blum is known as a tough negotiator, but he takes spiritual cues from his time in the Himalayas and his close friend, the Dalai Lama. His downtown San Francisco office could rival a museum of Himalayan art, adorned with ornate Buddha statues, painted and embroidered scrolls known as Thangkas, and a colorful Tibetan prayer wheel that stands just outside Blum’s private office.

The offices house both Blum Capital Partners, which Blum founded in 1975, and his American Himalayan Foundation, the humanitarian organization that carries on his vision for helping the Himalayan people. On the business side, Blum Capital’s staff includes investment professionals typical of a private equity firm and portfolio managers who invest in public stocks. This structure mirrors what Blum calls his firm’s “hybrid investment strategy” of focusing as much on adding value to companies as on acquiring and selling them.

“We will do buyouts like anybody else,” Blum explains, “but we look for value in the market. We take large positions in companies and work with them — sometimes for a decade or more.”

His early successes included Ringling Bros.-Barnum & Bailey Circus in the late 1960s with previous employer Sutro & Co. and Northwest Airlines in the late 1980s. During the dot-com bust, Blum’s firm acquired a majority interest in CB Richard Ellis, now the world’s largest real estate firm, where Blum still serves as board chairman.

Most recently, one of Blum’s holdings — Myer, Australia’s largest department store chain — was moving forward on an IPO to raise up to $2.5 billion (Australian dollars). Blum Capital was part of a consortium that acquired the firm in 2006. If the IPO is successful, Blum and his limited partners will enjoy a return of approximately seven times on their money.

During the pre-recession equity frenzy, Blum’s approach may have looked downright conservative, but in retrospect it seems instructive. “Over a period of 30 years, I would say our balance sheets have about one-third the leverage of the average private equity guys, and nonetheless our returns over that period have been right around 20 percent. So I guess we must have done something right,” he says.

Leading Change at UC
Blum’s skill at getting results has been just as critical to his high-profile role on the UC Board of Regents. As chairman, he issued a scathing public critique of the university system and went on to lead a sweeping leadership overhaul in the office of the president.

Over 18 months, the administration substantially downsized its bureaucracy and cut operating costs by $169 million a year. And “the team of people there now is infinitely better,” Blum says, referring to UC President Mark Yudof, whom Blum personally recruited.

Blum also took a hard look at the University of California’s balance sheet. “There was a time when we were told we had very little debt capacity, about $7 billion, but it wasn’t really true,” Blum recalls. “We found that we really had about $11 billion available to us if we were willing to go down to a single-A (bond) rating. We took some arbitrary debt caps off. For example, Berkeley had a $50 million debt cap. That frankly won’t keep your plumbing up to date.”

Blum’s dedication to the UC system stems not only from his loyalty to his alma mater but also a strong belief in its role serving California and the world. He has been involved with Haas for more than 50 years, serving on its advisory board and as president of the Cal Business Alumni Association. He was named the Haas School’s alumnus of the year in 1994 and received the Berkeley Medal, the campus’s highest honor, from Chancellor Robert J. Birgeneau in April.

“UC Berkeley has never had a more passionate or dedicated advocate than Dick Blum,” says Birgeneau. “He has repeatedly invested his energy, influence, and personal resources in Berkeley’s students and faculty. I know from personal experience that this is not just because of his fond memories of attending Berkeley in the past, but because he truly believes in the role of Berkeley’s students and faculty in alleviating poverty and creating more just societies.”

Tackling Global Poverty
Perhaps nothing demonstrates this belief more than Blum’s more than $30 million gift to create and build a new facility for the Richard C. Blum Center for Developing Economies, where faculty and students from Haas and across Berkeley focus on creating sustainable solutions to global poverty.

“One day walking across campus with Chancellor Birgeneau, it just struck me that you can’t find one kid on the Berkeley campus who doesn’t care about climate change, environmental issues, or making the world a better place,” says Blum.

The center’s projects have included designing devices for safe water and sanitation, developing technologies to help the rural poor, and nurturing local entrepreneurs and markets to help communities become self-sufficient. Students and faculty also are addressing issues such as good government and human rights. And a new minor in global poverty in practice is housed within the Blum Center.

If Blum seems keen to expose students to the reality of global poverty, disease, and malnutrition, it’s likely because he truly knows the transformative power of such experiences.

“I would say that not merely have I been changed” by the Himalaya, he has written, “but I have been transformed by the great inner strength of the people of this mountain range, and by their lessons of caring and kindness.”

Blum’s love for the region and its people, and his deep, lasting concern for the chronic poverty, malnutrition, and displacement he has witnessed there led to his creation of the American Himalayan Foundation (AHF), with help from such partners as the Dalai Lama and Sir Edmund Hillary, one of the first people to reach the summit of Mount Everest and founder of the Himalayan Trust. Blum’s AHF has about 175 active projects, including clinics, schools, elder care, and conservation efforts.

“He really cares, not in a syrupy way, but in a from-the-heart way — like it’s in his DNA — about people who are poor or struggling,” Erica Stone, MBA 87, AHF’s longtime executive director, says of Blum. “I’ve been trying to keep up with him and the myriad ideas that pour out of him every day for 18 years now, and I love being on his team getting to figure out real and practical ways to make the world better.”

Indeed, it was Blum who urged Stone to earn her MBA from Haas. “There are a lot of well-meaning people that try to go out into the world and do great things,” Blum says. “But whether that is running a few schools in Namibia or encouraging carpet weavers in Tibetan refugee camps, the basic skills of business are really fundamental.”

“At the end of the day, really the only way you’re going to break people out of poverty is to grow enterprise and employment,” he adds.

Pioneer in Asia
This philosophy explains Blum’s investment approach in Asia and the developing world. In 1994, Blum co-founded Newbridge Capital, one of the first private equity firms dedicated to Asian markets (now a Texas Pacific Group subsidiary, TPG Asia V, of which Blum is chairman). Blum hired another Cal grad, Peter Kwok, MBA 80, PhD 81, as the fund’s first managing director. Among the fund’s investments: Korea First Bank, one of Korea’s largest banks and a successful turnaround in early 2000.

“You find that in places like Korea, China, and India, once someone has an income of a few thousand dollars or more they’re a potential bank customer,” Blum says. “But these countries really didn’t have any banking system that caters to those people so someone can buy a washer or maybe put a little money toward an apartment, car, or whatever. So firstly, investing there is a good business. And secondly, it helps change people’s lives.”

“I really like to invest in companies that help people grow and prosper in their own lives,” Blum adds. “I’m still a deal junkie. But my highest rates of return are seeing how you can change people’s lives, whether on the Berkeley campus or in a village in the Himalayas.”

 

 

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