After 36 years at the helm of KKR, Henry Kravis and George Roberts have both earned a place among private equity’s éminence grises. But their partnership began when they were 2-year-old first cousins vacationing in Marblehead, Mass. (“We remember that meeting. There was a PowerPoint,” Roberts deadpans.) The pair were classmates at Claremont McKenna College, contemporaries at Bear Stearns, and cofounders of KK (KKR)R with their mentor, Jerome Kohlberg, who retired in 1987.
Kravis and Roberts speak like one of the couples in the film When Harry Met Sally, finishing each other’s stories and making dry jokes. Roberts, who works in Menlo Park, Calif., says they focus on business: “We don’t spend time on social conversations or talking about what the other person wore.” To which Kravis, who works in New York City, replies, “But you did want to know what I wore yesterday, and you were jealous of my new tie.”
These titans of finance admit to having big egos, but they say they could never have built KKR without the other man. “We’re lucky to be true friends, meaning we’re not judgmental, that we can trust the other 100%, and that when we screw up, we’re there to support the other person,” says Roberts. Now they’re relying on each other as they push into new markets. The firm, which has $76 billion in assets under management, recently acquired a fund of hedge funds platform, is pushing into lending, and is creating investment opportunities for retail investors.
Back when their firm underwent a dramatic change, the cousins became introspective. In 2010, just before KKR went public, they held a leadership meeting to discuss company culture and values. “George and I gave two examples of where we’ve made mistakes,” says Kravis. “You could hear a pin drop. People were thinking, ‘If they can [examine their errors], maybe this is a good place for us to start.'” After encouraging executives to get coaches, Kravis and Roberts got one too. (Unsurprisingly, they share an instructor.)
With several new businesses launching, Kravis and Roberts, both 69, say they’re in only the “second inning” of KKR. “We can create value in so many more ways than we could for the first three decades of the firm,” Roberts says. What won’t change? Roberts and Kravis’s close-knit partnership — and the witty banter.
–Face to Face examines successful business partnerships that offer lessons on collaboration and compromise.
This story is from the March 18, 2013 issue of Fortune.