"When you deploy too much money into one strategy, you'll crush your performance because there aren't enough interesting opportunities (and) you don't have a differentiated model … That happens all the time," Schwarzman told CNBC's Andrew Ross Sorkin at the World Economic Forum (WEF) in Davos on Tuesday.
His comments come at time when financial markets are increasingly concerned about a serious global economic slowdown, with a long-running U.S.-Sino trade war souring business and consumer sentiment worldwide.
Nonetheless, Blackstone's Schwarzman said there is an optimal amount of capital for every business strategy.
The New York-based financial giant is the world's largest business in the alternative asset industry, Schwarzman said, with close to $500 billion in capital at present.
"Interestingly for us, we keep getting better as we get bigger because we know more. There is nothing more desperate than a few people in a room trying to figure out the entire world with almost no help … That is a start-up, that's why most of them fail," Blackstone's CEO said during a panel discussion at WEF.
"When you get to a certain scale, as long as you limit the amount of capital you have for a strategy and you can keep inventing new strategies, then you do actually quite wonderfully well."