WEBVTT 00:00:00.000 --> 00:00:02.359 Welcome to the Deep Dive, the place where we 00:00:02.359 --> 00:00:05.099 take the largest, most complex forces shaping 00:00:05.099 --> 00:00:09.119 the global economy, crack them open, and really 00:00:09.119 --> 00:00:11.460 extract the most vital nuggets of insight for 00:00:11.460 --> 00:00:14.519 you, the learner. Today, we are taking a deep, 00:00:14.560 --> 00:00:16.760 comprehensive look into the engine room of global 00:00:16.760 --> 00:00:20.039 capital. We're talking about the colossal, and 00:00:20.039 --> 00:00:22.920 let's be honest, often opaque world of Blackstone 00:00:22.920 --> 00:00:25.440 Inc. Right. And when we talk about a company 00:00:25.440 --> 00:00:27.899 of this scale, the numbers are... Well, they're 00:00:27.899 --> 00:00:30.579 almost unfathomable. We're discussing the world's 00:00:30.579 --> 00:00:32.960 largest alternative investment management company. 00:00:33.039 --> 00:00:35.920 The largest. Commanding a staggering $1 .2 trillion 00:00:35.920 --> 00:00:38.979 in assets under management. And you should know. 00:00:39.340 --> 00:00:41.380 That figure is current as of September 2025. 00:00:41.799 --> 00:00:43.759 Yeah. And it's crucial to understand what that 00:00:43.759 --> 00:00:45.539 means. We're not talking about, you know, your 00:00:45.539 --> 00:00:47.560 typical stocks and bonds here. Yeah. This is 00:00:47.560 --> 00:00:49.859 the world of alternatives. So think massive, 00:00:49.979 --> 00:00:52.060 often controlling stakes in private companies, 00:00:52.200 --> 00:00:55.500 colossal real estate portfolios, complex credit 00:00:55.500 --> 00:00:58.679 instruments, the heavy stuff. Exactly. And our 00:00:58.679 --> 00:01:00.820 mission today, it really extends beyond just, 00:01:00.899 --> 00:01:02.960 you know, cataloging those massive dollar figures. 00:01:03.140 --> 00:01:05.819 The goal is to dissect the very operating DNA 00:01:05.819 --> 00:01:11.140 of this firm. started so small come to literally 00:01:11.140 --> 00:01:15.159 own pieces of the global economic backbone? That's 00:01:15.159 --> 00:01:17.500 the question. We need to understand the strategic 00:01:17.500 --> 00:01:20.620 threads connecting these seemingly disparate 00:01:20.620 --> 00:01:22.620 sectors. I mean, you're looking at everything 00:01:22.620 --> 00:01:25.379 from powering the world's data centers and managing 00:01:25.379 --> 00:01:28.420 luxury hotels. To funding gene therapy and holding 00:01:28.420 --> 00:01:30.659 stakes in critical infrastructure like airports. 00:01:31.079 --> 00:01:33.680 Right. And when an organization this massive 00:01:33.680 --> 00:01:36.540 becomes so central to the machinery of daily 00:01:36.540 --> 00:01:39.260 life, well... Understanding their influence is 00:01:39.260 --> 00:01:41.939 no longer optional. It's essential. Before we 00:01:41.939 --> 00:01:44.000 jump into the history, let's get one piece of 00:01:44.000 --> 00:01:46.439 crucial clarity out of the way. Because even 00:01:46.439 --> 00:01:48.900 if you follow finance closely, these names get 00:01:48.900 --> 00:01:51.260 mixed up constantly. All the time. Blackstone 00:01:51.260 --> 00:01:53.840 is emphatically not BlackRock. That is such a 00:01:53.840 --> 00:01:55.739 necessary distinction for every listener. They 00:01:55.739 --> 00:01:57.980 are separate, publicly traded entities. But their 00:01:57.980 --> 00:02:00.159 histories are connected. Oh, they share a fascinating, 00:02:00.400 --> 00:02:02.760 intertwined history, which we'll definitely cover 00:02:02.760 --> 00:02:06.239 shortly. For now, just know Blackstone Inc. is 00:02:06.239 --> 00:02:08.639 based right here in New York City, a pillar at 00:02:08.639 --> 00:02:11.659 345 Park Avenue. And it trades publicly on the 00:02:11.659 --> 00:02:15.500 NYSE as BX. And it's a component of the S &P 00:02:15.500 --> 00:02:17.800 500 index. So it is, I mean, structurally and 00:02:17.800 --> 00:02:20.800 geographically absolutely central to the U .S. 00:02:20.819 --> 00:02:23.400 financial landscape. OK, let's unpack this journey, 00:02:23.539 --> 00:02:26.520 starting with the almost laughably humble origins 00:02:26.520 --> 00:02:29.039 of what became a trillion dollar powerhouse. 00:02:29.159 --> 00:02:32.300 We're diving into part one. the foundations, 00:02:32.439 --> 00:02:35.240 and the first foray into finance. The founding 00:02:35.240 --> 00:02:38.639 story is, it's classic Wall Street lore. It's 00:02:38.639 --> 00:02:41.860 a powerful narrative about how intense focus 00:02:41.860 --> 00:02:45.099 and, you know, strategic ambition can build immense 00:02:45.099 --> 00:02:48.020 leverage from relatively small initial capital. 00:02:48.240 --> 00:02:51.400 It all started in 1985. The firm was founded 00:02:51.400 --> 00:02:53.460 by two established veterans of Lehman Brothers, 00:02:53.719 --> 00:02:55.740 Peter Peterson, who was a former U .S. Secretary 00:02:55.740 --> 00:02:58.419 of Commerce and Lehman CEO. A huge name. And 00:02:58.419 --> 00:03:01.419 Stephen Schwartzman, a top M &A dealmaker. And 00:03:01.419 --> 00:03:03.240 they didn't start with some massive seed fund 00:03:03.240 --> 00:03:05.639 from a sovereign wealth player or a huge bank. 00:03:05.819 --> 00:03:07.879 The sources indicate they started with only U 00:03:07.879 --> 00:03:10.620 .S. $400 ,000 in seed capital. Think about that 00:03:10.620 --> 00:03:12.039 for a moment. Just let that number sink. And 00:03:12.039 --> 00:03:13.939 if you adjust that capital for inflation, it's 00:03:13.939 --> 00:03:16.900 equivalent to about $1 .2 million in 2024. Which 00:03:16.900 --> 00:03:19.300 is still a lot of money. It's a significant amount, 00:03:19.439 --> 00:03:23.099 certainly. But consider this. $1 .2 million is 00:03:23.099 --> 00:03:25.699 the price of a modest apartment in Manhattan. 00:03:26.120 --> 00:03:28.879 Right. Yet it launched the firm that now manages 00:03:28.879 --> 00:03:32.319 one point two trillion dollars. That difference, 00:03:32.400 --> 00:03:35.080 that one thousand fold increase, that is the 00:03:35.080 --> 00:03:37.419 measure of their leverage and success. It's just 00:03:37.419 --> 00:03:40.180 astounding. That humble start truly contrasts 00:03:40.180 --> 00:03:42.240 sharply with their current size. And there's 00:03:42.240 --> 00:03:44.620 a fun, memorable detail about the name Blackstone. 00:03:44.919 --> 00:03:47.319 It's actually derived directly from the founder's 00:03:47.319 --> 00:03:49.340 name. That's right. It's a clever little portmanteau. 00:03:49.460 --> 00:03:52.620 Schwartz is German for black. OK. And Peter, 00:03:52.800 --> 00:03:55.280 which is derived from the Greek word Petra, means. 00:03:55.400 --> 00:03:58.560 Stone or rock? Black. Stone. Exactly. It was 00:03:58.560 --> 00:04:01.120 a highly intentional, symbolic naming convention 00:04:01.120 --> 00:04:03.439 from the very beginning. They were setting a 00:04:03.439 --> 00:04:05.580 foundation of permanence and strength. I appreciate 00:04:05.580 --> 00:04:08.080 that detail. So moving into their early strategy, 00:04:08.479 --> 00:04:10.439 Blackstone didn't start as a massive investment 00:04:10.439 --> 00:04:13.240 fund ready to buy up corporations. No, not at 00:04:13.240 --> 00:04:15.699 all. They actually began as an M &A advisory 00:04:15.699 --> 00:04:18.720 boutique, essentially consulting on mergers and 00:04:18.720 --> 00:04:21.399 acquisitions. And that initial advisory period 00:04:21.399 --> 00:04:24.540 was brief, but it was absolutely critical for... 00:04:24.620 --> 00:04:27.319 building credibility. I mean, Schwarzman, he 00:04:27.319 --> 00:04:29.800 had previously headed global M &A at Lehman Brothers, 00:04:29.879 --> 00:04:31.959 so he leveraged that network immediately. And 00:04:31.959 --> 00:04:34.800 their first major advisory deal came pretty quickly. 00:04:34.980 --> 00:04:38.399 Very quickly. In 1987, they advised on the high 00:04:38.399 --> 00:04:41.100 -profile merger of the investment banks EF Hutton 00:04:41.100 --> 00:04:44.449 & Co. and Shearson Lehman Brothers. That single 00:04:44.449 --> 00:04:47.829 complicated transaction earned them a substantial 00:04:47.829 --> 00:04:51.829 $3 .5 million fee. A phenomenal return on their 00:04:51.829 --> 00:04:54.370 initial seed capital. A massive return. It proved 00:04:54.370 --> 00:04:56.750 the concept overnight. But the sources consistently 00:04:56.750 --> 00:04:59.410 suggest the ultimate plan was always bigger than 00:04:59.410 --> 00:05:01.670 just advising. They wanted to enter private equity 00:05:01.670 --> 00:05:04.189 or P .E. Always. Which means they wanted to stop 00:05:04.189 --> 00:05:06.629 just, you know, telling people how to buy companies 00:05:06.629 --> 00:05:08.649 and start buying, managing and selling companies 00:05:08.649 --> 00:05:11.459 directly. That was the crucial strategic pivot. 00:05:11.620 --> 00:05:14.060 They realized that in so many business situations, 00:05:14.279 --> 00:05:17.180 what was needed was a capital partner, someone 00:05:17.180 --> 00:05:19.699 to actually fund the transaction, not just a 00:05:19.699 --> 00:05:21.459 consultant giving advice. But they hit a wall. 00:05:21.740 --> 00:05:24.680 They did. They faced a genuine hurdle. Neither 00:05:24.680 --> 00:05:27.500 Peterson nor Schwarzman had actually led a leveraged 00:05:27.500 --> 00:05:32.040 buyout or LBO before. An LBO, simply put, is 00:05:32.040 --> 00:05:34.600 acquiring a company using a significant amount 00:05:34.600 --> 00:05:37.519 of borrowed money leverage to meet the cost of 00:05:37.519 --> 00:05:39.769 the acquisition. And because they lacked that 00:05:39.769 --> 00:05:42.550 specific LBO track record, it made it initially 00:05:42.550 --> 00:05:45.029 very difficult to raise capital for their first 00:05:45.029 --> 00:05:48.329 dedicated PE fund. Precisely. They had the M 00:05:48.329 --> 00:05:50.990 &A pedigree, but not the merchant banking pedigree. 00:05:51.029 --> 00:05:53.290 They had to overcome that initial doubt from 00:05:53.290 --> 00:05:55.110 investors. And the timing of the fundraising 00:05:55.110 --> 00:05:58.290 for that first PE fund is, well, it's a historic 00:05:58.290 --> 00:06:00.350 footnote. It was finalized immediately after 00:06:00.350 --> 00:06:04.029 Black Monday. The October 1987 global stock market 00:06:04.029 --> 00:06:06.930 crash. I mean, talk about timing. Talk about 00:06:06.930 --> 00:06:09.170 entering the market at a moment of extreme volatility. 00:06:09.189 --> 00:06:11.790 The fact that they successfully closed the fund 00:06:11.790 --> 00:06:14.250 at that moment, it just speaks volumes about 00:06:14.250 --> 00:06:16.149 their credibility. It does. It shows the commitment 00:06:16.149 --> 00:06:18.310 of the initial large institutional investors 00:06:18.310 --> 00:06:20.990 who backed them even amid global market chaos. 00:06:21.689 --> 00:06:24.209 And the key investors in that first fund were 00:06:24.209 --> 00:06:26.230 major players. You're talking about Prudential 00:06:26.230 --> 00:06:28.689 Insurance Company, Nikko Securities of Japan. 00:06:29.230 --> 00:06:31.829 And notably, the General Motors Pension Fund. 00:06:32.029 --> 00:06:34.889 Yes. And these large pension and insurance funds, 00:06:34.949 --> 00:06:36.930 you have to understand, they are the bedrock 00:06:36.930 --> 00:06:39.990 of private equity. They're seeking long -term, 00:06:40.009 --> 00:06:42.930 high -yield investments that stabilize their 00:06:42.930 --> 00:06:45.670 future obligations to pensioners. Okay, so before 00:06:45.670 --> 00:06:48.290 Blackstone became the corporate buyout behemoth 00:06:48.290 --> 00:06:50.750 we know today, they were instrumental in the 00:06:50.750 --> 00:06:53.370 creation of their most famous rival. This brings 00:06:53.370 --> 00:06:57.389 us to... the BlackRock chapter. Ah, yes. This 00:06:57.389 --> 00:06:59.089 is one of the most compelling pieces of Wall 00:06:59.089 --> 00:07:01.790 Street history. And it's a huge lesson that even 00:07:01.790 --> 00:07:04.670 giants make colossal strategic errors. So what 00:07:04.670 --> 00:07:07.610 happened? Well, in 1987, Blackstone formed a 00:07:07.610 --> 00:07:10.970 50 -50 partnership with Larry Fink, the man who 00:07:10.970 --> 00:07:12.870 would eventually become the legendary CEO of 00:07:12.870 --> 00:07:14.970 BlackRock, and another partner, Ralph Schloss 00:07:14.970 --> 00:07:17.480 Stein. Fink and Schlossstein were experts in 00:07:17.480 --> 00:07:19.339 structured finance, particularly fixed income 00:07:19.339 --> 00:07:22.000 securities. So the idea was that Fink and Schlossstein 00:07:22.000 --> 00:07:24.680 would manage an investment fund focused on fixed 00:07:24.680 --> 00:07:27.120 income investments, and it would operate as a 00:07:27.120 --> 00:07:29.120 kind of arm within the new Blackstone structure. 00:07:29.540 --> 00:07:32.839 Correct. BlackRock essentially started as Blackstone's 00:07:32.839 --> 00:07:35.079 internal fixed income and risk management division. 00:07:35.639 --> 00:07:38.360 The partnership was productive, you know, initially, 00:07:38.480 --> 00:07:41.199 but the strategic visions just diverged. How 00:07:41.199 --> 00:07:43.980 so? Schwarzman and Peterson were totally focused 00:07:43.980 --> 00:07:46.959 on the high -risk, high -reward world of leveraged 00:07:46.959 --> 00:07:50.009 corporate buyouts. That's private equity. Fink, 00:07:50.110 --> 00:07:52.029 on the other hand, was focused on institutional 00:07:52.029 --> 00:07:54.990 asset management, managing fixed income and later 00:07:54.990 --> 00:07:58.470 index funds. He was prioritizing scale and predictable 00:07:58.470 --> 00:08:01.029 fees over jackpot returns. And that divergence 00:08:01.029 --> 00:08:03.990 led to a strategic divorce, which Schwarzman 00:08:03.990 --> 00:08:06.129 would later describe as a monumental mistake. 00:08:06.370 --> 00:08:08.509 A monumental mistake is putting it lightly. In 00:08:08.509 --> 00:08:11.470 1995, Blackstone sold its 50 percent stake in 00:08:11.470 --> 00:08:14.370 what had become BlackRock to PNC Financial Services 00:08:14.370 --> 00:08:17.980 for $240 million. Which on paper at the time 00:08:17.980 --> 00:08:19.899 must have looked like an enormous win. Oh, absolutely. 00:08:20.040 --> 00:08:22.079 I mean, they turned part of their initial $400 00:08:22.079 --> 00:08:25.379 ,000 seed capital into a $240 million cash out, 00:08:25.439 --> 00:08:27.560 not even counting their P .E. returns. They chose 00:08:27.560 --> 00:08:29.660 to double down and focus exclusively on the P 00:08:29.660 --> 00:08:32.259 .E. path. But the magnitude of the missed opportunity 00:08:32.259 --> 00:08:36.139 is what makes this story so legendary. That $240 00:08:36.139 --> 00:08:38.340 million eventually ballooned into something, 00:08:38.500 --> 00:08:41.720 well, astronomical. It really did. Schwarzman's 00:08:41.720 --> 00:08:44.019 regret is well documented. The source material 00:08:44.019 --> 00:08:46.879 notes that between 1995, the year of the sale, 00:08:47.039 --> 00:08:51.059 and 2014 alone, PNC subsequently reported a stunning 00:08:51.059 --> 00:08:54.139 $12 billion in pre -tax revenues and capital 00:08:54.139 --> 00:08:57.440 gains stemming from BlackRock. $12 billion. And 00:08:57.440 --> 00:08:59.399 that doesn't even account for the massive growth 00:08:59.399 --> 00:09:01.399 in the subsequent decades. So if they had maintained 00:09:01.399 --> 00:09:04.000 that stake, Blackstone would likely be managing 00:09:04.000 --> 00:09:06.899 not $1 .2 trillion, but potentially double that 00:09:06.899 --> 00:09:09.039 spread across two completely distinct investment 00:09:09.039 --> 00:09:11.620 models. Precisely. It's such a powerful lesson 00:09:11.620 --> 00:09:13.960 in valuation. They valued the immediate cash 00:09:13.960 --> 00:09:18.299 infusion of $240 million in 1995, more than the 00:09:18.299 --> 00:09:21.639 long -term compounding value of a vast high -fee 00:09:21.639 --> 00:09:24.220 asset management platform. It confirms that the 00:09:24.220 --> 00:09:26.539 BlackRock Path asset management ultimately became 00:09:26.539 --> 00:09:28.860 the far larger financial behemoth because of 00:09:28.860 --> 00:09:31.279 its scalable fee structure. It's much less cyclical 00:09:31.279 --> 00:09:33.399 than the leverage -dependent model of pure private 00:09:33.399 --> 00:09:35.860 equity. It truly is the one that got away, just 00:09:35.860 --> 00:09:38.240 exponentially. Okay, so moving on from that early 00:09:38.240 --> 00:09:41.330 history, let's explore part two. Defining the 00:09:41.330 --> 00:09:44.070 buyout era, which really spans the 1990s through 00:09:44.070 --> 00:09:47.429 2007, this is where Blackstone really diversified 00:09:47.429 --> 00:09:49.710 and started flexing its institutional muscle. 00:09:49.909 --> 00:09:54.769 The 1990s marked a period of rapid and very calculated 00:09:54.769 --> 00:09:57.610 expansion for them. And it was fueled significantly 00:09:57.610 --> 00:09:59.690 by that early institutional backing we mentioned. 00:09:59.809 --> 00:10:02.039 Right. But the single most important financial 00:10:02.039 --> 00:10:05.139 injection came in 1988, right after their first 00:10:05.139 --> 00:10:07.860 fund closed, when the Japanese bank Nikko Securities 00:10:07.860 --> 00:10:11.179 acquired a 20 % interest in Blackstone for $100 00:10:11.179 --> 00:10:14.240 million. $100 million. That's a staggering amount 00:10:14.240 --> 00:10:16.460 of capital at the time. What did that do for 00:10:16.460 --> 00:10:18.620 the firm? It was transformative. It did two things. 00:10:18.700 --> 00:10:21.519 First, it immediately valued the young firm at 00:10:21.519 --> 00:10:24.080 $500 million, which gave them immense credibility. 00:10:24.570 --> 00:10:26.549 Second, it gave them the liquidity they needed 00:10:26.549 --> 00:10:29.350 to aggressively launch new business lines without 00:10:29.350 --> 00:10:31.690 having to rely solely on the slow process of 00:10:31.690 --> 00:10:34.309 fundraising for specific PE funds. So it was 00:10:34.309 --> 00:10:38.210 rocket fuel. It was pure rocket fuel. This funding 00:10:38.210 --> 00:10:41.029 accelerated their entry into distinct asset classes, 00:10:41.409 --> 00:10:44.230 moving them far beyond the old M &A advisory 00:10:44.230 --> 00:10:46.529 model. Let's break down those new business lines. 00:10:46.750 --> 00:10:48.570 They weren't just running a PE fund anymore. 00:10:48.870 --> 00:10:52.210 No, not by a long shot. By 1990, they launched 00:10:52.210 --> 00:10:54.970 their hedge funds business, which was initially 00:10:54.970 --> 00:10:57.730 just set up to manage internal investments for 00:10:57.730 --> 00:11:00.529 senior management. And then real estate. In 1991, 00:11:00.789 --> 00:11:02.370 they established their real estate investment 00:11:02.370 --> 00:11:05.149 business, which, as we now know, became absolutely 00:11:05.149 --> 00:11:09.269 monumental. And critically, by 1999, they added 00:11:09.269 --> 00:11:11.470 mezzanine capital, bringing in professionals 00:11:11.470 --> 00:11:14.429 led by Howard Jealous from Nomura to manage that 00:11:14.429 --> 00:11:16.669 debt -focused operation. Can we pause on that 00:11:16.669 --> 00:11:19.250 term mezzanine capital? For a listener who isn't 00:11:19.250 --> 00:11:21.570 steeped in finance jargon, what does that signify 00:11:21.570 --> 00:11:23.990 in terms of their strategy? That's a great question 00:11:23.990 --> 00:11:26.470 because it really illustrates their growing sophistication 00:11:26.470 --> 00:11:28.490 in dealing with complex financial structures. 00:11:28.710 --> 00:11:31.269 So mezzanine capital is a hybrid of debt and 00:11:31.269 --> 00:11:33.190 equity. Think of it as sitting in the middle 00:11:33.190 --> 00:11:36.169 of a company's capital stack. It's subordinated 00:11:36.169 --> 00:11:39.389 debt, which means it gets paid after senior bank 00:11:39.389 --> 00:11:42.289 loans in case of a bankruptcy. But this is the 00:11:42.289 --> 00:11:45.309 key part. It often carries an equity kicker like 00:11:45.309 --> 00:11:48.710 warrants or the right to convert that debt into 00:11:48.710 --> 00:11:51.710 company stock. So it's riskier than a standard 00:11:51.710 --> 00:11:54.429 bank loan, but it also offers the potential for 00:11:54.429 --> 00:11:56.909 much higher returns if the company succeeds. 00:11:57.110 --> 00:11:59.860 Exactly. It's flexible financing that's often 00:11:59.860 --> 00:12:02.779 used to bridge the gap between senior loans and 00:12:02.779 --> 00:12:05.220 pure equity investment, especially for rapid 00:12:05.220 --> 00:12:08.899 growth or for these huge buyouts. By adding this 00:12:08.899 --> 00:12:11.299 capability, Blackstone could structure larger, 00:12:11.460 --> 00:12:14.299 more complex deals and offer a full suite of 00:12:14.299 --> 00:12:16.580 financing solutions. It just made them a much 00:12:16.580 --> 00:12:18.639 more attractive partner than a purely equity 00:12:18.639 --> 00:12:21.139 -focused firm. And their early real estate moves 00:12:21.139 --> 00:12:23.460 in the 90s, I see they were heavily focused on 00:12:23.460 --> 00:12:25.600 hospitality under the leadership of a guy named 00:12:25.600 --> 00:12:27.740 Henry Silverman. Yes, and this was a pivotal 00:12:27.740 --> 00:12:29.639 strategy for developing their real estate muscle. 00:12:29.840 --> 00:12:32.200 It led to the creation of hospitality franchise 00:12:32.200 --> 00:12:35.539 systems, or HFS. They aggressively acquired major 00:12:35.539 --> 00:12:38.419 hotel franchises. They were struggling or needed 00:12:38.419 --> 00:12:40.740 to be consolidated. I'm talking about brands, 00:12:41.000 --> 00:12:43.940 you know, like... Days Ends of America, Ramada, 00:12:44.039 --> 00:12:46.320 and Howard Johnson. So the strategy wasn't just 00:12:46.320 --> 00:12:48.980 to manage the hotels themselves. No, it was much 00:12:48.980 --> 00:12:50.960 smarter than that. The strategy was to create 00:12:50.960 --> 00:12:53.919 a franchise platform. Silverman ultimately left 00:12:53.919 --> 00:12:57.159 Blackstone to become the CEO of HFS, which later 00:12:57.159 --> 00:12:59.639 became the massive Sendin Corporation. It's a 00:12:59.639 --> 00:13:03.080 perfect example of their model. Acquire. consolidate, 00:13:03.200 --> 00:13:05.440 and then spin out these platforms for a significant 00:13:05.440 --> 00:13:08.940 profit. The 90s also highlight the inherent volatility 00:13:08.940 --> 00:13:11.360 and risk in private equity. I mean, they clearly 00:13:11.360 --> 00:13:14.080 had some huge successes, particularly in telecommunications, 00:13:14.100 --> 00:13:17.019 but also some significant failures. Oh, absolutely. 00:13:17.220 --> 00:13:19.120 The telecommunications investments were remarkably 00:13:19.120 --> 00:13:21.299 successful and really helped define their reputation 00:13:21.299 --> 00:13:23.960 early on. Their holdings included four cable 00:13:23.960 --> 00:13:27.200 TV systems in rural areas and a successful cellular 00:13:27.200 --> 00:13:29.279 operator in the Rocky Mountain states called 00:13:29.279 --> 00:13:32.370 ComNet Cellular. And those were big wins. Huge 00:13:32.370 --> 00:13:34.990 wins. The source material shows these generated 00:13:34.990 --> 00:13:39.029 a collective profit of $1 .5 billion for Blackstone's 00:13:39.029 --> 00:13:42.490 funds. However, their portfolio was inevitably 00:13:42.490 --> 00:13:45.080 mixed. The sources note that later industrial 00:13:45.080 --> 00:13:47.539 investments like Haynes International, a specialty 00:13:47.539 --> 00:13:50.279 metals producer, and Republic Technologies International, 00:13:50.779 --> 00:13:53.379 a steel company, struggled significantly during 00:13:53.379 --> 00:13:55.879 economic downturns. And ultimately filed for 00:13:55.879 --> 00:13:58.340 bankruptcy? They did. It's a crucial reminder 00:13:58.340 --> 00:14:00.700 that even the most sophisticated financial engineering 00:14:00.700 --> 00:14:04.399 can't inoculate a business from, you know, systemic 00:14:04.399 --> 00:14:06.460 market pressures or just straight up industry 00:14:06.460 --> 00:14:09.399 decay. That really sets the stage for the mid 00:14:09.399 --> 00:14:12.360 -2000s, which was the absolute peak of the buyout 00:14:12.360 --> 00:14:14.100 boom. It really felt like they were in an arms 00:14:14.100 --> 00:14:16.279 race, and the scale of their funds became truly 00:14:16.279 --> 00:14:18.940 historic. The growth was just exponential, and 00:14:18.940 --> 00:14:20.759 it was deeply intertwined with the prevailing 00:14:20.759 --> 00:14:23.100 macroeconomic conditions of the era, which was, 00:14:23.200 --> 00:14:26.840 in one phrase, cheap, plentiful debt. Right. 00:14:27.139 --> 00:14:30.320 In July 2002, Blackstone completed fundraising 00:14:30.320 --> 00:14:33.269 for Blackstone Capital Partners IV. It was a 00:14:33.269 --> 00:14:36.750 $6 .45 billion private equity fund. At that time, 00:14:36.750 --> 00:14:39.029 that was the single largest PE fund ever raised 00:14:39.029 --> 00:14:42.149 globally. And that level of capital commitment, 00:14:42.269 --> 00:14:44.850 that dry powder, meant they could dominate the 00:14:44.850 --> 00:14:46.909 market, even during the lingering recessionary 00:14:46.909 --> 00:14:49.830 conditions of the early 2000s. And this massive 00:14:49.830 --> 00:14:52.269 capital led directly to the rise of what became 00:14:52.269 --> 00:14:55.570 known as the club deal. Yes, the club deal, where 00:14:55.570 --> 00:14:58.309 multiple massive firms teamed up for one record 00:14:58.309 --> 00:15:00.629 -breaking acquisition. And the classic, most 00:15:00.629 --> 00:15:04.289 detailed example of this era is the 2005 SunGuard 00:15:04.289 --> 00:15:07.509 buyout. That deal was valued at $11 .3 billion. 00:15:08.190 --> 00:15:11.190 It was so enormous it required seven major private 00:15:11.190 --> 00:15:13.509 equity firms to pool their resources and leverage. 00:15:13.710 --> 00:15:16.429 You have Blackstone, Silverlake, Bain Capital, 00:15:16.690 --> 00:15:20.000 Goldman Sachs, KKR, Providence Equity. And TPG. 00:15:20.080 --> 00:15:22.580 All rivals working together. All rivals. And 00:15:22.580 --> 00:15:24.740 at the time, it was the largest leveraged buyout 00:15:24.740 --> 00:15:27.220 since the notorious takeover of RJR Nabisco back 00:15:27.220 --> 00:15:30.220 in the late 1980s. So why did these club deals 00:15:30.220 --> 00:15:33.419 attract criticism from investors? On the surface, 00:15:33.580 --> 00:15:35.620 it sounds logical to share the risk on such a 00:15:35.620 --> 00:15:38.960 massive transaction. It attracted criticism due 00:15:38.960 --> 00:15:41.460 to concerns over, well, coordination, potential 00:15:41.460 --> 00:15:44.639 price collusion and fiduciary duty. Critics, 00:15:44.639 --> 00:15:47.330 particularly... the big institutional investors 00:15:47.330 --> 00:15:50.590 who are funding these PE houses felt that involving 00:15:50.590 --> 00:15:54.309 so many direct rivals in one transaction was, 00:15:54.470 --> 00:15:56.750 and I'm quoting, Generally unattractive. That's 00:15:56.750 --> 00:15:59.129 why unattractive. They suggested that competitive 00:15:59.129 --> 00:16:01.029 bidding might have been suppressed. You know, 00:16:01.049 --> 00:16:03.389 if all the big buyers are on the same team, who 00:16:03.389 --> 00:16:06.110 is left to bid up the price? I see. And they 00:16:06.110 --> 00:16:07.909 were also worried that sharing a company among 00:16:07.909 --> 00:16:10.570 seven masters might compromise the intense operational 00:16:10.570 --> 00:16:13.610 focus that's required to maximize returns. They 00:16:13.610 --> 00:16:16.230 worried that sharing the target meant compromising 00:16:16.230 --> 00:16:18.549 the ultimate profit goal for their limited partners. 00:16:19.070 --> 00:16:21.049 Regardless of the criticism, the transactions 00:16:21.049 --> 00:16:24.509 just kept getting bigger in 2006 and 2007. They 00:16:24.509 --> 00:16:26.429 were setting records seemingly every quarter, 00:16:26.590 --> 00:16:28.870 fueled by all that abundant and cheap debt. The 00:16:28.870 --> 00:16:31.509 size of these deals was just staggering. In 2006, 00:16:31.690 --> 00:16:35.690 they acquired EQ Office for $37 .7 billion. $37 00:16:35.690 --> 00:16:37.950 .7 billion. At the time of its announcement. 00:16:38.330 --> 00:16:41.029 This deal surpassed the buyout of Hospital Corporation 00:16:41.029 --> 00:16:43.710 of America as the largest buyout in history. 00:16:43.950 --> 00:16:46.929 Now, that record was quickly eclipsed by KKR's 00:16:46.929 --> 00:16:50.490 massive TXU energy deal, but it highlights Blackstone's 00:16:50.490 --> 00:16:53.809 aggressive, market -defining posture. They also 00:16:53.809 --> 00:16:57.090 completed the $17 .6 billion takeover of Freescale 00:16:57.090 --> 00:16:59.470 Semiconductor, which was then the largest tech 00:16:59.470 --> 00:17:02.149 LBO in history. And what made all these deals 00:17:02.149 --> 00:17:04.779 possible was the financial environment. Banks 00:17:04.779 --> 00:17:07.099 were extremely loose with credit, and debt was 00:17:07.099 --> 00:17:10.279 cheap. It allowed PE firms to put down only 20 00:17:10.279 --> 00:17:13.319 -30 % in equity and finance the rest, which massively 00:17:13.319 --> 00:17:15.700 boosted their potential returns. And their signature 00:17:15.700 --> 00:17:18.259 move that truly marked the end of that multi 00:17:18.259 --> 00:17:21.339 -year debt -fueled boom, what was the peak? That 00:17:21.339 --> 00:17:23.519 was, without a doubt, the massive $26 billion 00:17:23.519 --> 00:17:26.319 acquisition of Hilton Worldwide, which was announced 00:17:26.319 --> 00:17:29.710 in July 2007. The sources specifically refer 00:17:29.710 --> 00:17:32.170 to this deal as the high watermark of the multi 00:17:32.170 --> 00:17:35.569 -year LBO burn. It signaled maximum optimism 00:17:35.569 --> 00:17:37.670 right before the credit markets fundamentally 00:17:37.670 --> 00:17:41.650 seized up. They acquired Hilton at a 25 % premium 00:17:41.650 --> 00:17:45.009 to its all -time high stock price, which, in 00:17:45.009 --> 00:17:47.609 retrospect, was the clearest possible signal 00:17:47.609 --> 00:17:50.049 that the market had peaked and was about to turn. 00:17:50.349 --> 00:17:53.710 The Hilton deal, $26 billion at a 25 % premium, 00:17:53.829 --> 00:17:56.789 was the signature of that era. But the ultimate 00:17:56.789 --> 00:17:59.329 genius move, the capstone of the entire boom, 00:17:59.650 --> 00:18:02.730 wasn't a purchase. It was their decision to take 00:18:02.730 --> 00:18:05.170 their own company public. Let's talk about going 00:18:05.170 --> 00:18:07.750 public. The timing of their initial public offering 00:18:07.750 --> 00:18:11.640 was, it was impeccable. bordering on pressing 00:18:11.640 --> 00:18:13.440 it. It was highly scrutinized at the time, but 00:18:13.440 --> 00:18:15.380 it proved to be strategically brilliant. When 00:18:15.380 --> 00:18:17.420 did it happen? Blackstone became a public company 00:18:17.420 --> 00:18:20.839 on June 21st, 2007. Right. Just weeks before 00:18:20.839 --> 00:18:22.940 the true onset of the global credit crunch later 00:18:22.940 --> 00:18:25.660 that summer. Incredible. And they sold a 12 .3 00:18:25.660 --> 00:18:28.880 % stake for $4 .13 billion, marking the largest 00:18:28.880 --> 00:18:32.059 U .S. IPO since 2002. That decision allowed the 00:18:32.059 --> 00:18:34.420 founders... Steven Schwartzman and Peter Peterson 00:18:34.420 --> 00:18:37.500 and all their early institutional investors to 00:18:37.500 --> 00:18:39.900 monetize a significant portion of their firm's 00:18:39.900 --> 00:18:42.539 value immediately. They essentially realized 00:18:42.539 --> 00:18:45.220 the peak valuation of a leveraged buyout model 00:18:45.220 --> 00:18:47.980 right before the entire financial system discovered 00:18:47.980 --> 00:18:50.039 it was over leveraged. So they cashed out at 00:18:50.039 --> 00:18:52.279 the absolute top. They converted paper wealth 00:18:52.279 --> 00:18:55.119 into real cash just before the credit markets 00:18:55.119 --> 00:18:57.779 dried up and the financial crisis fundamentally 00:18:57.779 --> 00:19:00.910 altered the entire industry. It was an extraordinary 00:19:00.910 --> 00:19:03.970 exit for their initial public offering, capitalizing 00:19:03.970 --> 00:19:06.289 on the peak valuation environment that they themselves 00:19:06.289 --> 00:19:08.990 had helped create. So the firm survived the 2008 00:19:08.990 --> 00:19:11.869 crisis, partially protected by that timely IPO, 00:19:12.130 --> 00:19:15.269 and it emerged stronger. This leads us into part 00:19:15.269 --> 00:19:18.950 three, modern operations and global scale. This 00:19:18.950 --> 00:19:20.809 is where we break down the colossal machine that 00:19:20.809 --> 00:19:22.849 is Blackstone today, which is structured around 00:19:22.849 --> 00:19:25.450 four primary departments. Right. And what's fascinating 00:19:25.450 --> 00:19:28.069 here is how clearly they segmented their business. 00:19:28.289 --> 00:19:31.250 It was a move to ensure consistent growth and 00:19:31.250 --> 00:19:33.809 mitigate risk across different economic cycles. 00:19:34.089 --> 00:19:36.930 They operate through four main pillars, corporate 00:19:36.930 --> 00:19:39.710 private equity, real estate, marketable alternative 00:19:39.710 --> 00:19:41.730 asset management, which includes their hedge 00:19:41.730 --> 00:19:44.069 funds, and credit. And that diversified structure 00:19:44.069 --> 00:19:48.279 helps them. It ensures that if one area, like 00:19:48.279 --> 00:19:50.559 P .E., slows down because debt is expensive, 00:19:50.960 --> 00:19:54.099 others, like credit or real estate, can carry 00:19:54.099 --> 00:19:55.779 the weight. Let's start with private equity, 00:19:56.000 --> 00:19:58.920 P .E. This is the core strategy that launched 00:19:58.920 --> 00:20:01.359 them, and it still remains a massive focus. Their 00:20:01.359 --> 00:20:03.920 P .E. arm focuses primarily on friendly investments, 00:20:04.240 --> 00:20:06.880 large capitalization companies, minority investments, 00:20:07.099 --> 00:20:09.839 and industry consolidations. They really avoid 00:20:09.839 --> 00:20:12.380 the hostile takeovers of the 1980s. And they're 00:20:12.380 --> 00:20:14.400 still at the top of the league tables. Oh, yeah. 00:20:14.460 --> 00:20:17.039 They have been consistently ranked among the 00:20:17.039 --> 00:20:21.480 top global PE firms by capital raised. They held 00:20:21.480 --> 00:20:23.859 the title of the world's largest by capital commitments 00:20:23.859 --> 00:20:27.819 in 2019, 2023 and 2024, only slipping slightly 00:20:27.819 --> 00:20:31.420 to third in the 2025 list. This consistency just 00:20:31.420 --> 00:20:33.900 shows their unparalleled ability to raise dry 00:20:33.900 --> 00:20:36.559 powder that's cash ready to deploy. And they 00:20:36.559 --> 00:20:38.920 are constantly recycling capital. What notable 00:20:38.920 --> 00:20:41.119 companies illustrate the breadth of this portfolio 00:20:41.119 --> 00:20:44.059 today? The scope is incredible. It spans consumer 00:20:44.059 --> 00:20:47.180 leisure with Great Wolf Resorts, social technology 00:20:47.180 --> 00:20:49.319 with Bumble, the dating app. Right. And even 00:20:49.319 --> 00:20:51.559 essential manufacturing. They hold a majority 00:20:51.559 --> 00:20:54.099 stake in Essel Propak, which is a global leader 00:20:54.099 --> 00:20:57.900 in tube packaging. They raise these massive multibillion 00:20:57.900 --> 00:21:00.319 dollar funds, drawing committed capital from 00:21:00.319 --> 00:21:03.220 a huge range of institutional investors, large 00:21:03.220 --> 00:21:05.779 public and private pension funds, sovereign wealth 00:21:05.779 --> 00:21:08.019 funds from the Middle East and Asia, insurance 00:21:08.019 --> 00:21:10.119 companies and high net worth individuals. And 00:21:10.119 --> 00:21:12.220 the credit pillar, which became crucial during 00:21:12.220 --> 00:21:14.539 and after the financial crisis, really grew thanks 00:21:14.539 --> 00:21:17.500 to a strategic acquisition in 2008. That was 00:21:17.500 --> 00:21:19.880 the timely acquisition of GSO Capital Partners. 00:21:20.480 --> 00:21:23.759 GSO was a highly respected, credit -oriented, 00:21:23.859 --> 00:21:27.599 alternative asset manager. Blackstone paid $620 00:21:27.599 --> 00:21:31.339 million in cash and stock for GSO, plus a potential 00:21:31.339 --> 00:21:34.759 earn -out. And this move was, well, it was counter 00:21:34.759 --> 00:21:37.920 -cyclical and brilliant. Why was acquiring a 00:21:37.920 --> 00:21:40.660 credit platform so strategic in 2008? The world 00:21:40.660 --> 00:21:42.420 was falling apart. Because the credit markets 00:21:42.420 --> 00:21:44.200 had collapsed. That meant traditional corporate 00:21:44.200 --> 00:21:47.000 buyouts were slowing dramatically. By acquiring 00:21:47.000 --> 00:21:49.400 GSO, Blackstone positioned itself to capitalize 00:21:49.400 --> 00:21:52.559 on the ensuing chaos. So they were buying when 00:21:52.559 --> 00:21:55.700 everyone else was selling. Exactly. Merging GSO's 00:21:55.700 --> 00:21:57.740 operations created one of the largest credit 00:21:57.740 --> 00:21:59.640 platforms in the alternative asset management 00:21:59.640 --> 00:22:02.559 business, immediately expanding their AUM in 00:22:02.559 --> 00:22:06.369 that space to over $21 billion. This gave them 00:22:06.369 --> 00:22:08.329 the expertise and capital to acquire distressed 00:22:08.329 --> 00:22:10.410 debt, bankrupt companies, and assets that were 00:22:10.410 --> 00:22:12.730 being forced into fire sales, a massive opportunity 00:22:12.730 --> 00:22:15.390 when nobody else can secure financing. Okay, 00:22:15.450 --> 00:22:17.509 let's turn to real estate. This division has 00:22:17.509 --> 00:22:20.150 approximately 500 employees and is perhaps the 00:22:20.150 --> 00:22:22.210 most visible component of their operations because 00:22:22.210 --> 00:22:24.009 they are effectively one of the largest landlords 00:22:24.009 --> 00:22:26.589 on the planet. Their real estate arm is an immense 00:22:26.589 --> 00:22:30.569 driver of their AUM. It focuses on opportunistic 00:22:30.569 --> 00:22:34.710 core and debt strategies. And following the 2007 00:22:34.710 --> 00:22:38.049 -2010 subprime mortgage crisis, they implemented 00:22:38.049 --> 00:22:41.539 a highly successful and... Very controversial 00:22:41.539 --> 00:22:43.460 strategy in the residential market. What did 00:22:43.460 --> 00:22:46.259 they do? They bought more than $5 .5 billion 00:22:46.259 --> 00:22:49.880 worth of distressed multifamily homes and single 00:22:49.880 --> 00:22:52.140 -family rental properties across the U .S. This 00:22:52.140 --> 00:22:54.240 dramatically altered the residential market, 00:22:54.319 --> 00:22:56.259 turning millions of homes previously owned by 00:22:56.259 --> 00:22:58.799 individuals into institutional rental assets. 00:22:59.259 --> 00:23:01.680 Absolutely. They recognized the distressed sale 00:23:01.680 --> 00:23:04.240 opportunity, and they had the access to capital, 00:23:04.380 --> 00:23:07.200 that dry powder, to aggregate these assets on 00:23:07.200 --> 00:23:09.819 a massive scale. Something regional banks or 00:23:09.819 --> 00:23:11.980 smaller investors simply couldn't do. Their goal 00:23:11.980 --> 00:23:14.200 was clear. Hold them as rentals until prices 00:23:14.200 --> 00:23:15.960 rebounded, then bundle them up and sell them, 00:23:16.059 --> 00:23:18.319 often through a public REIT structure. And that 00:23:18.319 --> 00:23:20.519 decision positioned them perfectly to capitalize 00:23:20.519 --> 00:23:23.059 on the housing market recovery. Perfectly. And 00:23:23.059 --> 00:23:25.339 it fundamentally changed the landscape of American 00:23:25.339 --> 00:23:27.779 residential renting. They also hold major landmark 00:23:27.779 --> 00:23:31.359 commercial properties. Yes. The big, shiny office 00:23:31.359 --> 00:23:33.700 buildings are still a key part of the portfolio. 00:23:33.900 --> 00:23:38.039 They acquired the iconic Willis Tower. formerly 00:23:38.039 --> 00:23:41.940 the Sears Tower in Chicago in 2015, for $1 .3 00:23:41.940 --> 00:23:45.000 billion. And their acquisition pace hasn't slowed 00:23:45.000 --> 00:23:48.279 down? Not at all. In 2022 alone, they completed 00:23:48.279 --> 00:23:51.539 two massive deals, acquiring Austin -based American 00:23:51.539 --> 00:23:54.539 Campus Communities for nearly $13 billion, which 00:23:54.539 --> 00:23:57.480 focuses on high -end student housing, and P .S. 00:23:57.500 --> 00:24:00.740 Business Parks for $7 .6 billion, focusing on 00:24:00.740 --> 00:24:03.119 commercial office and industrial parks. They 00:24:03.119 --> 00:24:05.579 are also masters of the sale -leaseback model, 00:24:05.740 --> 00:24:07.819 especially in the hospitality sector. This is 00:24:07.819 --> 00:24:10.240 a key concept we need to fully unpack for the 00:24:10.240 --> 00:24:13.019 listener. Yes. This model is absolutely critical 00:24:13.019 --> 00:24:14.819 to understanding their financial engineering. 00:24:15.000 --> 00:24:17.160 A sale -leaseback transaction involves an owner 00:24:17.160 --> 00:24:19.940 -operator, say, a casino or a hotel, selling 00:24:19.940 --> 00:24:22.079 their property to an investment firm like Blackstone. 00:24:22.220 --> 00:24:24.579 Okay. And at the exact same time, they sign a 00:24:24.579 --> 00:24:26.519 long -term lease to rent it back and continue 00:24:26.519 --> 00:24:28.519 operating it. So what's the advantage for the 00:24:28.519 --> 00:24:30.619 operator, the casino, for instance? Why would 00:24:30.619 --> 00:24:32.900 they do that? The operator gains... an immediate 00:24:32.900 --> 00:24:36.839 massive cash infusion, liquidity. They can use 00:24:36.839 --> 00:24:39.220 that cash to pay down debt, fund new projects, 00:24:39.259 --> 00:24:42.039 or buy back their own stock. They turn a tangible 00:24:42.039 --> 00:24:45.380 asset, the building, into capital without disrupting 00:24:45.380 --> 00:24:47.440 the business operations inside the building. 00:24:47.640 --> 00:24:49.740 And what's the advantage for Blackstone? Blackstone 00:24:49.740 --> 00:24:52.980 secures ownership of premier, usually irreplaceable, 00:24:52.980 --> 00:24:56.200 real estate assets. And most importantly, they 00:24:56.200 --> 00:24:59.819 secure a long -term, predictable, and often escalating 00:24:59.819 --> 00:25:02.759 rental income from a reliable tenant. It's a 00:25:02.759 --> 00:25:05.200 low -risk, annuity -like income stream backed 00:25:05.200 --> 00:25:07.960 by incredibly valuable property. And we've seen 00:25:07.960 --> 00:25:10.039 them do this with some very famous property. 00:25:10.140 --> 00:25:12.980 Oh, yes. Prime examples of this include the Bellagio 00:25:12.980 --> 00:25:16.240 in 2019 and the Aria Resort and Casino Fodara 00:25:16.240 --> 00:25:18.940 in 2021, both of which they acquired from MGM 00:25:18.940 --> 00:25:21.460 Resorts in massive sale -leaseback transactions. 00:25:21.920 --> 00:25:23.759 And the sources show that their new frontier, 00:25:24.019 --> 00:25:26.279 the next massive asset class they're aggressively 00:25:26.279 --> 00:25:28.839 moving into, is data centers. That's where the 00:25:28.839 --> 00:25:31.490 infrastructure focus is shifting. It's directly 00:25:31.490 --> 00:25:33.990 addressing the massive capital demands of the 00:25:33.990 --> 00:25:36.509 digital economy, especially the rise of generative 00:25:36.509 --> 00:25:39.710 AI. Blackstone is reportedly building a $25 billion 00:25:39.710 --> 00:25:43.130 empire of these power -hungry data centers. And 00:25:43.130 --> 00:25:45.089 they made a huge acquisition to kick this off. 00:25:45.289 --> 00:25:47.970 They did. They acquired Quality Technology Services, 00:25:48.150 --> 00:25:51.710 or QTS, for approximately $10 billion in 2021. 00:25:52.130 --> 00:25:53.950 And they've doubled down on that strategy in 00:25:53.950 --> 00:25:56.950 the Asia -Pacific region. Exactly. In 2024, they 00:25:56.950 --> 00:25:59.569 announced an agreement to acquire AirDrunk. which 00:25:59.569 --> 00:26:02.250 is a major data center platform spanning Asia 00:26:02.250 --> 00:26:05.410 Pacific for an enterprise value exceeding a $24 00:26:05.410 --> 00:26:08.009 billion. So if we connect this to the bigger 00:26:08.009 --> 00:26:10.029 picture, they aren't just buying buildings anymore. 00:26:10.170 --> 00:26:12.009 They are buying the physical backbone required 00:26:12.009 --> 00:26:15.089 to run generative AI models, cloud storage, and 00:26:15.089 --> 00:26:17.990 the entire global digital ecosystem. This is 00:26:17.990 --> 00:26:21.279 a massive. multi -decade capital bet on the exponential 00:26:21.279 --> 00:26:23.900 growth of data and computing power. This naturally 00:26:23.900 --> 00:26:27.460 leads us to investment strategy 2021 -2025, a 00:26:27.460 --> 00:26:29.799 torrent of deals. The breadth of recent capital 00:26:29.799 --> 00:26:32.359 deployment just illustrates how pervasive their 00:26:32.359 --> 00:26:35.099 influence has become. The sheer volume of transactions 00:26:35.099 --> 00:26:37.859 really highlights their unparalleled ability 00:26:37.859 --> 00:26:40.819 to deploy capital across almost every imaginable 00:26:40.819 --> 00:26:43.980 sector. It demonstrates global confidence and 00:26:43.980 --> 00:26:46.220 a massive inflow of funds from limited partners 00:26:46.220 --> 00:26:48.559 who trust them to find value absolutely anywhere. 00:26:49.000 --> 00:26:51.740 In UK Leisure, for example, they acquired a majority 00:26:51.740 --> 00:26:54.559 shareholding in Bourne Leisure, which owns Butlins, 00:26:54.759 --> 00:26:57.740 Haven Holidays and Warner Leisure for £3 billion 00:26:57.740 --> 00:27:00.720 in 2021. Right. They're buying the places where 00:27:00.720 --> 00:27:02.759 millions of people take their annual family holidays. 00:27:03.000 --> 00:27:05.400 And they moved into luxury and lifestyle with 00:27:05.400 --> 00:27:08.160 the acquisition of a majority stake in Spanx 00:27:08.160 --> 00:27:11.759 Inc., the apparel company, in 2021. Yes. That 00:27:11.759 --> 00:27:15.200 deal valued Spanx at $1 .2 billion and was notable 00:27:15.200 --> 00:27:17.859 for its governance. It was managed by an all 00:27:17.859 --> 00:27:20.220 -female investment team from Blackstone, and 00:27:20.220 --> 00:27:22.279 the resulting board of directors was also announced 00:27:22.279 --> 00:27:25.000 to be all -female, reflecting a conscious effort 00:27:25.000 --> 00:27:27.259 to align with diversity initiatives and governance. 00:27:27.599 --> 00:27:29.480 Then there is heavy industrial infrastructure 00:27:29.480 --> 00:27:31.839 and specialized software. They are moving far 00:27:31.839 --> 00:27:33.759 beyond traditional real estate and hospitality 00:27:33.759 --> 00:27:36.220 into these highly specific industrial niches. 00:27:36.440 --> 00:27:39.940 In 2022, they struck a massive $14 billion deal 00:27:39.940 --> 00:27:46.460 for a fifth - This is a huge investment focused 00:27:46.460 --> 00:27:48.480 on the infrastructure required for climate control 00:27:48.480 --> 00:27:51.940 and energy efficiency. And in 2023. In 2023, 00:27:52.200 --> 00:27:55.299 they participated in a $1 .6 billion club deal 00:27:55.299 --> 00:27:58.180 to acquire Energy Exemplar, which is a highly 00:27:58.180 --> 00:28:00.960 specialized firm providing energy market analytics 00:28:00.960 --> 00:28:03.640 and simulation software. This shows they are 00:28:03.640 --> 00:28:05.900 diving deep into the technology that underpins 00:28:05.900 --> 00:28:09.000 utilities and global energy grids. Even our consumer 00:28:09.000 --> 00:28:11.220 staples and dining habits are becoming Blackstone 00:28:11.220 --> 00:28:13.400 assets. We see these aggressive investments in 00:28:13.400 --> 00:28:15.359 the food and beverage space. Absolutely. It's 00:28:15.359 --> 00:28:17.019 an institutional investment near lunch hour. 00:28:17.180 --> 00:28:19.920 In 2024, they made a growth equity investment 00:28:19.920 --> 00:28:21.960 in the American drive -thru coffeehouse Chain 00:28:21.960 --> 00:28:24.660 7 Brew, tapping into the rapid growth of specialized 00:28:24.660 --> 00:28:27.240 fast casual dining. And most notably, in November 00:28:27.240 --> 00:28:29.640 2024, they announced the acquisition of Jersey 00:28:29.640 --> 00:28:32.750 Mike's Subs. Huge brand. The transaction is expected 00:28:32.750 --> 00:28:36.029 to close in early 2025. They are buying into 00:28:36.029 --> 00:28:38.309 stable, high -volume consumer spending habits, 00:28:38.509 --> 00:28:41.029 shifting the focus from simple franchising to 00:28:41.029 --> 00:28:43.750 maximized asset utilization. And one of the most 00:28:43.750 --> 00:28:46.970 unexpected sectors they entered in 2024 was music 00:28:46.970 --> 00:28:50.109 IP. Yeah, this is a fascinating move. It's a 00:28:50.109 --> 00:28:51.869 nod to the growing importance of intellectual 00:28:51.869 --> 00:28:54.789 property as a secure long -term asset class. 00:28:55.130 --> 00:28:59.490 In April 2024, Blackstone made a $1 .57 billion 00:28:59.490 --> 00:29:03.150 offer, successfully outbidding a competitor to 00:29:03.150 --> 00:29:05.690 acquire Hypnosis Songs Fund. Which is a British 00:29:05.690 --> 00:29:08.009 company. A British company specializing in music, 00:29:08.109 --> 00:29:10.599 intellectual property, and song management. This 00:29:10.599 --> 00:29:13.259 acquisition, which completed in July, places 00:29:13.259 --> 00:29:15.900 them directly into the booming royalty -driven 00:29:15.900 --> 00:29:18.220 market of songwrites. But this isn't just about 00:29:18.220 --> 00:29:20.460 accumulating assets. It's about portfolio cycling 00:29:20.460 --> 00:29:23.420 and proving returns to investors. They also completed 00:29:23.420 --> 00:29:25.740 several high -value divestments, showing they 00:29:25.740 --> 00:29:27.880 know when to exit a growth story. Divestments 00:29:27.880 --> 00:29:29.900 are absolutely crucial for delivering the required 00:29:29.900 --> 00:29:32.240 returns to their investors, the pensions and 00:29:32.240 --> 00:29:34.420 endowments who rely on their funds. So in May 00:29:34.420 --> 00:29:37.380 2023, they sold their stake in IBS Software, 00:29:37.599 --> 00:29:41.279 a SaaS provider, for $450. $50 million. In October 00:29:41.279 --> 00:29:43.920 2023, they sold their stake in the Spanish hotel 00:29:43.920 --> 00:29:46.660 conglomerate Hotel Investment Partners, or HIP, 00:29:46.900 --> 00:29:49.400 to the Singaporean sovereign wealth fund GIC 00:29:49.400 --> 00:29:52.779 in a deal that valued HIP at over $4 billion. 00:29:52.980 --> 00:29:55.720 And most recently? Most recently, in April 2025, 00:29:56.240 --> 00:29:58.440 they sold their controlling stake in the U .S. 00:29:58.460 --> 00:30:01.279 software company HealthEdge to Bain Capital in 00:30:01.279 --> 00:30:03.720 a deal valuing the company at $2 .6 billion, 00:30:04.059 --> 00:30:07.470 including debt. This constant high volume buying 00:30:07.470 --> 00:30:09.950 and selling just illustrates the active management 00:30:09.950 --> 00:30:12.569 across their massive, diverse portfolio. This 00:30:12.569 --> 00:30:14.690 tremendous scale and influence, however, does 00:30:14.690 --> 00:30:16.890 not come without intense scrutiny and significant 00:30:16.890 --> 00:30:21.190 controversy. We now enter part four, controversies, 00:30:21.190 --> 00:30:24.049 challenges and critical incidents. And it is 00:30:24.049 --> 00:30:26.670 necessary to look impartially at the operational 00:30:26.670 --> 00:30:28.930 and ethical issues that have shadowed the firm's 00:30:28.930 --> 00:30:31.059 ascent. If we connect this to the bigger picture, 00:30:31.180 --> 00:30:34.400 when you operate at this scale, a $1 .2 trillion 00:30:34.400 --> 00:30:36.980 entity across dozens of industries globally, 00:30:37.180 --> 00:30:39.599 the potential for friction with regulatory bodies, 00:30:39.799 --> 00:30:42.700 social norms, and public opinion just increases 00:30:42.700 --> 00:30:45.339 dramatically. Their size makes them a high -profile 00:30:45.339 --> 00:30:47.700 target for critics and regulators alike. We have 00:30:47.700 --> 00:30:49.660 to start with the issues surrounding Motel 6, 00:30:49.859 --> 00:30:52.079 which Blackstone owned via its real estate funds. 00:30:52.319 --> 00:30:54.940 There were multiple cases involving the unauthorized 00:30:54.940 --> 00:30:58.309 disclosure of guest data. Yes. In two separate 00:30:58.309 --> 00:31:00.990 cases, Motel 6 agreed to settle for a combined 00:31:00.990 --> 00:31:05.769 total of $19 .6 million. These settlements resolved 00:31:05.769 --> 00:31:08.369 lawsuits that alleged the hotel chain had provided 00:31:08.369 --> 00:31:11.289 guest lists, including names and room numbers, 00:31:11.450 --> 00:31:14.630 directly to U .S. Immigration and Customs Enforcement. 00:31:15.150 --> 00:31:18.450 Or ICE. Without warrants. Without requiring warrants 00:31:18.450 --> 00:31:21.349 or any legal process. These disclosures led to 00:31:21.349 --> 00:31:23.890 subsequent arrests and raised very serious concerns 00:31:23.890 --> 00:31:26.329 over privacy and civil liberties, fundamentally 00:31:26.329 --> 00:31:28.490 challenging the whole notion of hotel privacy. 00:31:28.789 --> 00:31:30.650 And one of the most troubling recent revelations 00:31:30.650 --> 00:31:33.210 involves illegal child labor within one of their 00:31:33.210 --> 00:31:35.670 portfolio companies. This goes right to the heart 00:31:35.670 --> 00:31:38.279 of governance and operational oversight. The 00:31:38.279 --> 00:31:40.319 U .S. Department of Labor investigated Packer 00:31:40.319 --> 00:31:43.680 Sanitation Services, Inc., or PSSI, which is 00:31:43.680 --> 00:31:45.740 a slaughterhouse cleaning firm owned by Blackstone. 00:31:45.880 --> 00:31:48.460 The investigation found that PSSI had employed 00:31:48.460 --> 00:31:51.000 over 100 American children, some as young as 00:31:51.000 --> 00:31:54.059 13, illegally working in hazardous occupations 00:31:54.059 --> 00:31:56.400 across eight different states. And that detail 00:31:56.400 --> 00:31:58.640 about how the investigation started is deeply 00:31:58.640 --> 00:32:00.940 disturbing. It tells the whole story of the dangers 00:32:00.940 --> 00:32:03.599 involved. It began after a teacher at a middle 00:32:03.599 --> 00:32:06.150 school in Grand Island, Nebraska, reported a 00:32:06.150 --> 00:32:08.269 student who had suffered severe chemical burns, 00:32:08.430 --> 00:32:11.809 specifically hydrochloric acid burns on his hands 00:32:11.809 --> 00:32:15.289 and knees while working. Terrific. The DOL subsequently 00:32:15.289 --> 00:32:19.089 levied a $1 .5 million civil money penalty against 00:32:19.089 --> 00:32:22.470 PSSI for employing minors in breach of the Fair 00:32:22.470 --> 00:32:25.230 Labor Standards Act. It highlights the failures 00:32:25.230 --> 00:32:27.349 of corporate oversight at such a critical level. 00:32:27.569 --> 00:32:30.369 Beyond labor, the firm has faced criticism regarding 00:32:30.369 --> 00:32:32.730 the environmental impact of some of its investments. 00:32:33.049 --> 00:32:35.720 That's right. Environmental, social and governance 00:32:35.720 --> 00:32:39.099 or ESG concerns are increasingly central to finance. 00:32:39.380 --> 00:32:41.920 And Blackstone has been scrutinized for investing 00:32:41.920 --> 00:32:44.640 in companies with documented links to the commercialization 00:32:44.640 --> 00:32:47.700 and critically, the deforestation of the Amazon 00:32:47.700 --> 00:32:50.220 rainforest. And what's the argument from critics? 00:32:50.539 --> 00:32:52.460 Critics argue that private equity structures 00:32:52.460 --> 00:32:55.579 can exacerbate these issues by prioritizing immediate 00:32:55.579 --> 00:32:57.980 short term returns over long term environmental 00:32:57.980 --> 00:33:01.269 sustainability. It raises very serious questions 00:33:01.269 --> 00:33:04.069 about the role of global capital in climate change 00:33:04.069 --> 00:33:07.470 and ecological damage. This discussion of operational 00:33:07.470 --> 00:33:10.710 risk brings us back to their core strategy, that 00:33:10.710 --> 00:33:14.069 sale -leaseback model. We need to detail the 00:33:14.069 --> 00:33:16.950 severe real -world consequences when this model 00:33:16.950 --> 00:33:19.529 fails, as illustrated by the Southern Cross healthcare 00:33:19.529 --> 00:33:22.490 controversy in the UK. This is such a vital case 00:33:22.490 --> 00:33:25.190 study. It shows the potential social cost of 00:33:25.190 --> 00:33:27.660 aggressive financial engineering. In the late 00:33:27.660 --> 00:33:30.359 2000s, Blackstone acquired Southern Cross Healthcare, 00:33:30.579 --> 00:33:33.980 a major UK provider of elderly care homes. They 00:33:33.980 --> 00:33:38.059 then executed a massive sale lease back, transferring 00:33:38.059 --> 00:33:40.660 the properties into a REIT and leasing them back 00:33:40.660 --> 00:33:43.440 to the operating company. This burdened Southern 00:33:43.440 --> 00:33:46.819 Cross with high inflexible rental payments. So 00:33:46.819 --> 00:33:49.200 the operator, the company actually caring for 00:33:49.200 --> 00:33:52.160 people, was suddenly paying exorbitant rent for 00:33:52.160 --> 00:33:54.680 buildings they used to own. Exactly. And when 00:33:54.680 --> 00:33:56.700 market conditions tightened and government funding 00:33:56.700 --> 00:33:58.680 for care homes didn't keep pace with the rising 00:33:58.680 --> 00:34:00.980 rental costs dictated by that sale -leaseback 00:34:00.980 --> 00:34:03.700 agreement, Southern Cross became unsustainable. 00:34:03.779 --> 00:34:06.059 And the consequences were huge. The source material 00:34:06.059 --> 00:34:08.639 notes that by 2011, the company was approaching 00:34:08.639 --> 00:34:11.940 bankruptcy. jeopardizing the care of 31 ,000 00:34:11.940 --> 00:34:16.079 elderly residents across 750 care homes. Blackstone 00:34:16.079 --> 00:34:18.659 was widely accused of setting up the unsustainable 00:34:18.659 --> 00:34:21.760 business model and selling the company on, leaving 00:34:21.760 --> 00:34:24.300 the social responsibility and the financial fallout 00:34:24.300 --> 00:34:27.000 to the subsequent owners and ultimately the UK 00:34:27.000 --> 00:34:29.519 government and the residents themselves. It highlights 00:34:29.519 --> 00:34:32.480 a critical tension. A huge one. When investment 00:34:32.480 --> 00:34:34.539 firms operate essential social infrastructure, 00:34:34.920 --> 00:34:37.420 the profit imperative often clashes directly 00:34:37.420 --> 00:34:39.969 with social responsibility. Shifting to digital 00:34:39.969 --> 00:34:43.030 assets, the 2020 acquisition of Ancestry .com 00:34:43.030 --> 00:34:47.030 for $4 .7 billion sparked significant data privacy 00:34:47.030 --> 00:34:49.849 concerns. Right, because Ancestry .com controls 00:34:49.849 --> 00:34:52.269 access to millions of people's highly sensitive 00:34:52.269 --> 00:34:55.369 genetic and familial data. This acquisition heightened 00:34:55.369 --> 00:34:58.150 concerns about who controls accesses and profits 00:34:58.150 --> 00:35:00.889 from this information, particularly given Blackstone's 00:35:00.889 --> 00:35:02.989 reputation for aggressive asset management. And 00:35:02.989 --> 00:35:05.500 what's the core fear? The key fear is that this 00:35:05.500 --> 00:35:07.659 genetic data could potentially be used for non 00:35:07.659 --> 00:35:10.119 -consensual tracking, medical underwriting, or 00:35:10.119 --> 00:35:12.500 even law enforcement identification. And these 00:35:12.500 --> 00:35:15.760 concerns quickly materialized into complex legal 00:35:15.760 --> 00:35:18.059 challenges. That's right. Blackstone has had 00:35:18.059 --> 00:35:20.300 to aggressively defend itself against complex 00:35:20.300 --> 00:35:23.380 class action litigation. These suits specifically 00:35:23.380 --> 00:35:26.400 relate to the alleged misuse of data from people 00:35:26.400 --> 00:35:28.599 who did not directly consent to genetic testing, 00:35:28.760 --> 00:35:31.559 but were identifiable through biological relations 00:35:31.559 --> 00:35:33.719 or other means contained within the Ancestry 00:35:33.719 --> 00:35:36.559 database. It just underlines the complex legal 00:35:36.559 --> 00:35:39.360 and ethical gray areas inherent in controlling 00:35:39.360 --> 00:35:42.480 vast pools of highly personal and genetic information. 00:35:43.159 --> 00:35:45.139 Shifting to internal operational challenges, 00:35:45.420 --> 00:35:47.860 even a firm as large as Blackstone isn't immune 00:35:47.860 --> 00:35:50.760 to market volatility and investor nerves, which 00:35:50.760 --> 00:35:53.440 leads us to recent shocks and operational friction. 00:35:53.619 --> 00:35:56.099 The most notable internal shock was the restriction 00:35:56.099 --> 00:35:58.059 placed on their massive real estate investment 00:35:58.059 --> 00:36:00.940 trust. Bright, the Blackstone Real Estate Investment 00:36:00.940 --> 00:36:03.380 Trust. Bright is structured as a continuously 00:36:03.380 --> 00:36:06.000 open -ended fund designed primarily for high 00:36:06.000 --> 00:36:08.599 net worth retail investors, and it offers liquidity 00:36:08.599 --> 00:36:10.880 that's usually superior to traditional closed 00:36:10.880 --> 00:36:13.800 -end PE funds. But in December 2022, they had 00:36:13.800 --> 00:36:16.119 to restrict withdrawals. What caused that reaction? 00:36:16.809 --> 00:36:19.429 Well, due to a sharp downturn in investor sentiment, 00:36:19.650 --> 00:36:22.349 driven by rising interest rates and fears about 00:36:22.349 --> 00:36:24.789 the commercial property market, Blackstone faced 00:36:24.789 --> 00:36:27.150 a surge in redemption requests that exceeded 00:36:27.150 --> 00:36:29.809 their preset liquidity limits. So too many people 00:36:29.809 --> 00:36:32.449 wanted their money out at once. Exactly. They 00:36:32.449 --> 00:36:34.889 restricted investors' ability to withdraw funds 00:36:34.889 --> 00:36:38.949 from the $125 billion fund, causing widespread 00:36:38.949 --> 00:36:41.230 consternation among those investors who expected 00:36:41.230 --> 00:36:44.400 easy access to their capital. This event really 00:36:44.400 --> 00:36:46.880 exposed the liquidity challenges that can affect 00:36:46.880 --> 00:36:50.239 even these supposedly liquid private equity funds 00:36:50.239 --> 00:36:53.400 when investor sentiment shifts rapidly, forcing 00:36:53.400 --> 00:36:55.659 the firm to burn capital to meet redemptions. 00:36:55.840 --> 00:36:58.519 The sources also indicate a recent significant 00:36:58.519 --> 00:37:01.239 personnel shift at the top levels of their real 00:37:01.239 --> 00:37:03.380 estate division, which is always closely watched 00:37:03.380 --> 00:37:07.159 in finance. Yes. In November 2025, Kathleen McCarthy 00:37:07.159 --> 00:37:09.579 Baldwin, who had served as the global co -head 00:37:09.579 --> 00:37:11.559 of real estate, announced her departure from 00:37:11.559 --> 00:37:13.760 the firm at the end of the year. Baldwin was 00:37:13.760 --> 00:37:15.559 one of Wall Street's highest -ranking and most 00:37:15.559 --> 00:37:18.380 influential female executives, making her exit 00:37:18.380 --> 00:37:20.880 a high -profile loss for the firm, especially 00:37:20.880 --> 00:37:22.920 given her involvement in such a core segment 00:37:22.920 --> 00:37:25.619 of Blackstone's massive business. And finally, 00:37:25.719 --> 00:37:28.039 a devastating tragedy that struck at the very 00:37:28.039 --> 00:37:31.679 heart of the organization in 2025. In July 2025, 00:37:32.260 --> 00:37:34.460 a horrific mass shooting occurred at the Manhattan 00:37:34.460 --> 00:37:39.070 headquarters at 345 Park Avenue. The gunman identified 00:37:39.070 --> 00:37:41.349 as Shane Devin Tamara, entered the building, 00:37:41.510 --> 00:37:44.550 which resulted in a massive police response and 00:37:44.550 --> 00:37:46.769 a terrible loss of life. The tragedy resulted 00:37:46.769 --> 00:37:49.349 in the deaths of four people, including a very 00:37:49.349 --> 00:37:51.809 senior executive who was key to their real estate 00:37:51.809 --> 00:37:54.389 operations. Yes. Among the four victims killed 00:37:54.389 --> 00:37:56.969 was Wesley Lepantner, a senior managing director 00:37:56.969 --> 00:37:59.550 at Blackstone and the CEO of the firm's massive 00:37:59.550 --> 00:38:02.710 real estate fund, Prite. Also killed were an 00:38:02.710 --> 00:38:04.789 off -duty New York City police officer working 00:38:04.789 --> 00:38:07.409 security, a security guard, and another employee 00:38:07.409 --> 00:38:09.969 in the building. It was a shocking and devastating 00:38:09.969 --> 00:38:11.929 incident that occurred at the symbolic center 00:38:11.929 --> 00:38:14.309 of global finance, highlighting the vulnerability 00:38:14.309 --> 00:38:17.130 of even the most powerful institutions. What 00:38:17.130 --> 00:38:19.949 a monumental, multifaceted story spanning decades 00:38:19.949 --> 00:38:22.630 of innovation and controversy. Let's bring it 00:38:22.630 --> 00:38:24.329 all back together for the listener in our summary 00:38:24.329 --> 00:38:26.900 and final thought. We've tracked Blackstone Inc. 00:38:27.000 --> 00:38:30.440 from its founding in 1985, a $400 ,000 startup 00:38:30.440 --> 00:38:33.059 offering M &A advice that Strategical failed 00:38:33.059 --> 00:38:35.519 to capitalize on the birth of BlackRock, to a 00:38:35.519 --> 00:38:38.360 global investment behemoth commanding $1 .2 trillion 00:38:38.360 --> 00:38:41.260 in assets today. They are now fundamental owners 00:38:41.260 --> 00:38:43.869 of global commerce and infrastructure. They control 00:38:43.869 --> 00:38:45.710 everything from the resorts you might vacation 00:38:45.710 --> 00:38:48.170 at and the physical assets required for AI computing 00:38:48.170 --> 00:38:51.570 to essential specialized services like healthcare 00:38:51.570 --> 00:38:54.150 software and critical infrastructure, including 00:38:54.150 --> 00:38:57.929 a 22 % stake in AGS airports in the UK acquired 00:38:57.929 --> 00:39:01.119 in 2025. They have successfully inserted themselves 00:39:01.119 --> 00:39:03.559 as a foundational layer beneath modern global 00:39:03.559 --> 00:39:05.820 life. They really have. The consistency of their 00:39:05.820 --> 00:39:07.840 deal flow, spanning everything from music IP 00:39:07.840 --> 00:39:10.900 to climate tech, truly forces us to analyze their 00:39:10.900 --> 00:39:13.539 structural market impact. The sheer volume and 00:39:13.539 --> 00:39:15.619 diversity of that investment portfolio suggests 00:39:15.619 --> 00:39:18.480 an unparalleled level of influence. So what does 00:39:18.480 --> 00:39:20.059 this all mean for the global economy and for 00:39:20.059 --> 00:39:23.070 you? This raises an important question. What 00:39:23.070 --> 00:39:25.650 is the broader consequence of institutional investors 00:39:25.650 --> 00:39:28.710 like Blackstone holding vast swaths of residential 00:39:28.710 --> 00:39:31.409 property, commercial assets, and increasingly 00:39:31.409 --> 00:39:34.210 social infrastructure? Their success stems from 00:39:34.210 --> 00:39:36.750 financial innovation, the use of leverage in 00:39:36.750 --> 00:39:40.750 structures like the sale -leaseback, That maximizes 00:39:40.750 --> 00:39:43.610 asset value. Right. But when the imperative for 00:39:43.610 --> 00:39:46.309 profit dictates the operation of essential services, 00:39:46.449 --> 00:39:48.730 from utilities to elder care, as we saw with 00:39:48.730 --> 00:39:51.110 Southern Cross, the alignment of interest between 00:39:51.110 --> 00:39:53.349 shareholder value and public good inevitably 00:39:53.349 --> 00:39:56.570 becomes blurred. Their size grants them the ability 00:39:56.570 --> 00:39:59.730 to dictate trends, from the massive global push 00:39:59.730 --> 00:40:02.889 into data centers to their role as arguably the 00:40:02.889 --> 00:40:04.949 world's largest owner of real estate. The risk 00:40:04.949 --> 00:40:06.710 doesn't disappear. It just gets transferred. 00:40:06.969 --> 00:40:09.690 Exactly. When an investment firm achieves this 00:40:09.690 --> 00:40:11.909 status, becoming a fundamental owner and operator 00:40:11.909 --> 00:40:14.849 of critical services, how does the imperative 00:40:14.849 --> 00:40:17.130 for generating maximum profit for its limited 00:40:17.130 --> 00:40:20.090 partners intersect with the broader social responsibility 00:40:20.090 --> 00:40:22.489 owed to the communities and consumers who rely 00:40:22.489 --> 00:40:24.710 on those services? And who ultimately bears the 00:40:24.710 --> 00:40:27.619 risk? Who ultimately bears the risk when the 00:40:27.619 --> 00:40:29.920 investment model, which is based on leverage 00:40:29.920 --> 00:40:32.980 and financial engineering, inevitably fails or 00:40:32.980 --> 00:40:36.059 hits a major structural shock? That's the question 00:40:36.059 --> 00:40:38.139 you, the learner, should continue to mull over 00:40:38.139 --> 00:40:40.519 as you see these institutional giants making 00:40:40.519 --> 00:40:42.619 their next trillion -dollar moves. Because whether 00:40:42.619 --> 00:40:44.739 you know it or not, you are living in a Blackstone 00:40:44.739 --> 00:40:45.280 -owned world.