Empire Builder: Blackstone CTO William Murphy

Hand in Hand
Murphy says that effective transparency starts with data centralization. “Good technology and data quality go hand and hand. You have to focus on data quality, managing one source of the truth, and importantly, avoiding copying that source of the truth. It’s like evolution: Information gets copied someplace, something else happens to it, all the sudden you have five versions of the truth. A security master is probably the kernel of it, but everything in the enterprise should be in one place in the most simplistic terms, without creating slowness of response,” he says.

Two recently initiated partnerships also illustrate the changing times in private equity. “We made an investment, small by Blackstone standards, in Watchdox, a company that powers the documentation end of our investor portal, giving clients more granular security and ability to control documents once they’re gone, providing classic data loss prevention (DLP) on mobile applications,” Murphy says.

Blackstone’s in-house portfolio performance management system, iLevel, was meanwhile spun off in 2009. Several major private equity players, advising both general and limited partners, now have a stake, including Carlyle and Hamilton Lane. Murphy helps guide the firm’s product development from a seat on the board.

“iLevel was obviously born a little differently,” Murphy says. “But we think that is a good paradigm: bringing assets to the market and monetizing them, and in doing so, allowing them to grow faster than they would otherwise. Ultimately, Blackstone gets a better product, and there are a variety of common problems like this one. We may be fierce competitors on everything in terms of business, but on the tools to do it, it’s not necessarily a negative to work with similar enterprises.”

Raw Ability
Of course, competition in financial technology extends well beyond products. Finding the right technologists, Murphy says, is not only his most important role as CTO, but today, it is his most challenging. Fittingly, with the National Football League’s (NFL’s) head offices a few stories below Blackstone’s on Park Avenue, Murphy uses American football to explain the strategy.

“I’m a believer in athletes, not positions. At the NFL draft, commentators will say a team needs an offensive guard; the following team might have a lot of different needs, and they’ll be looking to take the ‘best player available’ once their pick is up. The second idea is how we like to build our teams: If you’re curious and energetic, and demand excellence from yourself, everything else can be learned,” he says.

Murphy says as he builds Innovations and Infrastructure, business analysis skills can prove more useful than specific finance expertise. “If there’s anything Blackstone has, it’s the institutional knowledge of our businesses,” he says. “With so many great finance people in the building, I can draw on that knowledge, and have someone work up a discounted cash-flow model in no time, if needed. On the technology side, what we need then is the raw ability to turn that knowledge into innovation.”

Murphy says it is still early days for Blackstone’s technology, adding, “We have a long field ahead of us.” But just as when he launched Capital IQ, the Blackstone CTO is happiest with hard work, and a sense of possibility still ahead.

“I liken it to the scientist who discovers the cure for a disease, and the engineers who built the transcontinental railroad,” Murphy explains. “There are two types of innovation there. The scientist clearly has a moment of genius, but usually that discovery comes from a small team trying out different experiments and ways of thinking, at times almost randomly. We are certain to do some of that along the way, but figuratively speaking, right now we’re laying track, connecting New York to San Francisco. Once completed, that was pretty revolutionary for the US.”

The nice part, Murphy’s learned? Not every piece of track requires luck.