China: 'The Best Place to Invest in the Next Five to 10 Years'

China Knowledge@Wharton: You are an entrepreneur and a smart investor. Do you think the skill sets required for the entrepreneur and investment professional are very different?

Rubenstein: You are going to succeed in life if you are smart, hardworking, willing to put in the hours to learn the business, if you know how to get along with people, if you are incented to make money, if you recognize that patience is a virtue. A lot of those qualities are true of a good investor, and also true for good entrepreneurs. Entrepreneurs are great risk takers. There are people who would like to bet their ideas would work. The entrepreneur style of Silicon Valley in the United States has inspired people around the world to start new companies and try to build something great (see "Invest Like a Venture Capitalist"). You see that a lot in China now. The center of the venture capital world has shifted from Silicon Valley to China in the last few years or so. That's a major change because Silicon Valley was dominating the venture capital world. It is still a major presence. But I think more and more exciting things are happening in China now. It is very interesting to watch.

China Knowledge@Wharton: You have described the private equity industry as the face of American capitalism. Why?

Rubenstein: Traditionally, when you talk about American capitalism, you talk about IBM (IBM - Cramer's Take - Stockpickr), Ford (F - Cramer's Take - Stockpickr), Microsoft (MSFT - Cramer's Take - Stockpickr), but now the names Blackstone (BX - Cramer's Take - Stockpickr), TPG, KKR, Carlyle are as well-known as the names of the companies that I have mentioned. Every day when you pick up the newspaper, you read in the business pages about what the private equity firms are doing, as opposed to what Ford is doing, because these private equity companies have become so large and own so many companies. That's what I meant.

China Knowledge@Wharton: Many people have a certain perception of private equity. They think private equity will cause many listed companies to exit the stock markets, and as a result damage the capital market. They say private equity will lead to layoffs. How can private equity improve its public image?

Rubenstein: For most of private equity's history, our focus has been convincing our investors that we get good returns that deserve their money. Now we recognize that we have to appeal to other people. We have constituencies in Congress and in the press, labor unions, environmental groups. We have to explain to them what we are doing. The truth is that we haven't done a good job in explaining that. We have created jobs. We make money by building better companies, not by destroying value . If you look at job losses in the United States over the last five or 10 years, those are large public companies. You never hear of private equity. The biggest job losses were at Ford or General Motors (GM - Cramer's Take - Stockpickr) or U.S. Steel (X - Cramer's Take - Stockpickr). They weren't in private equity firms. So it is an unfortunate perception that we are laying people off.