WEBVTT 00:00:00.000 --> 00:00:02.960 Welcome back to the Deep Dive. Today we're cutting 00:00:02.960 --> 00:00:05.160 right through the noise surrounding a name that 00:00:05.160 --> 00:00:07.660 constantly hits the headlines, but whose actual 00:00:07.660 --> 00:00:11.439 power and influence are, I think, often misunderstood. 00:00:12.259 --> 00:00:15.880 BlackRock. Ink. It's a great topic because we're 00:00:15.880 --> 00:00:17.859 really grappling with a financial institution 00:00:17.859 --> 00:00:22.100 that has... in a way, ascended to a geopolitical 00:00:22.100 --> 00:00:24.519 scale. Right. The mission of this deep dive for 00:00:24.519 --> 00:00:27.280 you today is to cut through the mythology and 00:00:27.280 --> 00:00:29.940 understand the specific levers of control this 00:00:29.940 --> 00:00:32.340 company wields. We're talking everything from 00:00:32.340 --> 00:00:35.659 risk management software to, you know, environmental 00:00:35.659 --> 00:00:37.979 policy. OK, let's just jump right in and try 00:00:37.979 --> 00:00:39.799 to grapple with the numbers because the scale 00:00:39.799 --> 00:00:42.429 is genuinely difficult to comprehend. It really 00:00:42.429 --> 00:00:45.770 is. Our sources confirm that as of 2025, BlackRock 00:00:45.770 --> 00:00:49.929 manages a mind -boggling $12 .5 trillion in assets 00:00:49.929 --> 00:00:53.530 under management. AUM. $12 .5 trillion. You almost 00:00:53.530 --> 00:00:55.149 have to just say the number a few times. Let 00:00:55.149 --> 00:00:57.210 that sink in. It doesn't feel real. It doesn't. 00:00:57.210 --> 00:00:59.149 To put that into perspective for you, this one 00:00:59.149 --> 00:01:01.649 company, this single entity, manages capital 00:01:01.649 --> 00:01:03.750 equivalent to more than three quarters of the 00:01:03.750 --> 00:01:06.890 entire U .S. gross domestic product. And if you 00:01:06.890 --> 00:01:09.909 look back just five years ago, the combined assets 00:01:09.909 --> 00:01:13.280 of... the so -called big three, that's BlackRock, 00:01:13.420 --> 00:01:16.180 Vanguard, and State Street, that totaled around 00:01:16.180 --> 00:01:19.079 $15 trillion. And now BlackRock is almost there 00:01:19.079 --> 00:01:21.400 on its own. Almost there by itself. This isn't 00:01:21.400 --> 00:01:23.280 just, you know, a successful company. It's an 00:01:23.280 --> 00:01:26.359 unprecedented concentration of financial stewardship. 00:01:27.129 --> 00:01:30.390 And that sheer overwhelming size is exactly why 00:01:30.390 --> 00:01:32.390 it stopped being treated just as an investment 00:01:32.390 --> 00:01:35.250 firm. I mean, publications have dubbed it the 00:01:35.250 --> 00:01:37.950 world's largest shadow bank. It's a loaded term. 00:01:38.170 --> 00:01:40.989 It is. And its position is absolutely central 00:01:40.989 --> 00:01:45.030 to these intense, high stakes debates that affect 00:01:45.030 --> 00:01:47.689 really every investor, every corporate board 00:01:47.689 --> 00:01:49.430 and every national government. We're talking 00:01:49.430 --> 00:01:52.250 corporate governance, climate policy and critically, 00:01:52.430 --> 00:01:54.310 national security. So the big question we're 00:01:54.310 --> 00:01:56.590 trying to address for you today is this. What 00:01:56.590 --> 00:01:59.209 does the stewardship of that much capital actually 00:01:59.209 --> 00:02:01.709 mean in practice? How did they get this level 00:02:01.709 --> 00:02:04.069 of influence? And what are the specific, often 00:02:04.069 --> 00:02:06.269 contradictory controversies that pop up when 00:02:06.269 --> 00:02:09.150 one company has such a massive say over the global 00:02:09.150 --> 00:02:11.610 economy? And not just the economy, but the energy 00:02:11.610 --> 00:02:14.849 transition, even government bailouts. Exactly. 00:02:14.849 --> 00:02:17.889 We're diving into a comprehensive overview. They're 00:02:17.889 --> 00:02:21.289 unique, risk -obsessed origin. They're often 00:02:21.289 --> 00:02:24.009 unseen technical backbone, which is a system 00:02:24.009 --> 00:02:27.349 called Aladdin. growth. And yeah, they're deep, 00:02:27.409 --> 00:02:29.669 sometimes conflicted ties to governments and 00:02:29.669 --> 00:02:32.069 global markets. So we've established the destination, 00:02:32.389 --> 00:02:36.849 $12 .5 trillion. But how did a company founded 00:02:36.849 --> 00:02:41.210 in 1988 get here? It starts, funnily enough, 00:02:41.250 --> 00:02:43.469 with a failure, a multi -million dollar mistake 00:02:43.469 --> 00:02:47.270 that ultimately became the firm's core competency. 00:02:47.409 --> 00:02:49.550 Let's dig into that origin story. The founding 00:02:49.550 --> 00:02:51.610 narrative is absolutely the key to understanding 00:02:51.610 --> 00:02:54.550 BlackRock's DNA. It was launched in 1988 by eight 00:02:54.550 --> 00:02:56.569 partners, including names you probably know, 00:02:56.669 --> 00:02:59.030 Larry Fink, Robert Capito, Susan Wagner. Right. 00:02:59.229 --> 00:03:01.610 But unlike most firms starting up in that era, 00:03:01.669 --> 00:03:04.009 which were all about maximizing returns, BlackRock's 00:03:04.009 --> 00:03:06.689 core mission was, well, it was unique. They wanted 00:03:06.689 --> 00:03:08.849 to provide institutional clients with asset management 00:03:08.849 --> 00:03:11.289 services, but always viewed through the lens 00:03:11.289 --> 00:03:15.060 of rigorous risk management. And that focus wasn't 00:03:15.060 --> 00:03:17.840 just some abstract business school theory. It 00:03:17.840 --> 00:03:20.680 was intensely personal for Larry Fink. It was. 00:03:20.759 --> 00:03:23.520 The famous anecdote is that he had this devastating 00:03:23.520 --> 00:03:25.879 experience as the head of First Boston's bond 00:03:25.879 --> 00:03:29.439 department. He lost $90 million in the mortgage 00:03:29.439 --> 00:03:33.419 -backed securities market. All from a bad call 00:03:33.419 --> 00:03:36.310 on interest rates. And that loss, that $90 million, 00:03:36.590 --> 00:03:39.389 it wasn't a failure that sidelined him. It was 00:03:39.389 --> 00:03:42.509 the crucible that forged BlackRock. It drove 00:03:42.509 --> 00:03:44.889 the partners to build the entire firm around 00:03:44.889 --> 00:03:48.129 this one singular principle of excellent risk 00:03:48.129 --> 00:03:51.270 management and fiduciary practices. So they essentially 00:03:51.270 --> 00:03:53.870 reverse engineered a financial disaster. That's 00:03:53.870 --> 00:03:56.310 a great way to put it. They decided that to truly 00:03:56.310 --> 00:03:58.729 succeed, they needed to be able to quantify and 00:03:58.729 --> 00:04:01.009 anticipate every possible risk their clients 00:04:01.009 --> 00:04:03.580 might face. That foundational fear, you know, 00:04:03.620 --> 00:04:05.180 the fear of hidden risk, that's what built the 00:04:05.180 --> 00:04:07.340 empire. So initially, they were actually a part 00:04:07.340 --> 00:04:08.900 of the Blackstone group. They started with a 00:04:08.900 --> 00:04:11.520 $5 million credit line and were called Blackstone 00:04:11.520 --> 00:04:14.110 Financial Management at first. Right. That early 00:04:14.110 --> 00:04:15.810 partnership with Stephen Schwartzman provided 00:04:15.810 --> 00:04:18.870 that crucial early backing. And it worked. I 00:04:18.870 --> 00:04:21.829 mean, it worked almost instantly. By 1989, their 00:04:21.829 --> 00:04:25.170 AUM had already quadrupled to $2 .7 billion, 00:04:25.449 --> 00:04:28.290 mostly because they were so focused on managing 00:04:28.290 --> 00:04:31.170 risk in fixed income markets. But that partnership, 00:04:31.269 --> 00:04:33.750 well, it quickly became a case study in corporate 00:04:33.750 --> 00:04:37.889 friction. By 1994, Fink wanted to reward new 00:04:37.889 --> 00:04:40.699 hires by giving them equity. He believed it was 00:04:40.699 --> 00:04:43.500 essential to lure top talent. And Schwartzman 00:04:43.500 --> 00:04:45.680 at Blackstone, he resisted. He was not willing 00:04:45.680 --> 00:04:48.399 to dilute Blackstone's stake any further. And 00:04:48.399 --> 00:04:50.839 that disagreement, which was purely about compensation 00:04:50.839 --> 00:04:54.420 and equity philosophy, led to the split. Fink 00:04:54.420 --> 00:04:56.680 and his team were sold, and they rebranded as 00:04:56.680 --> 00:04:59.480 BlackRock Financial Management. A pretty consequential 00:04:59.480 --> 00:05:02.040 decision. Oh, absolutely. Schwarzman later famously 00:05:02.040 --> 00:05:04.160 admitted that selling BlackRock was a heroic 00:05:04.160 --> 00:05:07.100 mistake, especially given the stratospheric growth 00:05:07.100 --> 00:05:09.480 that followed. BlackRock went public in 1999, 00:05:09.920 --> 00:05:13.620 selling shares at $14 each. By the end of that 00:05:13.620 --> 00:05:16.819 same year, they were already managing $165 billion 00:05:16.819 --> 00:05:20.139 in assets. They had clearly evolved from just 00:05:20.139 --> 00:05:23.339 a niche risk management shop into a major financial 00:05:23.339 --> 00:05:26.259 player. OK, so that's the origin. Now let's move 00:05:26.259 --> 00:05:28.620 past the big AUM number because the money is 00:05:28.620 --> 00:05:30.399 really just the result. We need to talk about 00:05:30.399 --> 00:05:32.779 how they actually operate. And that means diving 00:05:32.779 --> 00:05:35.199 into their tools and their massive products. 00:05:35.439 --> 00:05:37.519 Well, when you're analyzing the financial landscape, 00:05:37.939 --> 00:05:39.980 BlackRock is one of what people call the big 00:05:39.980 --> 00:05:43.089 four index fund managers. That's alongside Vanguard, 00:05:43.470 --> 00:05:46.250 State Street and Fidelity. They are completely 00:05:46.250 --> 00:05:49.089 central to the passive investing revolution that 00:05:49.089 --> 00:05:50.930 has swept the market over the last couple of 00:05:50.930 --> 00:05:53.730 decades. Where investors just track broad indexes 00:05:53.730 --> 00:05:55.829 instead of trying to pick winning stocks. Exactly. 00:05:56.029 --> 00:05:58.230 And the centerpiece of their passive dominance, 00:05:58.490 --> 00:06:00.529 the product that truly gave them the scale we 00:06:00.529 --> 00:06:03.449 see today, is iShares. That name is everywhere. 00:06:03.769 --> 00:06:07.110 The acquisition of iShares is, I think, arguably 00:06:07.110 --> 00:06:10.230 the single most decisive strategic move in BlackRock's 00:06:10.230 --> 00:06:13.379 entire history. They acquired this massive group 00:06:13.379 --> 00:06:16.699 of exchange traded funds, EPFs, through the $13 00:06:16.699 --> 00:06:20.100 .5 billion acquisition of Barclays Global Investors, 00:06:20.120 --> 00:06:23.560 or BGI, back in 2010. And this wasn't just about 00:06:23.560 --> 00:06:25.459 adding more assets to their pile, right? This 00:06:25.459 --> 00:06:28.199 was about buying market dominance in the fastest 00:06:28.199 --> 00:06:30.420 growing investment segment out there. Precisely. 00:06:30.420 --> 00:06:33.519 To quantify that dominance for you. By 2017, 00:06:33.819 --> 00:06:36.180 just seven years after they bought it, iShares 00:06:36.180 --> 00:06:40.819 accounted for $1 .41 trillion. Wow. That was 00:06:40.819 --> 00:06:44.459 26 % of their total AUM. But more tellingly, 00:06:44.459 --> 00:06:47.120 it accounted for a massive 37 % of their base 00:06:47.120 --> 00:06:49.759 fee income. iShares became the engine for their 00:06:49.759 --> 00:06:52.079 revenue and cemented their, frankly, indispensable 00:06:52.079 --> 00:06:55.060 position in index investing globally. Okay, but 00:06:55.060 --> 00:06:57.819 there's another piece to this puzzle. The true, 00:06:58.000 --> 00:07:01.259 often unseen source of their influence. The thing 00:07:01.259 --> 00:07:03.660 that gives BlackRock this almost infrastructural 00:07:03.660 --> 00:07:06.120 role in global finance. It's not the products 00:07:06.120 --> 00:07:08.060 they sell. No, it's the proprietary software 00:07:08.060 --> 00:07:10.879 they use. Aladdin. Aladdin. An acronym, right? 00:07:11.000 --> 00:07:14.000 It is. It stands for the Asset Liability and 00:07:14.000 --> 00:07:17.060 Debt and Derivative Investment Network. This 00:07:17.060 --> 00:07:19.540 platform is, well, it's legendary. It's often 00:07:19.540 --> 00:07:22.699 called the operating system of global finance. 00:07:23.079 --> 00:07:25.639 That's a perfect description. Aladdin grew directly 00:07:25.639 --> 00:07:28.180 out of Fink's initial obsession with risk management. 00:07:28.480 --> 00:07:31.339 It's this incredibly comprehensive platform that 00:07:31.339 --> 00:07:34.259 performs sophisticated risk management, investment 00:07:34.259 --> 00:07:37.540 analytics, and tracks portfolio exposure across 00:07:37.540 --> 00:07:40.300 everything. Fixed income, equities, alternatives. 00:07:40.759 --> 00:07:43.699 It's the centralized brain that's constantly 00:07:43.699 --> 00:07:46.509 looking for the next $90 million. loss before 00:07:46.509 --> 00:07:48.389 it can happen. OK, but here's where it gets really 00:07:48.389 --> 00:07:51.050 interesting for you, the listener. Aladdin doesn't 00:07:51.050 --> 00:07:53.829 just manage BlackRock's own $12 .5 trillion. 00:07:54.129 --> 00:07:56.769 Not even close. It is licensed out and used by 00:07:56.769 --> 00:07:58.970 many of the world's largest banks, insurers, 00:07:59.230 --> 00:08:02.230 pension funds and asset managers, including, 00:08:02.430 --> 00:08:04.829 and this is the key part, some of their direct 00:08:04.829 --> 00:08:06.529 competitors. What does that mean in practice? 00:08:06.889 --> 00:08:09.490 Well, when a major insurer or a sovereign wealth 00:08:09.490 --> 00:08:12.230 fund uses Aladdin, BlackRock, while remaining 00:08:12.230 --> 00:08:16.000 totally separate, gains this profound. real time. 00:08:16.379 --> 00:08:19.180 aggregated view of the entire global financial 00:08:19.180 --> 00:08:22.620 system's risk profile. They can see where leverage 00:08:22.620 --> 00:08:25.680 is building up, where correlated risks are concentrated, 00:08:25.980 --> 00:08:28.500 and how different market shocks might cascade 00:08:28.500 --> 00:08:31.379 across the globe. It gives them a kind of foresight, 00:08:31.459 --> 00:08:33.980 an informational advantage that no other asset 00:08:33.980 --> 00:08:36.659 manager has. Exactly. It's a visibility that 00:08:36.659 --> 00:08:39.679 transforms them from just an investor into an 00:08:39.679 --> 00:08:41.639 essential piece of financial plumbing for the 00:08:41.639 --> 00:08:43.799 whole world. So that's the engine. Let's just 00:08:43.799 --> 00:08:46.090 briefly frame the physical and legal structure 00:08:46.090 --> 00:08:47.830 of the company. They're headquartered in New 00:08:47.830 --> 00:08:49.649 York City, but their footprint is absolutely 00:08:49.649 --> 00:08:53.210 global. 70 offices in 30 countries, clients in 00:08:53.210 --> 00:08:55.889 100 countries, and what, over 21 ,000 employees. 00:08:56.169 --> 00:08:58.029 That's right. And when you look at who actually 00:08:58.029 --> 00:09:00.669 owns this financial giant, the structure just 00:09:00.669 --> 00:09:02.950 reinforces the concentration of power we're talking 00:09:02.950 --> 00:09:06.129 about. Over 80 % of BlackRock is owned by other 00:09:06.129 --> 00:09:08.690 institutional investors. So its management is 00:09:08.690 --> 00:09:11.690 really beholden to other massive financial entities. 00:09:11.870 --> 00:09:14.070 And you see a concentration right at the top. 00:09:14.720 --> 00:09:18.220 As of mid -2024, the top 10 shareholders hold 00:09:18.220 --> 00:09:21.059 over 36 % of the total shares. And who's on that 00:09:21.059 --> 00:09:23.220 list? The largest shareholders are names you'd 00:09:23.220 --> 00:09:26.440 expect. The Vanguard Group, State Street Corporation, 00:09:27.000 --> 00:09:30.539 Singapore's Sovereign Wealth Fund, Temasek Holdings, 00:09:30.600 --> 00:09:33.039 Bank of America. And this brings us to a really 00:09:33.039 --> 00:09:36.470 key concept for understanding the big four. recursive 00:09:36.470 --> 00:09:39.110 ownership. Meaning? Well, Vanguard is the largest 00:09:39.110 --> 00:09:42.330 external shareholder of BlackRock. And BlackRock, 00:09:42.450 --> 00:09:45.029 in turn, is a major shareholder in Vanguard's 00:09:45.029 --> 00:09:47.830 parent company through various mandates. They 00:09:47.830 --> 00:09:50.009 own each other. So that raises a really important 00:09:50.009 --> 00:09:52.610 question, doesn't it? If these massive index 00:09:52.610 --> 00:09:54.629 fund managers own each other, does that mean 00:09:54.629 --> 00:09:56.710 they're less likely to compete aggressively on 00:09:56.710 --> 00:09:59.590 things like fees? Or are they, in effect, a unified 00:09:59.590 --> 00:10:01.769 voting bloc when it comes to corporate governance 00:10:01.769 --> 00:10:04.610 across the S &P 500? it creates this fascinating 00:10:04.610 --> 00:10:06.629 equilibrium. I mean, they're legally separate 00:10:06.629 --> 00:10:09.230 and they're commercially competitive to a degree, 00:10:09.350 --> 00:10:12.230 but their institutional crossholdings, they sort 00:10:12.230 --> 00:10:15.330 of dampen the incentive for aggressive market 00:10:15.330 --> 00:10:18.190 destructive competition. Because they all own 00:10:18.190 --> 00:10:20.769 a piece of everything. Exactly. They are all 00:10:20.769 --> 00:10:23.629 highly sensitive to systemic risk because they 00:10:23.629 --> 00:10:25.610 own so much of the entire market, including each 00:10:25.610 --> 00:10:28.809 other. The very structure of modern index investing 00:10:28.809 --> 00:10:31.629 in a way inherently encourages oligopoly and 00:10:31.629 --> 00:10:34.429 stabilization rather than, you know, cutthroat 00:10:34.429 --> 00:10:37.169 price wars. So BlackRock built its foundation 00:10:37.169 --> 00:10:39.730 on risk management and technical dominance with 00:10:39.730 --> 00:10:41.909 Aladdin. In this next segment, we're going to 00:10:41.909 --> 00:10:45.419 talk about the next phase. translating that powerful 00:10:45.419 --> 00:10:48.840 foundation into global economic influence through 00:10:48.840 --> 00:10:52.120 calculated growth and crucially alignment with 00:10:52.120 --> 00:10:54.799 sovereign power. Their growth trajectory is just 00:10:54.799 --> 00:10:57.360 marked by these ruthless strategic acquisitions. 00:10:57.519 --> 00:10:59.679 They're designed not just to add assets, but 00:10:59.679 --> 00:11:01.919 to acquire key competencies and market share 00:11:01.919 --> 00:11:04.779 instantly. This is growth by swallowing competitors 00:11:04.779 --> 00:11:07.519 and whole market segments. One of the first big 00:11:07.519 --> 00:11:09.870 steps. Besides some early moves like acquiring 00:11:09.870 --> 00:11:11.870 State Street Research and Management in 2004, 00:11:12.210 --> 00:11:15.549 was the 2006 merger with Merrill Lynch's Investment 00:11:15.549 --> 00:11:19.389 Managers Division, MLM. Right. That merger significantly 00:11:19.389 --> 00:11:22.149 expanded BlackRock's retail client base and their 00:11:22.149 --> 00:11:24.730 international presence. It moved them beyond 00:11:24.730 --> 00:11:27.850 their initial focus on just institutions. But 00:11:27.850 --> 00:11:30.250 like we said, the ultimate game changer was that 00:11:30.250 --> 00:11:32.690 2010 acquisition of Barclays Global Investors 00:11:32.690 --> 00:11:36.250 for $13 .5 billion. That deal wasn't just huge 00:11:36.250 --> 00:11:38.940 in terms of money. It was massive in its strategic 00:11:38.940 --> 00:11:41.980 outcome. It instantly transformed them into an 00:11:41.980 --> 00:11:44.139 index fund behemoth because it came with iShares. 00:11:44.799 --> 00:11:46.860 Can we just dwell for a moment on the genius 00:11:46.860 --> 00:11:50.100 in that move? Oh, absolutely. Before 2010, BlackRock 00:11:50.100 --> 00:11:52.299 was a strong active manager with a growing passive 00:11:52.299 --> 00:11:55.519 arm. BGI was the pioneer, the market leader in 00:11:55.519 --> 00:11:58.960 ETFs. By buying BGI, BlackRock basically bought 00:11:58.960 --> 00:12:00.860 the future of passive investment. They didn't 00:12:00.860 --> 00:12:02.399 have to spend a decade building it themselves. 00:12:02.779 --> 00:12:05.899 They bought a turnkey dominant global platform 00:12:05.899 --> 00:12:09.399 that was scalable to infinity. This acquisition 00:12:09.399 --> 00:12:11.799 is why they are where they are today. It was 00:12:11.799 --> 00:12:14.980 a high risk, but incredibly high reward bet on 00:12:14.980 --> 00:12:18.059 the long -term trend of indexing. And their M 00:12:18.059 --> 00:12:20.519 &A strategy didn't stop there. They continued 00:12:20.519 --> 00:12:23.000 to expand into technology and alternative assets. 00:12:23.279 --> 00:12:25.879 In 2015, they bought Future Advisor, which is 00:12:25.879 --> 00:12:28.639 a digital wealth management provider. They integrated 00:12:28.639 --> 00:12:31.080 that robo -advisory right into their BlackRock 00:12:31.080 --> 00:12:32.960 Solutions division. Which showed they were getting 00:12:32.960 --> 00:12:35.480 serious about serving the mass affluent market 00:12:35.480 --> 00:12:38.139 with digital tools. Right. And then in 2019, 00:12:38.340 --> 00:12:41.460 just before the market chaos of COVID, they acquired 00:12:41.460 --> 00:12:44.950 eFront. for $1 .3 billion. Yeah. That company 00:12:44.950 --> 00:12:46.830 specialized in alternative investment management 00:12:46.830 --> 00:12:49.090 software. And that signaled their intent to go 00:12:49.090 --> 00:12:51.610 much deeper into private equity, real estate, 00:12:51.690 --> 00:12:54.370 hedge funds, all the less liquid, higher fee 00:12:54.370 --> 00:12:56.549 private markets that traditional index funds 00:12:56.549 --> 00:12:58.330 just don't touch. Okay, so this is where the 00:12:58.330 --> 00:13:00.210 conversation shifts a bit, from financial strategy 00:13:00.210 --> 00:13:03.490 to public power. Their strategic growth positioned 00:13:03.490 --> 00:13:05.950 them as this indispensable financial surgeon 00:13:05.950 --> 00:13:08.120 for the U .S. government. during moments of deep 00:13:08.120 --> 00:13:11.159 crisis. This advisory role is what truly separates 00:13:11.159 --> 00:13:12.940 BlackRock from the other members of the Big Four. 00:13:13.139 --> 00:13:16.419 They are the de facto financial SWAT team. They 00:13:16.419 --> 00:13:18.240 get called upon repeatedly when the financial 00:13:18.240 --> 00:13:20.220 system is melting down. So let's go back to the 00:13:20.220 --> 00:13:24.500 2008 crisis. In May 2009, BlackRock Solutions, 00:13:24.779 --> 00:13:27.279 powered by Aladdin, was retained by the U .S. 00:13:27.279 --> 00:13:29.559 Treasury Department. And their job, their highly 00:13:29.559 --> 00:13:32.879 sensitive job, was to analyze, unwind and put 00:13:32.879 --> 00:13:36.419 a price on the truly toxic assets held by institutions 00:13:36.419 --> 00:13:40.320 like Bear Stearns, AIG and Freddie Mac. And on 00:13:40.320 --> 00:13:42.539 top of that, the Federal Reserve allowed BlackRock 00:13:42.539 --> 00:13:45.759 to superintend the $130 billion debt settlement 00:13:45.759 --> 00:13:48.740 for Bear Stearns and AIG. Just think about that 00:13:48.740 --> 00:13:51.899 operational role. No other private company was 00:13:51.899 --> 00:13:54.480 entrusted with that level of access and responsibility. 00:13:54.919 --> 00:13:57.080 They were literally using their risk models to 00:13:57.080 --> 00:13:59.179 determine the fair value of assets that threatened 00:13:59.179 --> 00:14:01.820 to collapse the global banking system. They had 00:14:01.820 --> 00:14:04.039 the keys to the distressed asset kingdom. And 00:14:04.039 --> 00:14:06.340 then fast forward just over a decade to the 2020 00:14:06.340 --> 00:14:09.399 COVID crisis, and that relationship just solidified 00:14:09.399 --> 00:14:11.559 even further, and it sparked even more controversy. 00:14:11.879 --> 00:14:14.600 It did. The Fed, facing a complete liquidity 00:14:14.600 --> 00:14:17.820 freeze in the corporate bond market. chose BlackRock 00:14:17.820 --> 00:14:21.419 again, this time to manage two massive corporate 00:14:21.419 --> 00:14:24.580 bond buying programs, the primary market and 00:14:24.580 --> 00:14:26.720 secondary market corporate credit facilities. 00:14:26.940 --> 00:14:29.700 This appointment, it's structurally interesting. 00:14:29.960 --> 00:14:32.500 I mean, the Fed needed an asset manager with 00:14:32.500 --> 00:14:35.679 the technical capacity to execute these purchases 00:14:35.679 --> 00:14:38.639 quickly and efficiently. And BlackRock, with 00:14:38.639 --> 00:14:40.899 Aladdin's ability to assess liquidity and price 00:14:40.899 --> 00:14:43.820 risk across these massive, complex portfolios, 00:14:43.879 --> 00:14:46.759 was the natural, almost the inescapable choice. 00:14:47.159 --> 00:14:49.500 They were also tasked with buying commercial 00:14:49.500 --> 00:14:51.659 mortgage backed securities, which essentially 00:14:51.659 --> 00:14:53.639 propped up the entire commercial real estate 00:14:53.639 --> 00:14:55.460 market. But just because they're the natural 00:14:55.460 --> 00:14:58.159 choice, does that completely neutralize the conflict 00:14:58.159 --> 00:15:01.080 of interest? The scrutiny was immediate and intense 00:15:01.080 --> 00:15:03.019 because their own products appeared to benefit 00:15:03.019 --> 00:15:05.710 disproportionately. Right. During the Fed's quantitative 00:15:05.710 --> 00:15:08.909 easing in 2020, BlackRock's own corporate bond 00:15:08.909 --> 00:15:12.509 ETF received $4 .3 billion in new investment, 00:15:12.669 --> 00:15:15.629 far, far more than any of its competitors. That 00:15:15.629 --> 00:15:18.210 perception of double dipping, that's a huge political 00:15:18.210 --> 00:15:21.269 liability. Massive. BlackRock's defense was that 00:15:21.269 --> 00:15:23.730 their involvement was essential for market stability. 00:15:23.990 --> 00:15:26.649 And crucially, to try and mitigate the conflict, 00:15:26.950 --> 00:15:29.629 they publicly pledged to forego profits from 00:15:29.629 --> 00:15:31.669 the Fed's program, aside from their standard 00:15:31.669 --> 00:15:34.370 advisory fees. They also committed to returning 00:15:34.370 --> 00:15:37.389 any extra income earned on their bond ETFs from 00:15:37.389 --> 00:15:40.379 the buying program back to the Fed. So while 00:15:40.379 --> 00:15:42.460 they benefited indirectly from the attention 00:15:42.460 --> 00:15:44.580 and legitimacy drawn to their products during 00:15:44.580 --> 00:15:47.460 a crisis, there was a mechanism to ensure they 00:15:47.460 --> 00:15:49.500 didn't directly profit from the government contracts 00:15:49.500 --> 00:15:53.059 themselves. It's a delicate, high wire act of 00:15:53.059 --> 00:15:56.200 public service and private profit. And this reliance. 00:15:56.679 --> 00:15:59.480 It hasn't waned. After the 2023 U .S. banking 00:15:59.480 --> 00:16:01.840 crisis, who did they call? BlackRock. BlackRock 00:16:01.840 --> 00:16:05.100 was hired again to handle the sale of $114 billion 00:16:05.100 --> 00:16:07.500 in assets from the failed Signature Bank and 00:16:07.500 --> 00:16:09.940 Silicon Valley Bank. They remain the consistently 00:16:09.940 --> 00:16:12.480 chosen executor for cleaning up systemic failures. 00:16:12.759 --> 00:16:15.240 So moving past that crisis playbook, BlackRock 00:16:15.240 --> 00:16:17.679 is now pivoting to new frontiers for growth in 00:16:17.679 --> 00:16:21.000 the 2020s. And it shows a clear strategy to diversify 00:16:21.000 --> 00:16:23.700 beyond just tracking public stock indexes. The 00:16:23.700 --> 00:16:26.269 most monumental move, I think, has been pivot 00:16:26.269 --> 00:16:30.490 into infrastructure the january 2024 acquisition 00:16:30.490 --> 00:16:34.309 of global infrastructure partners gip for a whopping 00:16:34.309 --> 00:16:37.429 12 and a half billion dollars paid in cash and 00:16:37.429 --> 00:16:40.919 shares That is a massive statement. Larry Fink 00:16:40.919 --> 00:16:42.740 has said it pretty clearly. He believes the future 00:16:42.740 --> 00:16:45.120 growth in private markets is going to be infrastructure. 00:16:45.419 --> 00:16:47.720 And the G .I .P. acquisition instantly positions 00:16:47.720 --> 00:16:50.360 BlackRock as a world leader in managing these 00:16:50.360 --> 00:16:53.159 hard, long term assets, pipelines, energy grids, 00:16:53.220 --> 00:16:56.240 airports, data centers, utilities. These assets 00:16:56.240 --> 00:16:59.259 offer stable inflation linked returns, which 00:16:59.259 --> 00:17:01.720 makes them incredibly attractive to pension funds 00:17:01.720 --> 00:17:03.960 and sovereign wealth funds. OK, so that's frontier 00:17:03.960 --> 00:17:06.680 one. Frontier two is cryptocurrency. BlackRock 00:17:06.680 --> 00:17:08.400 went from being, well, high highly skeptical 00:17:08.400 --> 00:17:10.859 of crypto to becoming one of its most aggressive 00:17:10.859 --> 00:17:13.220 institutional champions. It's a massive strategic 00:17:13.220 --> 00:17:15.579 shift and it's driven by client demand and the 00:17:15.579 --> 00:17:17.900 realization that crypto assets are just becoming 00:17:17.900 --> 00:17:21.000 too important to ignore. Their entry was decisive. 00:17:21.339 --> 00:17:25.759 In January 2024, their spot Bitcoin ETF, the 00:17:25.759 --> 00:17:28.759 iShares Bitcoin Trust or iBit, was approved. 00:17:29.099 --> 00:17:32.940 By May of 2024, iBit had already become the world's 00:17:32.940 --> 00:17:35.420 largest Bitcoin fund. It accumulated nearly $20 00:17:35.420 --> 00:17:38.140 billion in assets. Which just illustrates the 00:17:38.140 --> 00:17:40.920 power of the BlackRock brand name in legitimizing 00:17:40.920 --> 00:17:43.480 what is, you know, a very volatile asset class. 00:17:43.740 --> 00:17:46.119 And they're not stopping the Bitcoin. No. They 00:17:46.119 --> 00:17:49.000 filed for a spot Ethereum ETF in November 2023, 00:17:49.319 --> 00:17:52.539 and they launched something called BUIDL, which 00:17:52.539 --> 00:17:55.019 is their first tokenized fund on the Ethereum 00:17:55.019 --> 00:17:58.519 blockchain. Now, BUIDL invests in highly secure 00:17:58.519 --> 00:18:01.140 traditional assets, U .S. Treasury bills, but 00:18:01.140 --> 00:18:03.019 it's tokenized. So they're embracing decentralized 00:18:03.019 --> 00:18:05.259 finance while dealing in the safest government 00:18:05.259 --> 00:18:07.509 securities available. Yeah. Kind of hybridization 00:18:07.509 --> 00:18:10.170 of TradFi and crypto. Exactly. And finally, we 00:18:10.170 --> 00:18:11.710 have to talk about their recent geographical 00:18:11.710 --> 00:18:14.650 and I would say political maneuver. The launch 00:18:14.650 --> 00:18:18.730 of the iShares Texas equity ETF TXN in June 2025. 00:18:18.789 --> 00:18:20.690 On the surface, it just looks like a standard 00:18:20.690 --> 00:18:22.569 fund targeting companies headquartered in Texas. 00:18:22.789 --> 00:18:25.519 But it's so much more than that. This is brilliant 00:18:25.519 --> 00:18:27.940 political strategy masquerading as a financial 00:18:27.940 --> 00:18:30.119 product. As we'll get into in the next segment, 00:18:30.259 --> 00:18:32.799 Texas and other Republican led states have been 00:18:32.799 --> 00:18:34.920 the most aggressive in politically challenging 00:18:34.920 --> 00:18:37.839 BlackRock because of its ESG policy. Right. Leading 00:18:37.839 --> 00:18:40.079 to state divestments worth billions. So by launching 00:18:40.079 --> 00:18:43.039 an ETF that specifically focuses on and invests 00:18:43.039 --> 00:18:46.079 in Texas headquartered companies, BlackRock is 00:18:46.079 --> 00:18:48.400 trying to demonstrate its commitment to the economic 00:18:48.400 --> 00:18:51.400 success of the very jurisdictions trying to blacklist 00:18:51.400 --> 00:18:54.720 them. It's a PR and financial attempt to. neutralize 00:18:54.720 --> 00:18:57.880 political opposition by literally investing in 00:18:57.880 --> 00:19:00.579 their critics' backyard. It just shows how intertwined 00:19:00.579 --> 00:19:02.920 their investment decisions have become with the 00:19:02.920 --> 00:19:05.140 political environment. Okay, this next segment 00:19:05.140 --> 00:19:08.039 is absolutely central to BlackRock's modern identity. 00:19:08.319 --> 00:19:11.059 It's where the company stated principles specifically 00:19:11.059 --> 00:19:13.839 around environmental, social, and corporate governance. 00:19:14.410 --> 00:19:17.769 or ESG investing, meet this fierce internal and 00:19:17.769 --> 00:19:20.289 external resistance. BlackRock started to actively 00:19:20.289 --> 00:19:23.369 position itself as a global leader in ESG investing 00:19:23.369 --> 00:19:26.730 around 2017. And this was a very calculated strategic 00:19:26.730 --> 00:19:29.690 move. It was designed to appeal to institutional 00:19:29.690 --> 00:19:32.990 clients, especially European pension funds, that 00:19:32.990 --> 00:19:35.390 were increasingly focused on sustainable outcomes 00:19:35.390 --> 00:19:38.250 alongside their financial returns. And they didn't 00:19:38.250 --> 00:19:40.750 just talk the talk. They leveraged their enormous 00:19:40.750 --> 00:19:43.569 shareholder voting power to push their agenda. 00:19:43.789 --> 00:19:45.829 That's right. We saw initiatives like them sending 00:19:45.829 --> 00:19:48.769 official letters to CEOs demanding climate action 00:19:48.769 --> 00:19:51.089 and actively backing shareholder resolutions 00:19:51.089 --> 00:19:53.950 for major climate shifts, famously at ExxonMobil 00:19:53.950 --> 00:19:57.089 in 2017. They also demanded increased gender 00:19:57.089 --> 00:19:59.190 diversity on corporate boards. They made it clear 00:19:59.190 --> 00:20:01.829 they expected the companies they owned on behalf 00:20:01.829 --> 00:20:04.269 of their clients to address these issues. And 00:20:04.269 --> 00:20:06.049 this all culminated in what was called the think 00:20:06.049 --> 00:20:09.150 shift. CEO Larry Fink's annual letters became 00:20:09.150 --> 00:20:12.069 these must -read documents. His 2020 statement 00:20:12.069 --> 00:20:14.049 that environmental sustainability would be a 00:20:14.049 --> 00:20:16.529 core investment goal, that was a watershed moment. 00:20:16.789 --> 00:20:19.390 He argued climate risk is financial risk. But 00:20:19.390 --> 00:20:21.250 the political environment, particularly in the 00:20:21.250 --> 00:20:24.450 U .S., it shifted dramatically. ESG became a 00:20:24.450 --> 00:20:27.690 political lightning rod. And in June 2023, Fink 00:20:27.690 --> 00:20:29.869 announced he had stopped using the term ESG, 00:20:30.089 --> 00:20:33.210 saying it had become weaponized and politicized. 00:20:33.329 --> 00:20:35.190 But even though he stepped away from the acronym, 00:20:35.430 --> 00:20:37.930 he didn't abandon the core concept, did he? Not 00:20:37.930 --> 00:20:40.390 at all. He immediately pivoted to emphasizing 00:20:40.390 --> 00:20:42.809 his core belief in conscientious capitalism, 00:20:43.170 --> 00:20:45.710 stressing that BlackRock still guides clients 00:20:45.710 --> 00:20:48.880 interested in sustainability. just without using 00:20:48.880 --> 00:20:52.180 that now toxic brand name. The fact he had to 00:20:52.180 --> 00:20:54.700 drop the acronym itself just highlights the deep 00:20:54.700 --> 00:20:57.380 political polarization the firm now faces. And 00:20:57.380 --> 00:20:59.900 the polarization is fueled by critics from both 00:20:59.900 --> 00:21:02.380 sides. You have those who argue BlackRock is 00:21:02.380 --> 00:21:05.000 doing too much and damaging returns, and those 00:21:05.000 --> 00:21:07.099 who argue the firm is not nearly committed enough. 00:21:07.240 --> 00:21:09.240 We should probably present both of those angles. 00:21:09.460 --> 00:21:11.180 Let's start with the critique that challenges 00:21:11.180 --> 00:21:14.240 BlackRock's internal commitment. A former BlackRock 00:21:14.240 --> 00:21:16.599 global chief investment officer for sustainable 00:21:16.599 --> 00:21:19.339 investing was incredibly critical. He called 00:21:19.339 --> 00:21:22.359 ESG a dangerous placebo that harms the public 00:21:22.359 --> 00:21:26.079 interest. A dangerous placebo. That's a powerful 00:21:26.079 --> 00:21:29.190 phrase. What was his argument? His core argument 00:21:29.190 --> 00:21:32.650 was that financial institutions pursue ESG investing 00:21:32.650 --> 00:21:35.529 primarily because ESG products have significantly 00:21:35.529 --> 00:21:38.609 higher fees compared to your standard index funds. 00:21:38.750 --> 00:21:41.589 And those higher fees directly and immediately 00:21:41.589 --> 00:21:44.849 boost the company's profits. The incentive is 00:21:44.849 --> 00:21:48.259 financial engineering, not necessarily. you know, 00:21:48.299 --> 00:21:50.460 planetary salvation. And so if the return structure 00:21:50.460 --> 00:21:51.940 is better for the fund manager, they're going 00:21:51.940 --> 00:21:54.480 to push the product. Exactly. Then on the external 00:21:54.480 --> 00:21:56.839 side, you have publications like the Wall Street 00:21:56.839 --> 00:21:59.700 Journal's editorial board criticizing BlackRock 00:21:59.700 --> 00:22:02.240 for pushing the SEC to mandate climate impact 00:22:02.240 --> 00:22:04.960 and diversity disclosures, even from private 00:22:04.960 --> 00:22:07.079 companies. And the critique there is that imposing 00:22:07.079 --> 00:22:09.819 these mandatory disclosures, which carry reputation 00:22:09.819 --> 00:22:12.559 and litigation risks, would cause companies to 00:22:12.559 --> 00:22:15.279 actively avoid public markets altogether. They'd 00:22:15.279 --> 00:22:17.259 just opt to stay private. which would ultimately 00:22:17.259 --> 00:22:20.019 harm stock exchanges, reduce transparency and 00:22:20.019 --> 00:22:22.099 paradoxically restrict the investment options 00:22:22.099 --> 00:22:24.980 available to retail investors. It's the argument 00:22:24.980 --> 00:22:28.000 that overregulation, even if it's well -intentioned, 00:22:28.000 --> 00:22:30.559 could stifle market activity. Then you have the 00:22:30.559 --> 00:22:33.619 more specific claims of fossil washing. I saw 00:22:33.619 --> 00:22:36.420 one detailed study that found these huge discrepancies 00:22:36.420 --> 00:22:38.740 in BlackRock's offerings. It noted that only 00:22:38.740 --> 00:22:41.759 9 % out of 82 funds that were labeled as sustainable 00:22:41.759 --> 00:22:44.680 actually avoided investment in fossil fuel companies. 00:22:45.200 --> 00:22:47.200 And that finding really speaks to the immense 00:22:47.200 --> 00:22:49.799 structural difficulty of simultaneously tracking 00:22:49.799 --> 00:22:52.579 broad market indexes, which are dominated by 00:22:52.579 --> 00:22:55.220 legacy energy companies and fulfilling a claim 00:22:55.220 --> 00:22:57.880 of being sustainable. If you own the market, 00:22:57.980 --> 00:23:00.529 you own the energy sector. It's that simple. 00:23:00.650 --> 00:23:02.630 And that structural reality brings us to the 00:23:02.630 --> 00:23:05.029 core contradiction that fuels so much activist 00:23:05.029 --> 00:23:09.109 anger. BlackRock's massive ongoing exposure to 00:23:09.109 --> 00:23:12.009 the very industries its ESG advocacy is supposed 00:23:12.009 --> 00:23:14.349 to be reforming. The scale of this exposure is 00:23:14.349 --> 00:23:17.450 enormous. As of 2018, BlackRock was confirmed 00:23:17.450 --> 00:23:19.750 as the world's largest institutional investor 00:23:19.750 --> 00:23:22.329 in coal -fired power stations. They held shares 00:23:22.329 --> 00:23:25.700 worth $11 billion in 56 companies. They also 00:23:25.700 --> 00:23:28.819 owned more oil, gas and thermal coal reserves 00:23:28.819 --> 00:23:31.539 than any other investment manager in the world. 00:23:31.759 --> 00:23:34.700 It totaled nine and a half gigatons of potential 00:23:34.700 --> 00:23:38.220 CO2 emissions. To put that in context for you, 00:23:38.259 --> 00:23:41.180 that was equivalent to 30 percent of total energy 00:23:41.180 --> 00:23:43.779 related emissions from 2017. So if BlackRock 00:23:43.779 --> 00:23:45.880 is truly committed to the energy transition, 00:23:46.220 --> 00:23:49.000 those numbers show the immense inertia they have 00:23:49.000 --> 00:23:52.170 to overcome. And this provoked these aggressive 00:23:52.170 --> 00:23:55.990 activist responses. It resulted in the BlackRock's 00:23:55.990 --> 00:23:58.369 Big Problem campaign. And environmental groups 00:23:58.369 --> 00:24:00.970 didn't just, you know, write letters. They engaged 00:24:00.970 --> 00:24:03.690 in physical protests, street theater. I read 00:24:03.690 --> 00:24:05.529 that activists even rushed the company's Paris 00:24:05.529 --> 00:24:07.990 offices. They did, accusing BlackRock of being 00:24:07.990 --> 00:24:10.230 the single biggest driver of climate destruction 00:24:10.230 --> 00:24:12.710 on the planet because of its holdings. So under 00:24:12.710 --> 00:24:14.849 all this pressure, and aligned with Fink's 2020 00:24:14.849 --> 00:24:17.609 commitment, BlackRock did make some changes. 00:24:18.059 --> 00:24:20.579 They announced the sale of $500 million worth 00:24:20.579 --> 00:24:23.180 of coal -related assets and created specific 00:24:23.180 --> 00:24:27.119 fossil fuel -free funds. But the paradox? It 00:24:27.119 --> 00:24:29.619 remains deeply entrenched. To illustrate that 00:24:29.619 --> 00:24:31.980 duality perfectly, just consider a major appointment 00:24:31.980 --> 00:24:36.039 in July of 2023. BlackRock appointed Amin H. 00:24:36.099 --> 00:24:39.059 Nasser, the CEO of Saudi Aramco, the world's 00:24:39.059 --> 00:24:41.220 largest oil company, to its board of directors. 00:24:41.400 --> 00:24:44.039 Wait, so they are demanding climate action and 00:24:44.039 --> 00:24:46.779 divestment from some companies while installing 00:24:46.779 --> 00:24:48.839 the leader of the world's largest oil company 00:24:48.839 --> 00:24:51.759 onto their own leadership team? Yes. That is 00:24:51.759 --> 00:24:54.359 the ultimate definition of cognitive dissonance 00:24:54.359 --> 00:24:57.380 in their public identity. It absolutely is. It 00:24:57.380 --> 00:24:59.359 signals that while the firm acknowledges the 00:24:59.359 --> 00:25:01.420 need to manage climate risk for clients who want 00:25:01.420 --> 00:25:04.259 it, they simultaneously recognize the indispensable 00:25:04.259 --> 00:25:07.259 short to medium term power and financial performance 00:25:07.259 --> 00:25:10.359 of legacy energy giants. They need that expertise 00:25:10.359 --> 00:25:12.380 at the highest level of their own governance. 00:25:12.619 --> 00:25:15.759 And this internal tension. It fed directly into 00:25:15.759 --> 00:25:19.420 the external, highly political ESG backlash across 00:25:19.420 --> 00:25:21.660 the United States. It basically transformed ESG 00:25:21.660 --> 00:25:24.599 into a political football. Yes. And this led 00:25:24.599 --> 00:25:26.839 to significant consequences for BlackRock in 00:25:26.839 --> 00:25:30.240 state capitals. Several U .S. states began refusing 00:25:30.240 --> 00:25:32.720 to do business with them, arguing that the firm's 00:25:32.720 --> 00:25:35.579 ESG policies were prioritizing social agendas 00:25:35.579 --> 00:25:38.180 over their fiduciary duty, which would ultimately 00:25:38.180 --> 00:25:40.740 harm investor interests. And we saw concrete, 00:25:40.940 --> 00:25:43.900 large scale financial actions. West Virginia, 00:25:44.039 --> 00:25:47.730 Louisiana, Florida. they divested combined totals 00:25:47.730 --> 00:25:51.529 exceeding $2 .79 billion. Right. Louisiana removed 00:25:51.529 --> 00:25:55.549 $794 million and Florida a massive $2 billion, 00:25:55.670 --> 00:25:58.869 specifically citing BlackRock's woke environmental 00:25:58.869 --> 00:26:02.430 agenda. So how did BlackRock respond? Their public 00:26:02.430 --> 00:26:04.990 response was robust. They argued that these state 00:26:04.990 --> 00:26:07.369 actions were just political grandstanding, that 00:26:07.369 --> 00:26:09.730 they put politics over investor interests and 00:26:09.730 --> 00:26:12.250 risked lower returns for state pensions simply 00:26:12.250 --> 00:26:14.940 to make an ideological point. This political 00:26:14.940 --> 00:26:17.200 pressure, though, it forced BlackRock to innovate 00:26:17.200 --> 00:26:19.140 its approach to shareholder voting. Right. This 00:26:19.140 --> 00:26:21.019 led to the creation of the Voting Choice Program, 00:26:21.240 --> 00:26:24.079 launched between 2021 and 2022. Can you explain 00:26:24.079 --> 00:26:26.079 this program? It's a bit complex. The Voting 00:26:26.079 --> 00:26:28.279 Choice Program is designed to allow clients first 00:26:28.279 --> 00:26:31.299 institutional investors and now retail investors 00:26:31.299 --> 00:26:35.900 in the massive iShares Core S &P 500 ETF to select 00:26:35.900 --> 00:26:38.359 specific voting policies for the shares held 00:26:38.359 --> 00:26:40.759 in their index funds. So instead of BlackRock 00:26:40.759 --> 00:26:42.519 Investment Stewardship voting on all the shares. 00:26:43.130 --> 00:26:45.750 The client can choose a mandate. Precisely. You 00:26:45.750 --> 00:26:48.730 can choose policies that range from simply mirroring 00:26:48.730 --> 00:26:51.630 what management recommends to prioritizing specific 00:26:51.630 --> 00:26:54.869 ESG factors or even selecting a Catholic values 00:26:54.869 --> 00:26:57.390 mandate that's designed to avoid sin stocks. 00:26:57.809 --> 00:27:00.750 It's an attempt to democratize proxy voting and 00:27:00.750 --> 00:27:03.210 deflect criticism that BlackRock is forcing its 00:27:03.210 --> 00:27:05.410 own political agenda on everyone. But the criticism 00:27:05.410 --> 00:27:07.349 of this program, I think the Wall Street Journal 00:27:07.349 --> 00:27:10.450 called it a false voting choice, is pretty compelling. 00:27:10.650 --> 00:27:13.160 How is the choice false? Well, it's considered 00:27:13.160 --> 00:27:15.299 a false choice because nearly all of the pre 00:27:15.299 --> 00:27:17.900 -selected voting options are still devised by 00:27:17.900 --> 00:27:20.720 major established proxy advisories like Glass 00:27:20.720 --> 00:27:22.900 -Lewis and institutional shareholder services. 00:27:23.339 --> 00:27:26.299 You might get to choose the flavor, but the ingredients 00:27:26.299 --> 00:27:29.279 and the overall preparation, the underlying principles 00:27:29.279 --> 00:27:32.140 of the voting recommendations were still coming 00:27:32.140 --> 00:27:34.740 from an ecosystem that is, you know, broadly 00:27:34.740 --> 00:27:37.819 ESG aligned. So it gives the appearance of choice 00:27:37.819 --> 00:27:40.900 without truly changing the fundamental influence 00:27:40.900 --> 00:27:43.000 structure. of corporate governance. That's the 00:27:43.000 --> 00:27:45.259 argument, yes. We've mapped BlackRock's scale, 00:27:45.420 --> 00:27:48.099 its technology, and its central role in the domestic 00:27:48.099 --> 00:27:51.000 ESG and climate fight. Now we need to turn to 00:27:51.000 --> 00:27:53.920 its influence on a truly global stage, starting 00:27:53.920 --> 00:27:55.740 with the major market where its strategy has 00:27:55.740 --> 00:27:58.160 faced its fiercest national security criticism. 00:27:58.859 --> 00:28:02.069 China. BlackRock's strategy has involved an incredibly 00:28:02.069 --> 00:28:04.630 aggressive market entry into China, a move that 00:28:04.630 --> 00:28:06.750 many critics see as directly conflicting with 00:28:06.750 --> 00:28:08.789 the geopolitical interests of the U .S. and its 00:28:08.789 --> 00:28:11.849 allies. And this market penetration was highly 00:28:11.849 --> 00:28:16.009 symbolic. In August of 2020, BlackRock received 00:28:16.009 --> 00:28:18.150 approval to set up a mutual fund business in 00:28:18.150 --> 00:28:20.789 China. That made it the first foreign -owned 00:28:20.789 --> 00:28:23.750 company allowed a wholly owned business in that 00:28:23.750 --> 00:28:26.420 specific sector. which gave them direct access 00:28:26.420 --> 00:28:28.940 to the massive Chinese domestic savings market. 00:28:29.119 --> 00:28:31.420 And the pushback was immediate, and it came from 00:28:31.420 --> 00:28:34.440 high places. The renowned financier George Soros 00:28:34.440 --> 00:28:36.720 publicly described BlackRock's initiative as 00:28:36.720 --> 00:28:39.779 a tragic mistake. He argued it would damage the 00:28:39.779 --> 00:28:41.759 national security interests of the U .S. and 00:28:41.759 --> 00:28:44.380 other democracies. So what specifically were 00:28:44.380 --> 00:28:46.259 those national security interests that he thought 00:28:46.259 --> 00:28:48.710 were at risk? The concerns centered on capital 00:28:48.710 --> 00:28:51.009 flowing from U .S. institutional and retirement 00:28:51.009 --> 00:28:53.930 investors managed by BlackRock into companies 00:28:53.930 --> 00:28:55.789 connected to the Chinese government's military 00:28:55.789 --> 00:28:58.609 and its human rights apparatus. The scrutiny 00:28:58.609 --> 00:29:00.589 really intensified when it was revealed that 00:29:00.589 --> 00:29:02.970 BlackRock had invested client money in companies 00:29:02.970 --> 00:29:04.589 that were blacklisted by the U .S. government 00:29:04.589 --> 00:29:08.069 for human rights abuses against Uyghurs in Xinjiang 00:29:08.069 --> 00:29:10.490 and for ties to the People's Liberation Army. 00:29:10.650 --> 00:29:13.730 A 2024 House committee report substantiated those 00:29:13.730 --> 00:29:16.630 claims, right? It found that BlackRock's index 00:29:16.630 --> 00:29:19.930 inclusion and fund investments had directed at 00:29:19.930 --> 00:29:24.109 least $1 .9 billion into these blacklisted entities. 00:29:24.390 --> 00:29:27.250 Yes. And while BlackRock correctly pointed out 00:29:27.250 --> 00:29:29.069 that this activity was legal at the time and 00:29:29.069 --> 00:29:31.829 complied with their client mandates, the perception 00:29:31.829 --> 00:29:34.789 remains incredibly damaging. It creates the impression 00:29:34.789 --> 00:29:36.990 that U .S. retirement money is inadvertently 00:29:36.990 --> 00:29:39.890 funding geopolitical rivals or ethically problematic 00:29:39.890 --> 00:29:42.950 enterprises. And it's prompted ongoing scrutiny 00:29:42.950 --> 00:29:45.180 from state attorneys. news general about inadequate 00:29:45.180 --> 00:29:47.900 disclosure to investors. This immense global 00:29:47.900 --> 00:29:50.000 footprint brings us right back to the concentration 00:29:50.000 --> 00:29:53.059 of power fueled by their size. When you hear 00:29:53.059 --> 00:29:54.819 someone like Senator Elizabeth Warren suggest 00:29:54.819 --> 00:29:57.299 that BlackRock should be designated as too big 00:29:57.299 --> 00:29:59.559 to fail. And regulated like a systematically 00:29:59.559 --> 00:30:01.900 important financial institution, she's speaking 00:30:01.900 --> 00:30:04.559 to a fundamental economic risk. Absolutely. The 00:30:04.559 --> 00:30:07.339 AUM equivalent to most of the U .S. GDP inherently 00:30:07.339 --> 00:30:10.240 introduces systemic risk. If BlackRock were to 00:30:10.240 --> 00:30:12.440 face a catastrophic failure, say from a bug in 00:30:12.440 --> 00:30:15.039 Aladdin or a massive liquidity crisis, the financial 00:30:15.039 --> 00:30:17.359 contagion would be immediate and global. But 00:30:17.359 --> 00:30:20.319 the more subtle ongoing concern is the concept 00:30:20.319 --> 00:30:22.859 of common ownership, which affects competition 00:30:22.859 --> 00:30:25.859 even in normal market conditions. Let's try to 00:30:25.859 --> 00:30:28.660 explain this mechanism simply for everyone. Common 00:30:28.660 --> 00:30:31.160 ownership occurs when the big three index fund 00:30:31.160 --> 00:30:34.200 managers BlackRock, Vanguard and State Street. 00:30:34.619 --> 00:30:37.140 are simultaneously the top shareholders in many 00:30:37.140 --> 00:30:39.440 competing publicly traded companies within the 00:30:39.440 --> 00:30:42.099 same industry. So let's use a concrete hypothetical 00:30:42.099 --> 00:30:44.759 example from the research. If BlackRock owns, 00:30:44.819 --> 00:30:47.359 say, an 8 % stake in American Airlines and an 00:30:47.359 --> 00:30:50.480 8 % stake in Delta Airlines, how does that change 00:30:50.480 --> 00:30:53.279 their incentive to engage in a fair war or compete 00:30:53.279 --> 00:30:55.579 aggressively on price? Well, the research suggests 00:30:55.579 --> 00:30:58.480 that BlackRock's incentive, acting as a steward 00:30:58.480 --> 00:31:00.700 for its clients across the whole market, is to 00:31:00.700 --> 00:31:03.259 maximize the combined value of all their airline 00:31:03.259 --> 00:31:06.210 holdings. just one. Aggressive competition between 00:31:06.210 --> 00:31:08.650 American and Delta might lead to lower prices, 00:31:08.750 --> 00:31:10.490 which are great for consumers, but it damages 00:31:10.490 --> 00:31:13.470 the profits of both companies. Since BlackRock 00:31:13.470 --> 00:31:16.309 holds a big chunk of both, it prefers stability 00:31:16.309 --> 00:31:18.930 and high pricing over fierce competition that 00:31:18.930 --> 00:31:22.950 cannibalizes profits. And that reduction in competitive 00:31:22.950 --> 00:31:25.789 incentive, even if it's just achieved passively 00:31:25.789 --> 00:31:28.009 through the shared ownership, has been linked 00:31:28.009 --> 00:31:30.849 to potential harm for consumers and higher CEO 00:31:30.849 --> 00:31:33.380 pay across various industries. What's really 00:31:33.380 --> 00:31:35.420 fascinating is BlackRock's evolution on this 00:31:35.420 --> 00:31:37.579 point. They initially dismissed the economic 00:31:37.579 --> 00:31:41.119 mechanism as vague and implausible in one of 00:31:41.119 --> 00:31:44.099 their internal white papers. However, the regulatory 00:31:44.099 --> 00:31:46.319 environment is starting to catch up. How so? 00:31:46.809 --> 00:31:50.589 By 2023, their own SEC annual report had a major 00:31:50.589 --> 00:31:53.650 shift in tone. BlackRock explicitly identified 00:31:53.650 --> 00:31:56.089 common ownership as a potential business risk. 00:31:56.190 --> 00:31:59.089 They noted that new FTC and Department of Justice 00:31:59.089 --> 00:32:02.190 merger guidelines now recognize that common ownership 00:32:02.190 --> 00:32:04.690 may reduce competitive incentives. So that's 00:32:04.690 --> 00:32:06.809 basically a tacit admission that regulators are 00:32:06.809 --> 00:32:09.049 beginning to view their structure as an anti 00:32:09.049 --> 00:32:11.829 -competitive risk. It is. BlackRock warned its 00:32:11.829 --> 00:32:13.930 shareholders that this regulatory scrutiny could 00:32:13.930 --> 00:32:16.170 adversely affect the firm through investigations 00:32:16.170 --> 00:32:18.849 and increase difficulty in getting mergers and 00:32:18.849 --> 00:32:21.029 acquisitions approved. They are acknowledging 00:32:21.029 --> 00:32:23.109 that the sheer scope of their ownership is now 00:32:23.109 --> 00:32:26.190 a regulatory liability. When an institution operates 00:32:26.190 --> 00:32:29.009 with this much scale, this much complexity and 00:32:29.009 --> 00:32:31.710 this sort of structural opacity, it inevitably 00:32:31.710 --> 00:32:33.789 attracts a shadow industry of misinformation. 00:32:34.779 --> 00:32:36.519 I think it's important for you to understand 00:32:36.519 --> 00:32:39.599 that BlackRock's complexity often fuels various 00:32:39.599 --> 00:32:42.559 conspiracy theories. Absolutely. When the real 00:32:42.559 --> 00:32:45.319 mechanisms of power like Aladdin's data visibility 00:32:45.319 --> 00:32:48.240 or the intricacies of proxy voting are difficult 00:32:48.240 --> 00:32:50.960 for the average person to grasp, people tend 00:32:50.960 --> 00:32:53.140 to fill that informational void with simpler, 00:32:53.319 --> 00:32:56.299 often more dramatic narratives. A couple of specific 00:32:56.299 --> 00:32:59.019 examples of debunked claims would be the assertion 00:32:59.019 --> 00:33:01.839 that BlackRock owns both Fox News and Dominion 00:33:01.839 --> 00:33:04.500 voting systems, giving them control over media 00:33:04.500 --> 00:33:06.819 and election infrastructure at the same time. 00:33:07.079 --> 00:33:09.700 Right. And while BlackRock does own a 15 percent 00:33:09.700 --> 00:33:12.220 stake in Fox Corporation, as an institutional 00:33:12.220 --> 00:33:14.619 investor holding shares for its clients, sources 00:33:14.619 --> 00:33:16.700 confirm they have no participation whatsoever 00:33:16.700 --> 00:33:19.660 in Dominion voting systems. These claims often 00:33:19.660 --> 00:33:21.799 conflate institutional ownership with operational 00:33:21.799 --> 00:33:24.460 control, which is a common error when we're dealing 00:33:24.460 --> 00:33:27.279 with index funds. And unfortunately, these theories 00:33:27.279 --> 00:33:29.400 can quickly descend into some deeply problematic 00:33:29.400 --> 00:33:32.940 territory. We have to note the presence of anti 00:33:32.940 --> 00:33:35.660 -Semitic theories, things linking BlackRock executives 00:33:35.660 --> 00:33:38.740 to a global cabal that's responsible for manufacturing 00:33:38.740 --> 00:33:41.299 the COVID agenda. And addressing these theories 00:33:41.299 --> 00:33:43.480 is necessary because it underscores a key takeaway. 00:33:43.779 --> 00:33:46.720 The actual measured influence of BlackRock, its 00:33:46.720 --> 00:33:49.460 12 .5 trillion in AUM, its role in government 00:33:49.460 --> 00:33:53.339 crises, its proxy voting power, is profound enough 00:33:53.339 --> 00:33:55.720 on its own without needing any fictional embellishment. 00:33:56.200 --> 00:33:58.279 The real challenge is understanding the legal 00:33:58.279 --> 00:34:00.559 and systemic power they hold in plain sight. 00:34:00.740 --> 00:34:03.220 So what does this all mean? Our deep dive really 00:34:03.220 --> 00:34:06.259 reveals BlackRock's dual identity. It is a company 00:34:06.259 --> 00:34:09.000 built on this rigorous, pioneering risk management 00:34:09.000 --> 00:34:11.559 software, Aladdin, which grew into the world's 00:34:11.559 --> 00:34:13.940 largest asset manager through ruthless strategic 00:34:13.940 --> 00:34:16.800 acquisitions like iShares and the recent monumental 00:34:16.800 --> 00:34:19.550 purchase of global infrastructure partners. But 00:34:19.550 --> 00:34:22.170 that sheer scale and influence mean their simultaneous 00:34:22.170 --> 00:34:25.369 pushes into volatile crypto products, highly 00:34:25.369 --> 00:34:27.869 regulated infrastructure and controversial Chinese 00:34:27.869 --> 00:34:30.730 markets, all while maintaining these deep financial 00:34:30.730 --> 00:34:34.449 ties to fossil fuels, makes BlackRock an unavoidable 00:34:34.449 --> 00:34:36.670 lightning rod for global political and economic 00:34:36.670 --> 00:34:38.949 debate. I think the essential lesson here for 00:34:38.949 --> 00:34:41.230 you is the critical difference between ownership 00:34:41.230 --> 00:34:44.440 and stewardship. BlackRock consistently argues 00:34:44.440 --> 00:34:46.780 that its clients, the institutional investors, 00:34:47.079 --> 00:34:50.139 the pension funds, you, the retail ETF holder, 00:34:50.280 --> 00:34:52.460 are the true owners of the shares and assets. 00:34:53.159 --> 00:34:55.780 BlackRock is just the fiduciary agent. However, 00:34:56.039 --> 00:34:58.360 BlackRock exercises the crucial shareholder votes 00:34:58.360 --> 00:35:00.260 on their behalf through BlackRock Investment 00:35:00.260 --> 00:35:03.239 Stewardship. This agency and corporate governance, 00:35:03.380 --> 00:35:05.380 combined with its indispensable advisory role 00:35:05.380 --> 00:35:08.019 during massive global financial crises, from 00:35:08.019 --> 00:35:10.800 pricing toxic assets in 2008 to steering recovery 00:35:10.800 --> 00:35:13.139 funds in 2020 and selling off failed bank assets 00:35:13.139 --> 00:35:16.559 in 2023, it places BlackRock in a unique and 00:35:16.559 --> 00:35:19.340 utterly unprecedented position. It operates in 00:35:19.340 --> 00:35:21.659 times of crisis as an arm of the state. But it 00:35:21.659 --> 00:35:27.960 remains fundamental. And that structural reality, 00:35:28.260 --> 00:35:30.639 where a private financial actor becomes a critical 00:35:30.639 --> 00:35:33.599 piece of national and global stability, leads 00:35:33.599 --> 00:35:35.699 us to our final provocative thought for you. 00:35:36.119 --> 00:35:38.980 If BlackRock acts as an arm of the state during 00:35:38.980 --> 00:35:41.599 emergency steering recovery funds for nations 00:35:41.599 --> 00:35:44.269 like Ukraine, advising the U .S. Federal Reserve, 00:35:44.610 --> 00:35:47.610 selling off failed bank assets, but remains accountable 00:35:47.610 --> 00:35:50.409 solely to its private shareholders, are we comfortable 00:35:50.409 --> 00:35:51.829 with the fact that its ultimate accountability 00:35:51.829 --> 00:35:54.909 remains financial, not civic? What regulatory 00:35:54.909 --> 00:35:57.269 framework should govern an entity that is functionally 00:35:57.269 --> 00:35:59.929 indispensable to the global economy, yet operates 00:35:59.929 --> 00:36:02.090 entirely outside of traditional bank regulation?